Is the past a good predictor of the future? In many ways, it is. That’s the premise behind predictive analytics, any way.
Predictive analytics is taking past information about your business – customers, marketing statistics, sales, inventory, etc. – and using it to predict future needs. You can use it for any aspect of your business. You can determine what your future maintenance costs might be or what your future personnel and staffing needs might be. You can even determine what your future product line might be based on how certain products have done in cycles.
This isn’t the same as analyzing your website traffic, although you can use predictive analytics to determine what your future website traffic might be.
For instance, if you have a business that traditionally peaks during the month of March, then you can predict that next year your business will peak in March. More specifically, if you traditionally see an increase in your business by 10%-12% from January to March each year and you know that in January your business was up by 20% over last year’s business, then you can predict what your March business might be based on those numbers.
Why is predictive analytics important? It’s important because predictions can help you plan better so that your business operations run more efficiently. If you need to order more inventory, you can do that. If you need to scale back on employee work hours, you can do that too.
Predictive analytics helps you plan better and make your business more profitable.