Predictive Analytics helps Retailers to make sense of Big Data

[simple-author-box]

“The most successful retail companies are utilizing data science and predictive analytics (PA) to improve efficiency, improve marketing campaigns, and gain significant customer insight for a competitive advantage” says Christine Kern, contributing for Innovative Retail Technology. But what about the “not so successful” retailers? How can they share in the advantages that Big Data and PA offer? Retailers can – by using predictive analytics.

What is Predictive Analytics?

Predictive analytics is a set of business intelligence technologies that uncovers relationships and patterns within large volumes of data that can be used to predict behaviour and events, according to Eckerson (2007) 1. Or, as Eckerson states it more bluntly “Predictive Analytics is like an “intelligent” robot that rummages through all your data until it finds something interesting to show you.”

Also, forecasting is about predicting the future, and predictive analytics adds questions regarding what would have happened in the past, given different conditions. Therefore, PA attempts to quickly and inexpensively approximate relationships between variables while still using deductive mathematical methods to draw conclusions 2.

Gregg Brunnick, Director of Product Management & Technical Services, Business Systems Division, Epson America explains the usefulness of PA: “If you know how many cheeseburgers John sold during last Tuesday’s lunch hour, for instance, you can improve the efficiency of your food ordering, preparation, labor, and marketing operations.”

The value of Predictive Analytics for retailers

Deon Abott of Smarter HQ writing in Inside Big Data, suggests that data science and predictive modeling have become the holy grail for the retail industry. For this reason retailers built reports summarizing customer behavior using metrics such as conversion rate, average order value, recency of purchase and total amount spent in recent transactions.

These measurements provided general insight into the behavioral tendencies of customers. However, says Deon “In order for retailers to create a meaningful dialogue with customers that honors the shopper’s preferred level and mode of engagement, it takes more than summarized reports, which is why customer intelligence and predictive analytics provide the opportunity to significantly change the retail marketing industry.”

Generic uses of Predictive Analytics are according SAS the following:

  • Detecting fraud. Combining multiple analytics methods can improve pattern detection and prevent criminal behavior. As cyber-security becomes a growing concern, high-performance behavioral analytics examines all actions on a network in real time to spot abnormalities that may indicate fraud.
  • Optimizing marketing campaigns. Predictive analytics are used to determine customer responses or purchases, as well as promote cross-sell opportunities. Predictive models help businesses attract, retain and grow their most profitable customers.
  • Improving operations. Many companies use predictive models to forecast inventory and manage resources. Predictive analytics enables organizations to function more efficiently.
  • Reducing risk. Credit scores are used to assess a buyer’s likelihood of default for purchases and are a well-known example of predictive analytics. A credit score is a number generated by a predictive model that incorporates all data relevant to a person’s creditworthiness.

Erick Siegel of Big Think suggests that predictive analytics allows for a keen assessment of the probability that any one person will buy, sell, click, lie, die, etc. PA doesn’t just predict the future; it can influence it as well.

The challenges of using Predictive Analytics

The big challenge for retailers is to use PA correctly. Not using PA appropriately can cause loss of brand equity and market share with astonishing speed. The key is in understanding the customer’s “digital body language”, suggests Earley (2014) 3. Retailers need to understand customer data – the attributes, needs, characteristics, life stage, behaviour, demographics, and psycho-graphics. The information coming from the data may be used to help customers behave in a way that satisfies their needs 3.

Unfortunately, the use of PA by some retailers has been reported as controversial. Not only are most companies not informing their customers of when and what data they are collecting, but they are not letting them know about their analysis policies, according to Corrigan et al (2014) 4.

According to Arliss Coates from EConsultancy retailers should note the following when using PA:

  • Is automation driving out your innovation and originality?
  • Do you have people that know how to interpret the results of PA?
  • Scenario planning – humans cannot prepare the machines to anticipate every possible nuance or scenario.
  • An over-reliance on data to substantiate decision-making may hampers innovation.
  • The “garbage in, garbage out” principle – bad data will render bad results.

Concluding

The explosion of data is here to stay. At this moment it seems that the availability and use of big data and predictive analytics will grow exponentially. In spite of some controversy and challenges, PA couldn’t have come at a better time for retailers. Predictive analytics may help retailers to integrate their channels more smoothly and thereby keeping in pace with their competitors.

Read also: Big Data for Small Retailers – Is it Doable?

Have a look at this practical demonstration of PA from IBM “”Predictive Analytics for Retail – Introduction”:

A Marketing Plan helps you to communicate the right content to the right audience.

Notes

1 Eckerson, W.W. 2007. Predictive Analytics. Extending the Value of Your Data Warehousing Investment, TDWI Best Practices Report, Q1.

2 Waller, M.A. and Fawcett, S.E. 2013. Data science, predictive analytics, and big data: a revolution that will transform supply chain design and management, Journal of Business Logistics, 34(2):77-84.

3 Earley, S. 2014. Big Data and Predictive Analytics: What’s New? IT Professional, 16(1):13-15.

4 Corrigan, H.B., Craciun, G. and Powell, A.M. 2014. How does target know so much about its customers? Utilizing customer analytics to make marketing decisions, Marketing Education Review, 24(2):159-166.

Image: Pixabay

Video: IBM

Published by

Douw G Steyn

Douw G Steyn

Management consultant, blog writer, dreamer

134 thoughts on “Predictive Analytics helps Retailers to make sense of Big Data”

  9. It’s a shame you don’t have a donate button! I’d definitely donate to
    this outstanding blog! I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account.
    I look forward to fresh updates and will talk about this site with my Facebook group.

