Predictive analytics is gaining momentum in virtually every industry. Using predictive analytics, businesses are able to approach opportunities, risks, business partners, and customers differently because they have foresight they lacked previously.
"Historical data can only show you so much," said Arvid Tchivzhel, director of revenue and pricing strategy at consulting firm Mather Economics. "If you're always looking at your historical revenue-to-date data, you're not really seeing where your future customers will be coming from and how much value they'll deliver to you in the long term."
Assuming there is a perfect storm of clean data, adequate data, and the expertise necessary to understand what the data is saying and apply that to a business problem, organizations are doing everything from increasing top-line revenue by a couple of percentage points to reimaging profitable customer relationships. Some are inventing entirely new business models.
"When you're talking about corporate strategy, what types of new policies we're going to put in place, and what kinds of new projects we're going to pursue, predictive analytics can help you decide which ones will be impactful," said Ryan McClurkin, chief of business analytics and marketing at handcrafted photo product company PhotoBarn. "Predictive analytics gives you much more insight into what's driving the revenue engine of your business than just about any other tool."
For example, airlines are using predictive analytics to improve profitability and provide customers with better traveling experiences. Using their own data and third-party data, they are able to understand seat-assignment and legroom preferences, how often their customers fly, and how price sensitive they are, as well as what customers are doing at the airport.
Predictive analytics helps them understand "value" from the customer's point of view -- specifically, the mix of convenience and price that will most likely appeal to an individual, according to Lalit Dhingra, president, US, NIIT Technologies.
"The industry is moving from insight to foresight -- knowing what's happening to knowing what may happen or what will happen," said Dhingra. "Predictive analytics can make a good company great and a great company can excel even further."
Here are a few ways predictive analytics is transforming the way companies do business.