What’s it worth to be able to predict the future?

Introduction:

For many of us, this is the time of year to prepare and finalize next year’s budget and to forecast future spending needs. There are several tools that can make this process faster, more accurate and more successful.

There are many types of budgeting processes used in large and medium-sized companies—Top-Down, Bottom-Up, Use It or Lose It and Zero-Based Budgeting to name a few of the most popular.

All budget processes focus on long-term goals and the strategies and tactics to move the company towards those goals—identifying the cost of each step along the way.

Predictive analytics can be of enormous assistance in the budget process, because its accompanying optimizer models can help every member of the C-suite identify and quantify the goals, KPIs, and spending levels necessary to achieve them.

More accurate budget planning is one of the notable corollary effects of predictive analytics.

How does predictive analytics complement budgeting?

Predictive analytics has new budgeting-related tools that allows you to build a model that can predict, for example, your optimum media mix down to a granular level, your optimum inventory level by product class, and the optimum spend to achieve your KPIs.

Predictive analytics requires some very smart people to find the data in your company (often hidden away in silos). Then we must format, clean, and analyze the data; we then build equations to explain the patterns we uncover. Finally, we develop a model which we run thousands of times in the space of a week. From that we create a customized optimizer tool that can anticipate future outcomes correctly 95 times out of 100.

“So,” you ask, “How do I put a dollar value on that?”

We typically find that when we analyze a media budget of $50 million+, we can often recommend a budget cut of at least 10% in immediate savings to achieve the same levels of market share you are currently experiencing.

So that could be worth $5+ million in immediate savings?

Yes, or our optimizer could also recommend reinvesting the $5 million in an area that seems likely to increase your marketing impact in selected geographies or with selected products.

How do you budget for a predictive analytics project that could save you 10+% of your media budget, or improve the effectiveness of your overall marketing, manufacturing, or operational spend by 10+%?

If our Chief Analytics Officer, John D. Clayton, can be of assistance, let us know.

What’s the ability to predict the future worth to you? It’s in your hands now.