    Chat soon!

  11. Thank you, I have recently been looking for
    information approximately this subject for ages and yours is
    the best I have came upon till now. But, what in regards to the bottom line?
    Are you positive about the source?

  13. It is the best time to make some plans for the future
    and it is time to be happy. I’ve read this post and if I could I want to suggest you some interesting things or tips.

    Perhaps you can write next articles referring to
    this article. I desire to read even more things about it!

  19. Hey! Do you know if they make any plugins to assist with Search Engine Optimization?
    I’m trying to get my blog to rank for some targeted
    keywords but I’m not seeing very good success. If you know of any please share.
    Many thanks!

  20. Definitely believe that which you stated. Your favorite justification appeared to be on the internet the easiest thing to
    be aware of. I say to you, I definitely get annoyed while people
    consider worries that they just don’t know about.
    You managed to hit the nail upon the top and also defined out the whole thing without having side effect , people can take a
    signal. Will likely be back to get more. Thanks

  24. Heya i’m for the primary time here. I came across this board and I
    in finding It really useful & it helped me out much.
    I am hoping to give one thing again and help others like you
    aided me.

  28. Hey would you mind letting me know which web host you’re working with?
    I’ve loaded your blog in 3 completely different browsers and I
    must say this blog loads a lot quicker then most. Can you suggest a good web hosting provider at a reasonable price?
    Thank you, I appreciate it!

  30. Hey I know this is off topic but I was wondering
    if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates.
    I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this.
    Please let me know if you run into anything. I truly enjoy reading your blog and I look
    forward to your new updates.

  31. Its such as you read my mind! You seem to grasp a lot about
    this, like you wrote the e-book in it or something.
    I feel that you just can do with some percent to pressure the message house a
    bit, however instead of that, this is wonderful blog.

    A great read. I will definitely be back.

  32. Pretty part of content. I simply stumbled upon your web site and in accession capital to assert that I acquire in fact loved account your blog posts. Anyway I will be subscribing on your feeds or even I achievement you get admission to consistently rapidly.

  33. I was curious if you ever thought of changing the layout of your website? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having one or two images. Maybe you could space it out better?|

  36. I’m impressed, I have to admit. Genuinely rarely should i encounter a weblog that’s both educative and entertaining, and let me tell you, you may have hit the nail about the head. Your idea is outstanding; the problem is an element that insufficient persons are speaking intelligently about. I am delighted we came across this during my look for something with this.

  38. I’m impressed, I have to admit. Genuinely rarely should i encounter a weblog that’s both educative and entertaining, and let me tell you, you may have hit the nail about the head. Your idea is outstanding; the problem is an element that insufficient persons are speaking intelligently about. I am delighted we came across this during my look for something with this.

  41. Pingback: Website Analytics Helps You to See How Your Online Business is Performing - eBizplan.net
  42. Pingback: Marketing Automation is enabled by Artificial Intelligence, Big Data and Chatbots - eBizplan.net
  43. Pingback: Big Data for Small Retailers – Is it Doable
  44. Pingback: Social Customer Relationship Management in Retail

  47. “Thanks for the marvelous posting! I certainly enjoyed reading it, you will be a great author.I will always bookmark your blog and will eventually come back in the foreseeable future. I want to encourage you to ultimately continue your great job, have a nice evening!”

  50. “I love your blog.. very nice colors & theme. Did you design this website yourself or did you hire someone to do it for you? Plz reply as I’m looking to design my own blog and would like to know where u got this from. kudos”

  55. “Hey would you mind stating which blog platform you’re working with? I’m going to start my own blog in the near future but I’m having a hard time choosing between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design and style seems different then most blogs and I’m looking for something completely unique. P.S Sorry for getting off-topic but I had to ask!”

  93. “”We are a group of volunteers and starting a new scheme in our community. Your website offered us with valuable info to work on. You’ve done a formidable job and our whole community will be grateful to you. que es la gastritis””

  111. Hiya, I am really glad I have found this info. Nowadays bloggers publish only about gossips and net and this is actually annoying. A good web site with interesting content, this is what I need. Thanks for keeping this website, I’ll be visiting it. Do you do newsletters? Cant find it.

  119. Magnificent goods from you, man. I’ve understand your stuff previous to and you’re just too excellent. I really like what you have acquired here, certainly like what you’re stating and the way in which you say it. You make it entertaining and you still take care of to keep it smart. I cant wait to read far more from you. This is actually a great website.

  122. Along with every little thing which seems to be developing inside this specific area, a significant percentage of viewpoints tend to be somewhat radical. Having said that, I beg your pardon, because I do not subscribe to your whole strategy, all be it refreshing none the less. It looks to us that your commentary are actually not totally rationalized and in simple fact you are yourself not really thoroughly certain of the assertion. In any case I did appreciate reading through it.

  124. hello there and thank you for your information – I have certainly picked up something new from right here. I did however expertise several technical points using this website, since I experienced to reload the web site many times previous to I could get it to load properly. I had been wondering if your web hosting is OK? Not that I am complaining, but sluggish loading instances times will often affect your placement in google and could damage your high quality score if advertising and marketing with Adwords. Anyway I’m adding this RSS to my e-mail and could look out for a lot more of your respective fascinating content. Make sure you update this again very soon..

  128. I am writing to make you know what a awesome discovery my girl developed browsing your site. She came to find so many things, most notably what it’s like to have an awesome helping mood to make others completely thoroughly grasp specific extremely tough topics. You undoubtedly exceeded people’s desires. Thank you for offering the priceless, safe, informative and also cool guidance on that topic to Julie.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.