By now, you likely understand the value prescriptive analytics brings to an organization. At the peak of analytic ascendency, this tool goes beyond forecasting what will happen next and actually provides businesses with the best course of action to make it happen.
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Of course, the foresight prescriptive solutions provides is only useful if a business acts on it. Companies must make decisions based on the recommendations to optimize their strategies. Essentially, prescriptive decision-making ensures your company is utilizing the analytical technique to its full potential; outlining the most effective plan to achieve your goals.
Whether your business needs to increase shares in unprecedented market conditions or make waves with a new product launch, we are going to explore a few prescriptive analytics examples that your organization could use.
Beyond a description
Along the way to the prescriptive peak, organizations will also have to utilize diagnostic analytics, descriptive analytics and predictive modeling. While we have already discussed the difference between predictive and prescriptive analytics, it’s now important to note the contrasts that define descriptions and other statistical models.
Ultimately the difference between descriptive and prescriptive perspectives comes down to which direction each type of data analysis moves. Forbes notes that a descriptive perspective focuses on the past. It tells businesses what happened based on historical data and it is best for tracking trends amongst consumers. For instance, if a snack brand found a specialty flavor performed better in the fall, the producer may want to release it again next year.
While big data analytics is beneficial for understanding cause and effect, the information gathered is usually rendered useless when market conditions are affected by unexpected events. On the other hand, prescriptive analytics strives to understand possible outcomes in a future full of uncertainty. Aided by artificial intelligence, machine learning and other business intelligence tools, this analysis helps organizations optimize everything from their supply chains to marketing strategies.
As you see, both perspectives bring value to an organization, but prescriptive decision-making is far more beneficial for preparing for the unexpected.
You understand the future, now what?
Prescriptive analysis provides data scientists and internal teams with a plan to reach their future goals, but it’s up to the people utilizing the technology to turn this into actionable insight. A prescription shows business decision-makers which levers create the most positive future outcomes.
The future is never set in stone. Businesses must use the information prescriptive analytics provides to mitigate risks and achieve the best results. Understanding why and to what extent consumers respond to change and competitor actions is the most valuable type of foresight an organization gains with modern technology.
5 prescriptive analytics examples to inspire your strategic decision-making program
On a broad scale, prescriptive analytics has the potential to improve sales and reduce costs. McKinsey even predicts that this analysis has the ability to raise retail store sales anywhere from 2-5% due to its human behavior forecasting capabilities.
However, this is just one way business analytics is beneficial. Here are five more prescriptive analytics examples to inspire your short- and long-term strategies:
1. Marketing Strategy: It’s been said that half the money a company spends on marketing is wasted, but it’s never known which half. While a funny quip, it’s never good for a business to waste resources on advertising that doesn’t deliver results.
When a pharmaceutical company was transitioning one of its heartburn relief products from prescription to OTC, the marketing team was unsure how to launch it in consumer retail. The marketers utilized a prescriptive model to test different strategies and find out how to meet minimum sales targets. They found that shifting their investment from an influencer strategy and TV support to in-store marketing was best. First-year sales were 3.1% over plan and the brand has grown to $2B in sales in five years.
2. Product Launches: A similar situation occurred when an automotive company was introducing a hybrid version of a flagship SUV. Three years in advance of launch, the company deployed a prescriptive analytics platform to optimize product design, marketing commitments, pricing and targeting. The company deferred development money from four key features into other areas and cut the go-to-market time by six months. During the first six months of launch, the company met its forecast with 97.4% accuracy, making the return on investment of this launch the highest in the company’s history.
3. Spend Optimization: Choosing investments with the best ROI is a top priority for every company. When a sparkling beverage company was launching a new product into the energy drink category, the business had key issues to resolve for the launch into the niche market. The main considerations, like taste profile and creative messaging, needed to be configured by country. In countries that used a prescriptive platform, market share was 18% higher on average than in countries that did not use the system.
4. Demand Forecasting: In uncertain times, when demand is inconsistent or suddenly slow, businesses must be prepared. A global alcoholic beverage used prescriptive analytics to identify which segments’ consumption would change and in which direction in light of recent events. The approach helped the company avert losing market share to new behaviors that were estimated to cause a $100B loss.
5. Competitive Action: Finally, when a major provider of voice, data and content to small and medium-sized businesses recently faced challenges with customer churn after an introductory period, the organization needed prescription to reduce it. This helped the company configure its offering to reduce the churn rate from 3.4% to 2.5%, translating into a $70M increase in revenue.
Prescriptive analytics on the Concentric platform helped these businesses use their collected information for good. The best part is that this kind of analysis is effective and accurate no matter the amount of data available. With information consolidated on one platform for data integration and a comprehensive view of the market, business leaders are empowered to make better decisions to optimize their strategies.
Contact the team at Concentric today to begin integrating the powers of prescriptive analytics into your business to stay ahead of the competition and achieve your goals.