CA-C22T: DATA ANALYTICS

UNIT: 1 Introduction to Data Analytics

Evolution of Data Analytics, Data Analytics Overview, Types of Data Analytics -
Descriptive Analytics -Diagnostic Analytics -Predictive Analytics -Prescriptive
Analytics, Importance and Benefits of Data Analytics. Different Applications of
Analytics in Business, Text Analytics and Web Analytics, Skills for Business
Analytics.
Introduction
BUSINESS ANALYTICS-THE SCIENCE OF DATA-DRIVEN DECISION
MAKING , “Go down deep enough into anything and you will find
Mathematics”. —Dean Schlicter
Data analytics is a valuable tool for businesses aiming to increase revenue,
improve products, and retain customers.
Data analytics converts raw data into actionable insights. It includes a range of
tools, technologies, and processes used to find trends and solve problems by using
data. Data analytics can shape business processes, improve decision-making, and
foster business growth.
Data analytics helps companies gain more visibility and a deeper understanding of
their processes and services. It gives them detailed insights into the customer
experience and customer problems. By shifting the paradigm beyond data to
connect insights with action, companies can create personalized customer
experiences, build related digital products, optimize operations, and increase
employee productivity.
Definition: Business analytics is a set of statistical and operations research
techniques, artificial intelligence, information technology and management
strategies used for framing a business problem, collecting data, and analysing the
data to create value to organizations.

Evolution of Data Analytics

Analytics has evolved from a simple number crunching exercise used for solving
problems and assisting in decision making to a competitive strategy.
During the early period of the 20th century, many companies were taking business
decisions based on ‘opinions’ rather than decisions based on proper data analysis
(which probably acted as a trigger for Deming’s quote). Opinion-based decision
making can be very risky and often leads to incorrect decisions. One of the primary
objectives of business analytics is to improve the quality of decision making using
data analysis
In the beginning of the 21st century, analytics became one of the most important
verticals within organizations due to its potential benefits including the ability to
make better decisions and its impact on profitability of an organization.
Today, several products and solutions are driven by analytics; Amazon Go,
recommender systems, predictive keyboards used in smart phones and chatbots are
few examples of solutions that are driven by analytics.
It has become evident that analytics has become an important differentiator
between high-performing and low-performing companies.
Davenport and Patil (2012) claim that ‘data scientist’ will be the sexiest job of the
21st century.

Data Analytics Overview

Every organization across the world uses performance measures such as market
share, profitability, sales growth, return on investment (ROI), customer
satisfaction, and so on for quantifying, monitoring, benchmarking, and improving
its performance. It is important for organizations to understand the association
between key performance indicators (KPIs) and factors that have a significant
impact on the KPIs for effective management. Knowledge of the relationship
between KPIs and factors would provide the decision maker with appropriate
actionable items. Analytics is a body of knowledge consisting of statistical,
mathematical, and operations research techniques; artificial intelligence techniques
such as machine learning and deep learning algorithms; data collection and
storage; data management processes such as data extraction, transformation, and
loading (ETL); and computing and big data technologies such as Hadoop, Spark,
and Hive that create value by developing actionable items from data. Two primary
macro-level objectives of analytics are problem solving and decision making.
Analytics helps organizations to create value by solving problems effectively and
assisting in decision making. Today, analytics is used as a competitive strategy by
many organizations such as Amazon, Apple, General Electric, Google, Facebook
and Procter and Gamble who use analytics to create products and solutions.
Marshall (2016) and MacKenzie et al. (2013) reported that Amazon’s
recommender systems resulted in a sales increase of 35%. Davenport and Harris
(2007) and Hopkins et al. (2010) reported that there was a high correlation between
use of analytics and business performance. They claimed that the majority of high
performers (measured in terms of profit, shareholder return and revenue, etc.)
strategically apply analytics in their daily operations, as compared to low
performers.
Analytics is used to solve a wide range of problems starting with simple process
improvement such as reducing procurement cycle time to complex decision-
making problems
Ex; farm advisory systems that involve accurate weather prediction, forecasting
commodity price etc, so that farmers can be advised about crop selection, crop
rotation.

Components of Business Analytics

Business Analytics can be broken into 3 components:
1. Business Context 2. Technology 3. Data Science

Data Science

Business Technology
Context

Business Context: Business analytics projects start with the business context and
ability of the organization to ask the right questions.
For ex; many customers shopping is a habit, and most do not respond to
promotions since shopping is a routine for them. The shopping behaviour changes
during special events such as marriage and pregnancy and it becomes easy to target
them during these special events.

