Predictive modelling seeks to answer the question.
“Based on known past behaviour, what is the most likely thing to happen in the future?
How is predictive modelling helpful?
Predictive modelling applies statistics to predict outcomes. It is a process that uses data mining and probability to forecast outcomes.
Models are made up of several predictors.
These are variables that are likely to influence future events. For example when and where a crime is likely to occur.
The BBC Horizon documentary ‘The Age of Big Data’ is good example. Unfortunately, no longer available on BBC i-player but you can view the program on Vimeo.
Modelling can be applied to any type of unknown event, regardless of when it occurred. For example, predictive models are often used to detect crimes and identify suspects. Before the crime has taken place.
Predictive modelling example applied to marketing.
Predictive modelling also called predictive analytics. Analytics is used by marketers to take the trial and error out of their marketing campaigns. Models seek to predict which actions and strategies are more likely to succeed.
Predictive analytics forecasts outcomes by pairing historical data with analytical algorithms. Businesses use software to track marketing efforts. Such as calls, clicks, web leads and more. The data is collected and added to the model.
The model seeks to account for various elements of a marketing campaign. Such as demographics time and location. Marketers can adjust different variables. For example when and where they are running their ads. Based on these adjustments the software generates predicted outcomes. Findings allowing marketers to see how campaign changes can impact their marketing outcomes.
Predictive modelling gives marketers an advantage.
By forecasting data driven outcomes exposing blind spots and highlighting potential revenue streams. Marketers can feel just a little more confident about their latest campaign strategy.
Key learning point
Predictive modelling is based upon historical data. What happened in the past rarely occurs in the exact same way in the future. Predictive analytics is a very powerful tool. But it remains just that a tool. In other words, there are no silver bullet predictors.