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BI Encyclopedia

Predictive Analytics

What is Predictive Analytics?

Predictive Analytics is a business intelligence technology that produces a predictive score that informs actions that customers should take. It’s an area of data mining that is related to the overall prediction of future probabilities and trends. For example, an insurance company is likely to take into account potential driving safety factors, such as age, gender, and driving record when distributing automobile insurance policies. Predictive analytics helps organizations identify the most efficient marketing campaigns and website behavior to increase customer responses, conversions and clicks, and to decrease interruptions.

The three types of models in predictive analytics include:

Predictive model: models of the relation between the specific performance of a unit in a sample and one or more known features of the unit

Descriptive model: quantifies relationships in data in a manner that is used to classify customers or prospective customers into groups

Decision model: describes relationship between all the elements of a decision, including the known data, the decision, and the results, to predict the results of decisions involving many variables