The most common form of analytics that businesses use is descriptive analytics, which provides insights on past performance or actions. Predictive analytics takes this a step further to identify likely future trends or what is about to happen.
Knowing what is about to happen, though, is useful only if you can act on that knowledge. This is where prescriptive analytics enters the picture.
Rather than simply enabling you to make accurate predictions, though, prescriptive analytics allows you to make informed recommendations. Specifically, prescriptive analytics shows what will likely happen as the result of various courses of action not yet undertaken. You can then recommend the action that yields the best results.
A Familiar Example of Predictive Analytics
The most familiar examples of predictive analytics in action may be Amazon’s suggestions of specific items you might want to buy as you browse their site. Predictive analytics tells Amazon that presenting those items to you proactively will likely result in your buying them. Similarly, predictive analytics guides Netflix to recommend movies and shows you might enjoy, since presenting them to you increases the likelihood of your purchasing them. This illustrates the value of predictive analytics concisely: Businesses can take actions that increase profits when they know what the likely outcome of any given action will be.
Informing Sales Decisions
As mentioned above, predictive analytics can play a key role in the sales process. Some purchase and decisions processes, such as choosing a movie to watch on a streaming service, are simple and relatively straightforward.
In a more complex sale, though, decision-making becomes more complicated. The salesperson will know what the customer is interested in buying. The salesperson may not know, however, what the customers should be interested in buying. Here, the data analyzed might consist of purchases by past customers that were:
- In a similar role
- At companies of a similar size
- In a similar industry
- In a similar geography
The pattern of past purchases might suggest a set of options for the salesperson to offer the current customer, such as:
- A particular set of items that the customer had not considered
- Particular terms for the purchase
- A particular level of discount
Moreover, the salesperson would know with a high level of confidence whether any of the possible actions would:
- Increase or decrease the chances of closing the current deal
- Accelerate or delay the purchase
- Have a different beneficial or adverse effect
Tools like IBM’s SPSS Software could easily assist organizations in gleaning meaningful insights from their data.
The Pop-Tart Surprise
With prescriptive analytics adding value to every conversation, salespeople become measurably more effective. To be clear, this is not simply a matter of an analytics telling the salesperson what they should already know. It seems intuitive, for example, that consumers may want to purchase a flashlight when a hurricane is approaching.
What is less obvious, though, is that consumers as a whole also purchase 7x as many strawberry Pop-Tarts when a hurricane is on the way compared to other times. This is a consistent and specific pattern. Prescriptive analytics pointed WalMart toward putting Pop-Tarts at the front of the store during hurricane season. WalMart has been reaping the benefits ever since.
Embrace Prescriptive Analytics
Paradigm understands that your employees do not make everyday decisions in a vacuum. Employees bring their own experience, expertise, and intuition to the process. That is why businesses tend to seek out the best and brightest employees.
“Understanding the past is great for memories and reflection, however, agile organizations need to be able to anticipate future events or risk becoming irrelevant,” comments Terrence Tyler, Paradigm’s Practice Director for Enterprise Information Management. “People who know how to leverage analytics solutions will be an added value to just having the tools.”
Employees can make faster decisions with greater consistency and drive greater profitability when they base their decisions on reliable data and a solid understanding of the potential results of each decision.
“The ability and time it takes to go from just having insight to being able to take action will be key for businesses. Paradigm Technology partners with companies regardless of their level of analytics maturity to keep them relevant and competitive for the future,” adds Tyler.
Is your business using data to make the most informed decisions? Reach out to Paradigm for analytics tools help your teams maximize the value of your information for your business.