You have been predicted — by companies, governments, law enforcement, hospitals, and universities. In this lesson excerpt from Big Think+, Eric Siegel, author of Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die, explains why these entities not only have the power to predict the future “but also to influence the future.”
Eric Siegel: Predictive analytics is technology that not only gives organizations the power to predict the future but also to influence the future. And the reason it has that difference is because predictive analytics predicts for you, me, everyone- one person at a time whether you’re going to click, lie, buy, die; whether you’re going to default on your credit card statements; whether you’re going to commit an act of fraud; whether you’re going to vote for this presidential candidate or that presidential candidate. And because the predictions are on that level- and that’s really the defining characteristic of this technology. It enables organizations to improve their operations, to operate more effectively.
Impact your bottom line
For companies and corporations there’s a great deal of motivation to enact predictive analytics to make these per person predictions and use them to drive per person operational decisions and actions. And it just has a definitive impact on the bottom line. So, for example, in marketing if you can predict who’s most likely to respond, you can eliminate from that big long response contact list for direct mail and you can eliminate the bottom of that list where it’s less likely that people are going to actually respond or make the purchase after they receive it. And similarly let’s say a presidential campaign, it’s another marketing endeavor. You can channel and more correctly target who’s likely to be receptive to your message. By doing that the impact of the bottom line is dramatic.
So if you improve your response rate and/or decrease the contact list size and therefore the marketing costs by like 15 up to 30-40 percent, the actual impact on the bottom line, the overall profit of a marketing campaign, can multiply by multiple factors. If you can use your fraud auditors or your credit decision managers for giving loans or issuing credit cards and use those people’s times more effectively – so it’s all about channeling resources in a more efficient way.
If you can use those people’s time more effectively, show them transactions that are much more likely to be fraudulent charges, show them credit applications that are much more likely to be red flags as far as where potentially you should decline an application for credit, show a presidential campaign volunteer the house where they should spend their time knocking on the door, right. Than these armies of resources- financial resources, human resources become multiple times stronger and this does, one way or another, translate directly into a dramatic bottom line improvement for companies and other organizations.