Group 11

Brandon Masuku N02213241T

Mbongeni Ndlovu N02160281J
Alex C Sibanda N02215838H
Mbongeni Ndlovu N02016739M
Robedia Mushandu N02133139T

• Explain the Predictive analytics process.

Introduction
With technological evolution, data dependence is increasing much faster. Gone are the days when
business decisions were primarily based on gut feeling or intuition. Organizations are now
employing data-driven approaches all over the world. One of the most widely used data applications
is ‘Predictive Analytics’. Predictive analytics is widely used for solving real-time problems, be it
forecasting the weather of a place or predicting the future scope of a business.
Definition of Predictive Analytics
“Predictive Analytics refers to the field that applies various quantitative methods on data to make
real-time predictions.”
It provides a method of approaching and solving problems using various technologies, essentially
machine learning. Predictive Analytics often makes use of machine learning algorithms and
techniques to build models that make predictions.
Tools needed to begin: Python programming, Numpy, Pandas, Matplolib, Seaborn, Scikit-Learn

Predictive Analytics: Steps

Figure 1: The Predictive Analytics Process

(1) Problem Understanding and Definition:

This is the initial stage in the process of predictive analysis. This is a vital stage because we first need
to understand what exactly the problem is to frame the solution. When a stakeholder approaches
you with a certain problem, the first step would be to know the stakeholders’ requirements, the
utilities available, the deliverables and finally, know how the solution looks from the business
perspective.
Sometimes the requirements of the stakeholders may not be clearly defined. It becomes our
responsibility to understand precisely what is to be predicted and whether the outcome solves the
defined problem. The dynamics of the solution and the outcome completely change based on the
problem definition.
Converting a business problem into an analytical one is the most important part of predictive
analysis. Hence explicitly define what is to be predicted and how does the outcome look like.

(2) Data Collection:

This is the most time-consuming stage. Sometimes, the required data may be provided by the
stakeholder, from an external database or in some cases, you may have to extract the data. It is
possible that the data so collected may not be sufficient for framing the solution. You may have to
collect data from many sources. Think about how much access you have to the dataset that is
required.
Since the outcome of the predictive model relies entirely on the data used, it is important to gather
the most relevant data that aligns with the problem requirements. Here are a few things to be kept
in mind while searching for a dataset:
Format of the data
Period across which the data is collected
The attributes of the dataset
Does the dataset meet your requirements?

(3) Exploratory Data Analysis:

Once you have the dataset ready, you now may be willing to build your predictive model. But before
we start, it is crucial to know the properties of your data. Understanding the kind of data you have,
the features it possesses, the target or outcome variable, and the correlation among these features
all play a role in designing a suitable model. The main aim of EDA is to understand the data. This
may be achieved by answering the below few questions:
What are the data types present in the dataset?
What is the dimensionality of the dataset?
What does the data distribution look like?
Is there any missing data?
Is there any prominent pattern in the data distribution?
Do you observe outliers?
How are data features correlated to each other?
Does their correlation affect the outcome?
Sometimes the data collected contains a lot of redundant data. If such data is fed as input to the
model, there is a high possibility that the model makes wrong predictions. Hence it is important to
perform EDA on the data to ensure that all the outliers, null values and other unnecessary elements
are identified and treated. Identifying the patterns in the data makes it easier to decide the model’s
parameters. EDA helps us improve the model’s accuracy even before it is built.
EDA generally has two components- numerical calculations and data visualizations. Calculating
Standard Deviation, Z-score, Inter-Quartile Range, Mean, Median, Mode, and identifying the
skewness in the data are some ways of understanding the dispersion of data across the dataset.
Graphical representations such as heat maps, scatter plots, bar graphs, and box plots help get a
wider view of the dataset.
(4) Model Building:
After applying EDA, it is finally time to build predictive models using machine learning. In the
dataset, we use the predictor variables to make predictions on the target variable.
Target: The dependent variable whose values are to be predicted.
Predictors: The independent attributes in the dataset that are used to predict the value of the target
variable. Once the target is identified, all other columns become the predictor variables.
Model Building | Predictive Analytics
Figure 2: Model Building
Here we consider the model a calculator that takes in inputs and gives out the predicted output. We
may have to build a Regression or a Classification model based on the problem.
Regression algorithms such as Simple Linear Regression, Multi Linear Regression, Decision Tree
Regression etc., may be used to get desired results. Such models are used when the target is a
numeric feature.
Example: Predicting the house prices
While classification models are used when the target is a categorical feature, the classification
problems may be a binary classification or multiclass classification.
Binary classification: The target has only two possible categories.
Multiclass classification: The target has more than two possible outcome categories.
Apart from these, unsupervised learning algorithms such as Clustering and Association algorithms
can also be used based on the requirement.

