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BizReport : Advertising archives : October 08, 2015

Brands: Why you need prescriptive analytics

There are four common types of data analytics that can be used: descriptive, diagnostic, predictive, and prescriptive. According to one expert prescriptive analytics are crucial for retail brands. Here's why.

by Kristina Knight

Kristina: Could you describe the four types of analytics?

Guy Yehiav, CEO of Profitect: Descriptive analytics look at what has happened, like reports. They are a great way to measure past performance and KPIs. Diagnostic, making the process with the data more elastic to slice / dice and drill down to identify the issues. Predictive analytics tell you what could happen. They are the best way to determine what the future holds, run simulations etc.. Prescriptive analytics actually tells you what you should do based on your data. They give you specific actions to ensure visible success, based on all scenarios and they do it in plain language so everyone in the organization could follow.

Kristina: Why are prescriptive analytics important for brands?

Guy: With all the accumulated data today, Brand marketers today must play the part of both mind reader and master manipulator. But it doesn't have to be that way. Instead of using data that tells you what you've done (descriptive) or how you may perform in the future (predictive), brands and marketers can use prescriptive data to provide them with instructions on how to be the most successful. Brand marketers can rely on facts and data with prescriptive analytics, allowing them to both justify their actions and show the ROI. As Gartner said it during their Symposium conference in orlando, Data is value, but in order to generate the value you need to create algorythms (Patterns) that drives actions and therefore generate the return.

Kristina: Why do retailers need to be aware of margins?

Guy: Margins measure the relationship between the costs retailers pay to buy the merchandising and the cost to run a businesses and the price customers pay to buy their product or service. Retailers want to sell as close to the original price planned as possible versus taking merchandise down to clearance all at once and take a big hit on the margins or for grocers ending up with a high waste of produce on their hand because of the shorter shelf life span. To avoid the latter scenario, retailers often pulse out sales to avoid a clearance. But, taking markdowns too often is expensive as it means re-ticketing items, moving merchandise to the back of a store and/or discounting merchandise shelved in proximity of the items that were marked down. Continuously changing prices also causes "paper shrinkage" from incorrect pricing or missed markdowns. Each time a retailer goes through this process, they are decreasing margins. One of the reasons behind this imperfect system is often forecasting systems; these solutions tend to have an underlying "forecast error." Prediction is very difficult especially since it's about the future. This is why retailers need to be aware of margins and look to tools like predictive analytics to uncover opportunities in real-time, to balance inventories between channels, stores and warehouses, price right and re-tune the allocations.

Kristina: How can retailers use prescriptive analytics to better engage customers?

Guy: Prescriptive analytics help retailers look at customer interactions to determine trends and outliers, ultimately allowing them to develop customer profiles. These profiles or clusters help retailers understand when customers like to shop, what they prefer to purchase, how they typically shop - online, in-store or a combination of both - and their desired methods of communication. Having the right data on the right customer helps retailers better engage customers with prescriptive analytics, making them comfortable interacting with the brand while the retailer improve margin rather than follow the trend of profitless prosperity.

Tags: advertising data, data tips, data trends, Profitect

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