PREDICTIVE ANALYTICS

K.MOHANASUNDARAM
MGT 482
CREDITS 3
SYLLABUS
• INTRODUCTION TO BUSINESS ANALYTICS
• DATA ANALYTICS IN EXCEL, MATHEMATICAL MODELLING
• UNDERSTANDING DATA TYPES AND EXPLORATORY ANALYTICS
• DATA PREDICTION TECHNIQUES, SAMPLING AND TESTING OF HYPOTHESIS
• SIMPLE LINEAR AND MULTIPLE LINEAR REGRESSION
• LOGISTIC REGRESSION
• FORECASTING TECHNIQUES
• CLUSTER ANALYSIS
• DECISION TREES
• PREDICTIVE ANALYTICS FOR BUSINESS STRATEGY- REASONING FROM
DATA TO ACTIONABLE KNOWLEDGE – JEFFREY T. PRINCE &
AMARANTH BOSE

• APPLIED PREDICTIVE ANALYTICS: PRINCIPLES AND TECHNIQUES FOR

THE PROFESSIONAL DATA ANALYSTS – DEAN ABBOTT
 Business Analytics
Business Analytics use data, information technology, statistical
analysis, quantitative methods, and mathematical or computer-
based models to help managers gain improved insight about their
business operations and make better, fact-based decisions.

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Business Analytics Applications
 Management of customer relationships
 Financial and marketing activities
 Supply chain management
 Human resource planning
 Pricing decisions
 Sport team game strategies
 Applications
 Pricing : setting prices for consumer and
industrial goods, government contracts, and
maintenance contracts
 Customer segmentation : identifying and
targeting key customer groups in retail,
insurance, and credit card industries
 Merchandising : Determining brands to buy,
quantities, and allocations
 Location : Finding the best location for bank
branches and ATMs, or where to service
industrial equipment
 Social Media : Understand trends and
customer perceptions; assist marketing
managers and product designers

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Importance of Business Analytics
 There is a strong relationship of BA with:
- profitability of businesses
- revenue of businesses
- shareholder return
 BA enhances understanding of data
 BA is vital for businesses to remain competitive
 BA enables creation of informative reports
Evolution of Business Analytics

• Operations research
• Management science
• Business intelligence
• Decision support systems
• Personal computer software
Evolution of Business Analytics

Centralized Data Business Business

Data Mining
(Mainframe) Warehouse Intelligence Analytics
Perspective of Business Analytics
Benefits of Business Analytics
• Reduced costs
• Better risk management
• Faster decisions
• Better productivity
• Enhanced bottom-line :
profitability
• Higher Customer
satisfaction.
Challenges of Business Analytics
• Quality data availability
• Lack of Expertise and
Insufficient analytical skills
• Competing business
priorities
• Not understanding the ROI
of Business Analytics
Initiatives.
Business Analytics Classification
Evolved Organisation
With Decision driven by Precriptive Analytics
Prescriptive
Analytics

Predictive Descriptive
Analytics Analytics

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Various Types of Business Analytics

 Descriptive analytics: the use of data to understand

past and current business performance and make
informed decisions

 Predictive analytics: predict the future by examining

historical data, detecting patterns or relationships in
these data, and then extrapolating these relationships
forward in time.

 Prescriptive analytics: identify the best alternatives

to minimize or maximize some objective

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Popular Tools for Business Analytics
• Database queries and analysis
• Spreadsheets Data visualization
• Dashboards to report key performance measures
• Data and Statistical methods
• Data Mining basics (predictive models)
• Simulation
• Forecasting
• Scenario and “what-if” analyses
• Optimization

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Scope of Business Analytics
Retail Markdown Decisions
 Most department stores clear seasonal inventory by reducing prices.
 The question is:
When to reduce the price and by how much?
 Descriptive analytics: examine historical data for similar products
(prices, units sold, advertising, …)
 Predictive analytics: predict sales based on price
 Prescriptive analytics: find the best sets of pricing and advertising to
maximize sales revenue
Scope of Business Analytics
Analytics in Practice:
Harrah’s Entertainment
•Harrah’s owns numerous hotels and casinos
•Uses analytics to:
- forecast demand for rooms
- segment customers by gaming activities
•Uses prescriptive models to:
- set room rates
- allocate rooms
- offer perks and rewards to customers
Data for Business Analytics

 DATA
- collected facts and figures
 DATABASE
- collection of computer files containing data
 INFORMATION
- comes from analyzing data
Data for Business Analytics

Examples of using DATA in business:

 Annual reports
 Accounting audits
 Financial profitability analysis
 Economic trends
 Marketing research
 Operations management performance
 Human resource measurements