(5) Model Evaluation:

Once the model is built, the next stage would be to analyze the performance of the model.
Evaluating the model based on different scenarios and parameters thereby contributes to deciding
‘the most effective’ model for solving the given problem. Usually, one or more metrics are used to
know how good the model performs.
Different measures are used for rating the performance of machine learning models.
For regression models: Mean Squared Error (MSE), Root Mean Squared Error (RMSE), R Squared (R2
Score)
For classification models: F2 Score, Confusion Matrix, Precision, Recall, AUC-ROC

(6) Model Deployment:

Now that the model has been built, tested and evaluated, it is time to deliver it to the stakeholder.
Model deployment involves placing the model into a real-world application that can be used for its
intended purpose. This may be done by using the model in a software application, integrating it into
a hardware device, building a framework around the model or using the model itself as a ‘data
product’.
 Conclusion
This article taught us the primary steps of predictive analytics. One needs to be aware of these while
dealing with predictive analytics problems.
Framing and understanding the problem statement
Collecting and preparing the data
Build appropriate models
Evaluate them to choose the best one
Deploy them in the required format
However, these were just an overview of the most important stages; further steps can also be
performed depending on the problem.
Now that you have a basic understanding of how prediction models are designed, you can start
learning the tools and concepts required to build your first prediction model.

• Describe various types of Predictive Analytical Models.

Predictive analytics is a subfield of data science that analyses historical data and makes predictions
about future events or outcomes using statistical algorithms, machine learning, and other
techniques. This method assists organizations in identifying patterns, detecting anomalies, and
forecasting future trends.
What are Predictive Analytics Models?
Predictive analytics models are statistical or machine learning algorithms that use historical data to
make predictions about future events or behaviors. These models analyze large amounts of data to
identify patterns and trends, which they then use to forecast future outcomes.
Predictive analytics model development typically entails several steps, including data preparation,
model selection, feature engineering, and model training and testing. The goal is to create a model
that predicts future outcomes accurately based on a set of input variables or features. Finance,
healthcare, marketing, and retail are just a few of the industries that can benefit from predictive
analytics modeling.
How Do Predictive Analytics Models Work?
Predictive analytics models identify patterns and trends in historical data that can be used to predict
future outcomes. Several steps are usually involved in the process:

Step 1: Data Collection

Gathering relevant data from multiple sources is the first step in developing a predictive analytics
model.
Step 2: Data Preparation
Once the data has been collected, it must be cleaned and transformed into an analysis-ready
format.
Step 3: Feature Selection
In this step, the most relevant variables or features are selected from the dataset to be used in the
model.
Step 4: Model Selection
There are various types of predictive analytics models available, including regression, decision trees,
and neural networks. Based on the nature of the problem and the available data, the appropriate
model is chosen.
Step 5: Model Training
The model is trained on historical data in this step to learn patterns and relationships that can be
used to make predictions.
Step 6: Model Evaluation
The model is evaluated after it has been trained to ensure that it can make accurate predictions on
new, unseen data.
Step 7: Model Deployment
Finally, the model is used to make predictions based on new data and provide business insights.

What are the types of predictive analytics models?

Predictive analytics models are classified into several types, including:

Regression models: These models use one or more input variables to predict a continuous numeric
value, such as sales revenue or customer lifetime value.
Classification models: these are used to categorize data into one of two or more groups based on
input variables. Fraud detection, customer segmentation, and spam filtering are a few examples.
Time series models: These models are used to predict future values based on historical trends and
patterns in time-series data, such as stock prices, weather patterns, or website traffic.
Clustering models: These models are used to categorize data points based on similarities in their
characteristics or behaviors. Clustering models are often used for customer segmentation and
market basket analysis.
Neural network models: These models are used to identify complex patterns in data and are based
on the structure and function of the human brain. Image and speech recognition, natural language
processing, and predictive maintenance are all common applications for neural network models.
Decision trees: These models are used to generate a visual representation of possible outcomes
based on various decision paths. They are frequently used to assess risk, detect fraud, and analyze
customer churn.
Ensemble models: combine multiple predictive models to improve accuracy while reducing the risk
of overfitting. Random forests, gradient boosting, and stacking models are some examples.
 These are a few predictive analytics models examples. There are numerous other models, each with
its own set of strengths and weaknesses, that can be used to solve various types of problems.

