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PREDICTIVE ANALYTICS
WHAT IS PREDICTIVE
ANALYTICS??
‣NEXT BEST OFFER FROM AMAZON
‣PRODUCT RECOMMENDATION SPECIFIC TO CUSTOMERS
‣FORECAST OF NEXT QUARTER’S SALE
‣DIGITAL MARKETING MODELS TO DETERMINE WHAT AD
TO PLACE ON WHAT PUBLISHER’S SITE
‣PREDICTION OF STOCK PRICES
‣INVESTMENT BANKING; WHETHER TO BUY OR SELL INTO
SOME ASSET
IT IS….
HOW TO PREDICT
FUTURE FROM DATA
THERE IS NO WAY THAT WE CAN FETCH THE DATA FROM
FUTURE
BUT WE CAN PREDICT FUTURE USING DATA FROM PAST
SKILLS REQUIRED TO
ANALYZE DATA FOR
FUTURE
1.
GOOD DATA FROM GOOD SOURCE
2.
STATISTICAL WIZARDRY
3
MODEL BASED ON RELIABLE ASSUMPTIONS
‣ CREATE DEMOGRAPHIC ATTRIBUTES OF
CUSTOMER(for e.g. age, gender etc)
‣ ATTRIBUTES OF THE DATA
‣ MACHINE LEARNING TO PREDICT THE
DATA
‣ THE SOURCE OF DATA SHOULD BE
RELIABLE
‣ CREATE SINGLE CUSTOMER DATABASE
WITH UNIQUE CUSTOMER ID’s TO PREDICT
MORE ACCURATELY
HOW TO USE THE DATA
STATISTICAL ANALYSIS
THE MAIN METHOD FOR PREDICTIVE ANALYSIS
IS REGRESSION MODEL.
IN THIS WE ASSUME A DATA SET AND PERFORM
SOME TESTS TO CHECK THE DEPENDABILITY OF
INDEPENDENT VARIABLES ON EACH OTHER.
THESE TESTS INVOLVE CHI-SQ TEST AND T-TEST
THIS FINDS THE CORRELATION BETWEEN EVERY
VARIABLE AND PREPARES THE BEST
REGRESSION MODEL
ASSUMPTION
THE CRUCIAL PART OF THE
PREDICTIVE ANALYSIS IS THE CORRECT
ASSUMPTION.
THE MOST COMMON MISTAKE THAT
PEOPLE MAKE IS; THEY ARE USING THE
ASSUMPTION BASED MODEL THAT
WAS CREATED SEVERAL YEARS
AGO.THERE IS A HIGH CHANCE THAT
THE MODEL DOES NOT ACCURATELY
PREDICT CURRENT BEHAVIOURS.
ONE MORE MISTAKE THAT PEOPLE
TEND TO MAKE IS THAT THE VARIBALE
THEY ARE USING IN PREDICTION MAY
HAVE CHANGED OVER THE PERIOD
OF TIME.
THE CONSEQUENCES OF BAD
ASSUMPTIONS
ECONOMIC FAILURE!!!!!!
TIPS FOR MANAGERS
MANAGERS SHOULD CAREFULLY CHECK THE ATTRIBUTES AND THE
REGRESSION MODEL CREATED BY THE ANALYSTS FOR DATA PREDICTION.
THEY SHOULD ALSO HAVE A CHECK ON THE ASSUMPTIONS; IF THEY ARE
VALID AND HAVE NOT CHANGED OVER A PERIOD OF TIME, ESPECIALLY IN A
DEVELOPING COUNTRY LIKE INDIA WHOSE ECONOMY IS CONSTANTLY
CHANGING.
FOR THIS THEY NEED TO HAVE CERTAIN KNOWLEDGE ABOUT THE DATA AND
STATISTICAL ANALYSIS.
BIBLIOGRAPHY
WEBSITES:
https://docs.google.com/document/d/1Vl26TosaYe3XZGZVt2ZUM_blQ8RhPFlbzcSzbqjm-Q8/edit#
https://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers
http://www.lehman.com
THANKS

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