Five Key Building Blocks Help You Realize the Bottom-line Benefits of Predictive Analytics

Building Blocks to Evolving
Your Predictive Analytic Practice:
Five Key Building Blocks Help You Realize
the Bottom-line Benefits of Predictive Analytics
By Debbie MayvilleJune 15, 2006Customer Chemistry Building Blocks to Evolving Your Predictive Analytic PracticeIntroduction 2
IntroductionIn any competitive market, the ability to leverage data to understand acustomer's next move is essential. This is particularly true in businessesdriven by ongoing relationships and a steady stream of customer data.For that reason, companies in relationship-driven industries, from telecom-munications to banking, must continuously evolve their use of customerdata to stay competitive. To achieve a competitive advantage in customer marketing, companieshave invested millions of dollars in customer intelligence systems. Despitethis investment, many companies still struggle to increase marketing ROI.This is due largely to the absence of an effective predictive analyticsapproach to customer data.
An Effective Predictive Analytics Practice The good news is that an effective predictive Delivers Key Advantages analytics approach can deliver significant results forA predictive analytics approach to customer mar- companies that put it into practice. In a recentketing leverages statistical modeling to generate example, a global telecommunications companyranked lists based on each customer's propensity realized a 40% reduction in customer churn ratesto exhibit a certain behavior. Predictive analytics and achieved nearly $100 million from campaigncan deliver several significant business benefits, uplift, thanks in large part to an effective predictive including: analytics practice.
n Improved Targeting: An improved ability to focus So, what makes an effective approach? The answerappropriate marketing activity to each customer. lies in the fundamentals. Building a top tier predictive analytics practice entails more than n Enhanced Revenue: Better targeting yields simply buying a software package or implementingcampaign uplift, translating directly into a statistical toolset. It requires a well-planned andenhanced revenue. well-executed approach that comprises careful development across five key "building block" n Better Cost Control: Enables companies to disciplines, including: Strategy, Resources, Analyticfocus resources on high-value, high-potential Systems, Business Process, and Measurement.customers to improve effectiveness and reduceoverall marketing costs.
n Competitive Advantage: A well-executed pre-dictive analytics strategy can keep a company infront of the pack in the race to improve relation-ships and build customer revenue.Customer Chemistry Building Blocks to Evolving Your Predictive Analytic PracticeIntroduction 3
Figure 1. The Five Building Blocks The use of each of these disciplines varies exten-sively across industries and companies. Some com-panies have built highly sophisticated infrastructurewhile others are still managing via spreadsheets.For any company, the end goal is to realize a com-petitive advantage in the marketplace and imple-ment a strategy that provides a marked increase inrevenue or a reduction in costs.
Structure Married with FlexibilityOne of the main characteristics of a successful pre-dictive analytics program is the ability to balancethe need for structure with the need for flexibility.An established structure keeps the analyticsprocess focused, consistent and relevant. Tacticalflexibility enables organizations to address oppor-tunities as they arise and to support a company'sunique needs and core competencies. Most impor-tantly, the structure of a predictive analytics pro-gram must scale as the practice grows and changeas business develops over time.Careful planning across five "building block" disciplines is crucial for an effective predictive analytics practice.
Figure 2. A Balance of Structure and Flexibility
Structure Flexibility
n Proven defined process n Leverage your company's data nuances and proprietary informationn Quality and consistency of design and outcomes n Models, systems and analysis built relevant to yourn Predefined algorithms and methodologies company's objectives
n Repeatable and scalable n Your company's insights drive modeling (unlike solutions with pre-built industry models)n Transferable n Technical sophistication can grow and scale whileleveraging experience and lessons learne... [download for more]