How the Uncanny gets into Marketing
Chicago Tribune 7/25/2005, Business Section
Predictive Analytics is one of the most promising forefronts of business technology. An advanced form of statistical analysis, predictive analytics provides business solutions in the form of advanced regressions, RFM analysis, and mean comparisons. Put more simply, this relatively new area of statistical analysis technology can help academics and business people alike use probability to tell who will buy, what will happen, and what business options to pursue when dealing with seemingly random variables.
In this article, Chicago Tribune writer Jon Van details areas where predictive analytics has shown incredible results and promise for the future. In marketing for instance, a database comprised of customer data and information can be put together and regressions run to help predict a variety of things about customer behavior. Predictive analytic software can help assess the probability of a customer buying a new product given the customer’s past behaviors and demographic/ethnographic/ psycho- graphic attributes. Distributed along a standard distribution, predictive analytics helps find the reason for statistical variance and apply that to practical business models. A sporting goods company like Nike could use the software and analysis systems to see whether or not John Smith, age 55, white male, would buy their new line of footwear. If the probability is significant, Nike would most likely find it profitable to market to him- send him a catalogue or promotion of some sort. In a business world of huge numbers of customers, huge numbers of attributes, and limited marketing resources- predictive analytics allows for accurate targeting.
Of the many analytic packages out there, the industry leader is Chicago-based SPSS. An international software and consulting firm based in the Sears Tower, SPSS has captured a huge share of the predictive analytics market with its prestige and quality. Last quarter, SPSS registered $57.5 million in earnings, a good 25% of the predictive analytics market all by itself. Major companies are all flocking to SPSS and this area of business technology. Without much time to spare, global businesses are looking for accuracy, refinement, and efficiency. Predictive analytics gives them exactly that.