Introduction

In today's data-driven world, data analytics has become an indispensable part of any business operation. In particular, predictive analytics and descriptive analytics are two essential techniques used by businesses to handle large datasets.

However, many people find it challenging to distinguish between these two techniques, often using them interchangeably. In this blog post, we will provide a factual and unbiased comparison of predictive analytics and descriptive analytics, their differences, and use cases.

Descriptive Analytics

Descriptive analytics is a retrospective analysis of historical data to understand what has happened in a business. It is concerned with gathering, organizing, and summarizing data to provide insights that can inform operational decisions.

Descriptive analytics typically uses statistical techniques like mean, mode, and standard deviation to understand historical trends and provide evidence-based insights regarding the past. This information can be used to inform strategies and determine opportunities to grow a business.

For example, a small retail store may use descriptive analytics to understand how much inventory was sold during different periods of the year. Understanding sales trends provides insight as to how well certain products are performing and whether the store needs to stock up on inventory or decrease it.

Predictive Analytics

Predictive analytics, on the other hand, involves using algorithms and statistical models to analyze current and historical datasets and make predictions about future outcomes. It helps businesses to prepare for future trends and forecast business growth.

Predictive analytics often uses techniques such as machine learning, data mining, and modeling to predict outcomes. The primary aim of predictive analytics is to forecast trends and patterns based on complex data so that businesses can prepare for what is yet to come.

For example, a bank may use predictive analytics to identify customers who are at risk of defaulting on their loans. By analyzing a vast amount of customer data, such as previous payments, credit scores, and demographics, the bank can identify customers who may default on their loans in the future and take action accordingly.

Key Differences

The primary difference between descriptive and predictive analytics lies in their focus. While descriptive analytics provides insight into what happened in the past, predictive analytics forecasts what will happen in the future.

Another significant difference between descriptive and predictive analytics is their technique. Descriptive analytics relies heavily on statistical techniques to analyze historical data, while predictive analytics uses advanced algorithms and modeling techniques to make predictions.

Use Cases

Both types of analytics are essential for businesses, depending on their needs. Descriptive analytics can be used to gain insight into past events and aid with decision-making based on those events.

Predictive analytics is useful when a business wants to predict future events and prepare a strategy to meet future demands.

Some practical applications of descriptive analytics include analyzing sales trends, website traffic, customer demographics, and market share, while predictive analytics can be used for demand forecasting, customer acquisition, fraud detection, and risk management.

Conclusion

In conclusion, both descriptive and predictive analytics are used to help businesses make informed decisions based on data analysis. Descriptive analytics is useful when a business seeks to understand past events, while predictive analytics is useful when preparing for the future.

While descriptive analytics focuses on historical data and trends, predictive analytics uses those trends to make predictions to inform future strategies. Understanding the differences between these two techniques can allow businesses to make better-informed decisions and stay ahead in this data-driven world.

References

• Predictive Analytics Vs. Descriptive Analytics: What's The Difference? Aico.
• Descriptive vs. Predictive Analytics: What's The Difference? SAS
• Descriptive Analytics vs. Predictive Analytics: What’s the Difference? Phocas Software.