Prescriptive Analytics: Your Secret Weapon for Achieving Stellar Marketing ROI
This post is part of our Analytics of Things series.
As a decision-maker in an organization, there will be times when you will be in charge of making tough calls, calculating the risks, and guiding those looking to your leadership under tight deadlines. At times, with incomplete information.
These moments of decision-making define the path the organization will take. The ability to weigh the risks and rewards, draw upon data and insights, and lead confidently becomes essential in achieving your goals and stimulating innovation.
What you need is a prescription to success.
Cultivating Precision
Prescriptive analytics uses algorithms, machine learning, and rule-based systems to provide specific, actionable recommendations to optimize decision-making.
It goes beyond descriptive analytics, which helps you understand past events, and predictive analytics, which forecasts future outcomes.
This analysis can simulate the probability of various outcomes and predict what is likely to happen and suggest what actions you should take to achieve a desired result.
5 Steps to A Clear Prescription
- Objective: You would begin by pinpointing the precise goal or target you aim to achieve, setting the stage for the entire process. It's crucial to clearly understand what you're trying to optimize or improve. For example, it could be marketing campaigns or customer service.
- Data Application: Next, you would meticulously collect, curate, and apply data as the cornerstone for informed decisions. As a critical component, your data will help you make informed decisions and generate insights. For example, you would collect A/B testing results and customer feedback.
- Analyzing Scenarios: Using the generated data, you would explore various scenarios and examine each possibility to anticipate their potential outcomes and implications. For example, what were the results of A/B tests, and what are the common themes in the feedback?
- Optimization: This is the central element of prescriptive analytics. It is optimizing to find the best solution to maximize your desired outcome while considering various constraints and factors to align with the established objectives. This step can involve mathematical modeling and optimization algorithms while considering costs, resources, and constraints. For example, you would look at allocating more budget to higher performing A/B test results and using customer feedback to improve your product.
- Decision: Using data-backed, well-reasoned decisions, you make informed choices and take the steps likely to lead to the best possible outcomes. Your final prescription, based on data-driven recommendations, will guide you toward your desired objectives. For example, the marketing campaign has decided on a basic template from the A/B results, and based on feedback, you have prioritized a product improvement roadmap.
The Role of Probability
Probability plays a significant role in prescriptive analytics by helping decision-makers make informed choices based on the likelihood of different outcomes.
In this instance, it is seen as a tool for decision-makers to make informed choices based on the likelihood of different outcomes.
Let's look at a few ways probability is analyzed to deliver results.
Scenario Assessment: Prescriptive analytics often involves evaluating various "what-if" scenarios to determine the best action. Probability assesses the likelihood of each scenario's success and helps choose the option with the highest chance of achieving its objectives.
Risks: Simulating the probability of various outcomes and showing the chance of each helps organizations better understand the level of risk and uncertainty they face. Decision-makers can then prioritize actions based on their associated probabilities.
Decision Support: The main objective of the decision-making process, guided by prescriptive analytics, is to maximize desired outcomes by implementing specific actions recommended through data-driven insights. Your decisions are supported by data and not just averages.
Resource Allocation: Quite a few times, decisions based on resources can sometimes be limited. Probability can help you analyze which areas can have a higher success rate and allocate resources to those projects to increase the return on investment.
Sensitivity Analysis: Probability analysis allows decision-makers to understand how sensitive their outcomes are to different variables or assumptions. These steps help identify key factors that may impact the success of a decision.
In essence, probability in prescriptive analytics provides a framework for understanding uncertainty, assessing risk, and making choices most likely to lead to successful outcomes.
Any organization implementing prescriptive analytics aims to maximize efficiency, reduce costs, and make better data-backed decisions. Business environments can be complex, whether corporate or customer-facing; gaining clear insights on actions to implement for a clear outcome can help in more straightforward navigation of intricate business landscapes.