Wednesday 26 September 2012

so what is prescriptive analytics?

Today every business is surfing in the ever-expanding sea of data & using analytics for getting the edge over their competition.
With the explosion of unstructured data on social media, audio-video steams, companies are rushing to use this for big insights.
There are mainly 3 types of analytics & it is based on the company’s maturity in analytics as to which one to adopt….Descriptive, Predictive & Prescriptive analytics.
Let me explain with examples.

Descriptive Analytics
Predictive Analytics
Prescriptive Analytics
What questions are answered?
What happened?
How many customers?
Where revenue is less?
Why it is so?
What will happen next?
What trends will continue?
What if we change pricing?
What is the best course of action for a given situation?
What is the impact of seasonality?
How it is done?
Use of KPIs, dashboards, charts
Use of statistical methods to understand the relationships in input data & predict the outcomes.
Use of data mining, forecasting, predictive modeling.
Use of advanced statistical optimization & simulation techniques with inputs & constraints to recommend what actions to be taken.
General examples
How many customers have churned? Why did they churn?

How many customers will churn in the next few months?
What actions to be taken to retain these predicted churners?
Some of the Industry examples
Netflix uses data mining to find out correlations between different movies that subscribers rent & then recommend the one which you are most likely to watch
ING using personalized campaign offers in real time by predicting who will respond, to increase 30-40% response rates & reduce direct marketing costs by 35% per year. using price optimization based on demand to increase the online shopping revenues.

  How various industries are using prescriptive analytics?
·    Consumer product companies are using it to maximize the marketing dollar spend
·    Transportation & Logistics companies are using it to find the best route for their deliveries & backhaul
·    Healthcare service providers are using it to decide how many beds they should increase in the hospitals
·    Manufacturing giants are using it for inventory optimization to decide how much safety stock they should keep of each item, where to stock it based on the demand
·   Telecom business is using it for providing on the spot offers to customers when they call the customer service centers
One daily life example - Imagine you are driving a car with a built-in GPS, which analyses all the data it collects from the satellite about traffic, accidents, weather etc. It tells you which routes will have heavy traffic (prediction), but also recommends you the alternate routes (prescription) with less traffic.
So Prescriptive analytics is where you know what the future is, but also know what to do with it, with alternatives of best outcomes J


  1. Really nice differentiation.. giving overall good idea about three types of analytics

  2. All this really amounts to is using analytics to grapple with the options approach to business (or life) strategy. You can give it a new name if you like, and it is certainly an area where analytics can and should enable great impact, but this is not really a new thing.

  3. I would imagine 80% of analytics for most companies still focuses on descriptive analytics. With my company's current clients, most of them still have huge amounts of value to extract from just understanding what data is available internally and getting more decision makers to use descriptive analytics. I would imagine really instituting predictive or prescriptive analytics would be a huge investment in money and training and I wonder if it wouldnt be better spent getting most descriptive analytics right first.

    1. there is no sequence as you can use all 3 types together...provided all the required data is available for consumption !!

  4. It's very informative and useful article. Every companies maturity based on top three analytic's such as Descriptive, Predictive & Prescriptive analytic's. Prescriptive analysis is possible today, because of the improvements we have made to the pace and storage size computer systems. It’s a processing-intensive process that examines prospective choices, the communications between those choices, the aspects and restrictions on each choice and the greatest business result of each situation to reach an maximum remedy. Prescriptive analytic's is where you know what the future is, but also know what to do with it, with solutions of best outcomes. Market Report

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  6. Thanks so very much for taking your time to create this very useful and informative site. I have learned a lot from your site. Thanks!!

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  7. Thanks for the table; that actually explains it pretty well. Much better than some of the extremely dense material on predictive and prescriptive analytics. What are your thoughts on how to get to the prescriptive stage of analytics in financial services, for example? Thanks!

  8. Excellent summary, Sandeep. I like the table.

  9. Great Blog ! While looking into table , we can understand easily .

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