Predictive Analytics

Submitted To: Submitted By:

Mr.Kuntal Dey Shakun Bishnoi
Roll No: 42A
Introduction
Predictive Analytics use mathematical and
statistical means to evaluate historical data
patterns in order to make predictions about future
behavior.
In business, predictive models exploit patterns
found in historical data to identify risks and
opportunities.
Models capture relationships among many factors
to allow assessment of risk or potential associated
with a particular set of conditions, guiding decision
making for candidate transactions.
When can Predictive Analytics
be beneficial?
Quick decisions need to be made while
balancing many variables.
Know what customers have done in the
past but don’t know what they will do in
the future
Making bad decisions is costly, making
good decisions is rewarding.
Need of a consistent decision process.
Weather forecasting is an
example of PA
“There’s a 60% chance of
rain tomorrow.”
Using historical weather
data and current weather
patterns, a forecast for the
near future is developed.
The forecast is whether or
not it will rain.The
probability of rain is 60%.
The decision is should I
carry an umbrella or not?
Applications of PA
Types of Predictive Analytics
Predictive Models
- Analyze past performance to predict the likelihood of
an individual customer to exhibit a specific behavior in
the future.
-Use historical data to identify patterns
Descriptive Models
- Descriptive models identify different relationships
between customers to group or segment for marketing
or treatment.
- Use transaction history to group customers or
products
Decision Models
- Decision models predict outcomes of complex
decisions, relationships, products and processes.
- Use all known data and relationships between that
data to predict a response.
Scorecards
Scorecards rank order customers based on past
behaviors and their likelihood of exhibiting future
behaviors.
- Easy to build,easy to implement,easy to
interpret,easy to explain.
Clustering
A descriptive model that groups customers relative to
different attributes.
- Uses demographic data or other customer attributes
to create customer segments.
Road Map to Developing
Predictive Models
Building a basic model
1.Identify an objective and gather relevant historical
data
For example, “increase dollars recovered on disconnect for non- pay
customers”.
2. Build a Scorecard
a)Identify ‘predictor’ attributes
- Factors that influence the objective
b)(Optional) Determine weight of predictors
- For example, the number of payments in the last 6
months may be more important than the age of the
account so its value should be weighted more.
 c)Assign point values to the predictors
- Point values are assigned intuitively.

3. Develop a segmentation scheme

- Using the point predictors and point values, identify 3 to 6 different
segments. Arbitrarily select different break points which can be fine
tuned over time.

4. Develop the baseline

- Document current and historical performance of each
customer segment identified.
5. Compare results of model with current
performance
- Sometimes it’s necessary to substitute predictors or
test different versions of the model to achieve the
desired results
THANK YOU