Applications of Predictive Analytics Models

Predictive analytics models have numerous applications in various industries, including:
Finance: In finance, predictive analytics models are used to forecast stock prices, credit risk, and
other financial metrics. These models are used by banks and financial institutions to identify
potential risks and opportunities.
Healthcare: uses predictive analytics models to forecast disease outcomes, identify high-risk
patients, and improve patient outcomes. Hospitals and healthcare providers use these models to
improve patient care while lowering costs.
Marketing: Marketing uses predictive analytics models to identify customer segments, predict
customer behaviour, and optimise marketing campaigns. Businesses use these models to improve
customer engagement and sales.
Manufacturing: Predictive analytics models are used in manufacturing to predict equipment failures,
optimise production processes, and reduce downtime. Manufacturers use these models to increase
efficiency and lower costs.
Retail: Retailers use predictive analytics models to forecast customer demand, optimise inventory
levels, and improve pricing strategies. These models are used by retailers to improve customer
satisfaction and increase sales.

What are the benefits of predictive analytics models?

The key benefits of using predictive analytics models are:
Improved Accuracy
Improved Decision-making
Increased Efficiency
Competitive Advantage

A predictive analytics platform is a software tool that analyses data and predicts future events or
outcomes using statistical and machine learning algorithms. These platforms have applications in a
variety of industries, including finance, healthcare, marketing, and manufacturing.

• Discuss possible uses of predictive analytics as used in Data Analytics.

*Predicting buying behavior
One of the biggest uses of predictive analytics is predicting buying behavior in the retail industry.
Companies use the tools to learn all about their customers. Companies use advanced analytics to
identify buying habits based on previous purchase history.
Walmart is a great example. It used early data to understand buying behavior in certain
circumstances. Small ecommerce retailers can incorporate predictive analytics in PoS to predict
customer purchase patterns. It helps to understand customers on a deeper, more personalized level.
*Fraud detection
As cybersecurity becomes a growing concern, predictive analytics examples are plenty. The most
important one is fraud detection. These models can identify anomalies in the system and detect
unusual behavior to determine threats.
For example, experts can feed historical data of cyberattacks and threats to the system. When the
predictive analytics algorithm identifies something similar, it will send a notification to the
respective personnel. It will limit the entry of hackers and vulnerabilities that might put the system
at risk.
*Healthcare diagnosis
The healthcare industry is benefitting the most from the predictive analysis module. Health data is
critical to understand the history and current illness of any patient. Predictive analytics models help
in understanding the disease by providing an accurate diagnosis based on past data.
With the help of certain health factors, predictive analytics help doctors reach the root cause of
diseases. It gives them timely analytics so that they can start working on the treatments at an early
stage. With the help of predictive analytics models, the spread of negative health effects can be
stopped.
*Cart abandonment
Retailers love this application of predictive analytics. Cart abandonment is a big issue. However,
based on past history, models can predict how likely a customer is to abandon the cart.
For example, by feeding the data to the model of purchase made and cart abandoned, the model
predicts how many customers will abandon it. It will also provide companies with details about each
customer about whether they will purchase or abandon the cart based on the previous visits to the
store.
*Content recommendation
One of the most relatable and visible predictive analytics examples is content recommendation.
Through algorithms and models, entertainment companies can predict what users want to watch
based on their history.
When you ask, “what companies use predictive analytics?” The most relevant answer is Netflix. The
entertainment company utilizes predictive algorithms to recommend content to users based on
genre, keywords, ratings, and more. The intelligent system uses highly advanced analytics for
predicting the user’s behavior.

Citations:
- Predictive Analytics Process : https://www.sap.com/products/technology-platform/cloud-
analytics/what-is-predictive-analytics.html
- Types of predictive analytical models: https://www.voxco.com/blog/types-of-predictive-analytics-
models-and-their-applications/

-Possibel uses of predictive analytics in data analytics: https://www.redalyc.org/predictive-

analytics/a-study-of-it's-advantages-and-applications.html