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What is predictive analytics?

The predictive analytics definition is one of the most searched queries online. The term refers to the utilization of statistical modeling techniques to forecast future performance. Predictive analytics tools are used to assess current and historical trends to establish the likelihood of those patterns emerging again. 

Predictive business analytics are applicable in a wide range of industries: These span from health, insurance, technology, finance to marketing, amongst a host of others. Predictive models can be used to do produce forecasts, make customer experience decisions, and even develop investment portfolios.

Predictive analytics algorithms are reliant on a variety of high-end statistical techniques, such as data mining, artificial intelligence, machine, and deep learning. They come up with predictive models that can extract information from datasets, identify patterns, and identify a predictive score for an array of outcomes. It is a useful tool for evaluating opportunities, risks and making decisions.

Let us be quick to highlight that most people ask the question, “How is predictive analytics used in business?” The applications of predictive analytics are vast. It forms the core of what we will discuss in this article. Read on.

Types of predictive business analytics models

While there are several predictive analytics models that users can access, there are three core techniques. To get started, you need to know the decision trees, regression, and neural networks. These are the ones that are supported across a wide range of predictive analytics platforms. They are described in depth below.

Decision trees

Decision trees are the most popular techniques used to analyze the decision-making process. They are dependent on a schematic tree-shaped diagram that establishes the courses of action and their statistical probabilities. A branching method is an effective tool for showing every possible route and how it might lead to the next. No doubt, decision trees are the easiest models. It is because they are simple to understand and dissect. They also avail a quick way to make urgent decisions. 


Regression is a powerful tool used by statisticians to determine correlation. It is used if there is a need to establish the patterns in a large dataset, and there is a linear relationship between the inputs. Regression works by finding the formula, which best represents the relationship between the various variables of a dataset. For instance, it can help figure out how the price and other factors affect sales in a business.

Neural networks

These were developed in predictive analytics by mimicking the way the human brain functions. Neural networks can handle complex data relationships using artificial intelligence and machine learning. They are useful when you have several difficulties that you need to overcome. For instance, having too much data at hand, not having a formula connecting the inputs and outputs of your dataset, or when there is more need for making predictions rather than explanations.

Predictive analytics definition and history

Understanding the predictive analytics definition and history is pivotal if you are to fully exploit the opportunities that come with it. As highlighted before, by definition, predictive analytics is the utilization of big data, statistical algorithms, and machine learning tactics to assess the chances of future occurrences based on historical trends.

The history of modern predictive analytics can be retraced to the 1940s when government institutions started embracing computational models in their daily operations. By the end of the 1950s, predictive analytics already had commercial applications. ENIAC had developed the first models that could be used to forecast the weather. FICO also started applying predictive modeling to credit risk decisions. It also began to be used in finding the shortest path in air travel and logistics. 

From the 1970s through the 1990s, that was when predictive analytics went mainstream. The era marked the entry of modern-day technology heavyweights, such as Google, Amazon, and Microsoft into the predictive analytics space. Ecommerce platforms used the technique to enhance customer experience. 

The 21st century has been marked by the widespread use of predictive analytics. The possibilities are endless, from fintech, healthcare to social media. It is vital to point out that almost all Big Tech companies work on advancing predictive analytics using technologies, such as artificial intelligence and machine learning.

Why is predictive analytics important? 

Predictive analytics has emerged to be a vital tool; its importance can not be overlooked. Numerous organizations are now relying on their artificial intelligence and machine learning abilities for their daily operations in solving difficult problems and uncovering new opportunities. Below are some of the applications that highlight the importance of predictive analytics.

Reducing fraud

Predictive analytics is a powerful tool for fraud detection. Multiple layers of analytics methods help with detecting patterns that might be linked with criminal behavior. It is critical, considering that cyber threats are becoming a growing concern in this era where most business activities, including financial, have gone digital. 

High-end behavioral analytics can be used to scrutinize real-time activity on a network and pick up abnormalities that may be an indication of fraud, zero-day vulnerabilities, and advanced threats.

Reducing credit risk

The tool can also be used to evaluate a person’s credit score based on the trends from past financial transactions. The credit score system assesses a buyer’s probability of defaulting after making a purchase. Each person is assigned a number by the predictive model that is inclusive of the data relevant to that person’s creditworthiness. It is the backbone of fintech heavyweights such as the Chinese-based Ant Group. 

Optimizing marketing campaigns

Nowadays, businesses ought to use big data to optimize their marketing campaigns. There is a need for them to target that part of the market. It will help them yield the best results. Predictive analytics is a powerful tool to determine customer responses and purchasing behavior and improve cross-selling opportunities.

The models help businesses channel their resources and energy towards retaining and growing their most profitable clients. Nowadays, most business owners are interested in the question, “What are business leads, and how do they benefit them?” The answer is predictive analytics, which helps their marketing campaigns generate business leads and increase the business’ sales funnel.

Optimizing operations

Nowadays, numerous companies depend on predictive analytics for businesses to forecast inventory and manage their resources. For instance, airliners make use of predictive analytics to set ticket prices. 

Hospitality service providers also use it to forecast the expected number of guests at any point in time to maximize their occupancy levels and increase their revenue. The tools help organizations function optimally.


Predictive analytics also plays a pivotal role in underwriting. Insurance firms are known to be reliant on predictive analytics for businesses to assess policy applicants and determine their chances of having to pay out for a future claim. 

They base their analysis on the current risk pool of similar policyholders and historical trends that have resulted in payouts. Underwriting companies use predictive modeling that considers characteristics of data relative to past events. It helps reduce the risks associated with insurance.

How is predictive analytics used in business?

No doubt, predictive analytics can be used to advance businesses' future interests. This is where the tool has its most applications. Business entities can utilize models to help fine-tune their operations. Predictive modeling tools are useful for improving both customer experience and outreach.

Company executives and owners can utilize predictive modeling to analyze consumer behavior. It is crucial in making daily decisions in business. For instance, predictive analysis can be used by the management to target regular clients who end up defecting and going to a competitor. 

Predictive analytics also plays a role of paramount importance to determine advertising and marketing efforts. Entities use models to identify the clients who have a high probability of having a positive response to marketing and sales campaigns. As a result, business owners can save financial resources by targeting customers who already need their products.

Predictive analytics tools

Predictive analytics give their users the much-needed deep and real-time insights into an endless pool of business activities. They can be used to extrapolate different behavioral kinds and patterns. In the end, the business will derive useful information such as how to allocate resources at particular points in time, when to restock, and the best time to do their marketing campaigns based on data collected and analyzed over a long period. 

Almost all users of predictive analytics use tools developed by one or more competent technology companies. Most predictive analytics tools are customized to meet the requirements of particular enterprises and departments. The most popular predictive analytics software and service providers include the ones listed below:


As seen from this article, predictive analytics is what you need to embrace to take your business to the next level. It can offer your entity much-needed business leads and, ultimately, sales. There are organizations such as Belkins that can help you use the tool to advance your business interest.

If you wonder how to do B2B digital lead generation with Belkins, then it is high time you engaged with them. It is in your business's best interest and, of course, it will yield great results.