Technology: Information Technology (IT) is used for data capture, data storage,
data preparation, data analysis, and data share. Today most data are unstructured
data; to analyse data, one may need to use software such as R, Python, SAS, SPSS,
Tableau, etc. Technology is also required to deploy the solution.
For ex; To find out whether a customer is pregnant or to find out whether a
customer has forgotten to place an order for an item, we need data. In both the
cases, the point of sale data has to be captured consisting of past purchases made
by the customer.

Data Science: Data Science is the most important component of analytics, it

consists of statistical and operations research techniques, machine learning and
deep learning algorithms. Given a problem, the objective of the data science
component of analytics is to identify the most appropriate statistical
model/machine learning algorithm that can be used. The objective of the data
science component is to identify the technique that is best based on a measure of
accuracy.

For ex; Target’s pregnancy prediction is a classification problem in which

customers (or entities) are classified into different groups.

Types of Data Analytics:

There are mainly four categories of data analytics, they are-
1. Descriptive Analytics
2. Diagnostic Analytics
3. Predictive Analytics
4. Prescriptive Analytics
Descriptive - which answers the question, “What happened?”

Diagnostic - which answers the question, “Why did this happen?”

Predictive - which answers the question, “What might happen in the future?”

Prescriptive, which answers the question, “What should we do next?”

1. Descriptive Analytics
“If the statistics are boring, then you’ve got the wrong numbers”. —Edward
R. Tufte
Descriptive analytics is the simplest form of analytics that mainly uses simple
descriptive statistics, data visualization techniques, and business related queries to
understand past data. One of the primary objectives of descriptive analytics is
innovative ways of data summarization. Descriptive analytics is used for
understanding the trends in past data which can be useful for generating insights.
Ex; Progress to Goals, Demand Trends, Aggregated Survey Results, Financial
Statement Analysis, Traffic and Engagement Reports, etc.
2. Diagnostic Analytics
Diagnostic analytics focuses on examining past data in order to identify the causes
of specific events. It involves analyzing data to understand why something
happened or to find patterns and relationships that may help explain a particular
outcome. Diagnostic analytics is about examining data to gain insights into what
has already happened, as opposed to predictive analytics which is about using data
to make informed predictions about the future.
Ex; Examining Market Demand, Explaining Customer Behavior, Identifying
Technology Issues, Improving Company Culture

3. Predictive Analytics
“If you torture the data long enough, it will confess.” —Ronald Coase
It aims to predict the probability of occurrence of a future event such as forecasting
demand for products/services, customer churn, employee attrition, loan defaults,
fraudulent transactions, insurance claim, and stock market fluctuations.
The use of predictive analytics can reveal relationships that were previously
unknown and are not intuitive.
Ex; Finance: Forecasting Future Cash Flow, Entertainment & Hospitality:
Determining Staffing Needs, Marketing: Behavioral Targeting, Manufacturing:
Preventing Malfunction

4. Prescriptive Analytics
Every decision has a consequence. —Damon Darrel
Prescriptive analytics is the highest level of analytics capability which is used for
choosing optimal actions once an organization gains insights through descriptive
and predictive analytics. In many cases, prescriptive analytics is solved as a
separate optimization problem. Prescriptive analytics assists users in finding the
optimal solution to a problem or in making the right choice/decision among several
alternatives. Operations Research (OR) techniques form the core of prescriptive
analytics. Apart from operations research techniques, machine learning algorithms,
metaheuristics, and advanced statistical models are used in prescriptive analytics
Ex; Venture Capital: Investment Decisions, Sales: Lead Scoring, Banking: Fraud
Detection, Product Management: Development and Improvement, Marketing:
Email Automation.
Importance and Benefits of Data Analytics

Importance
 Better Customer Targeting: You don’t want to waste your business’s precious
time, resources, and money putting together advertising campaigns targeted at
demographic groups that have little to no interest in the goods and services you
offer. Data analysis helps you see where you should be focusing your
advertising and marketing efforts.
 Know Your Target Customers Better: Data analysis tracks how well your
products and campaigns are performing within your target demographic.
Through data analysis, your business can get a better idea of your target
audience’s spending habits, disposable income, and most likely areas of interest.
This data helps businesses set prices, determine the length of ad campaigns, and
even help project the number of goods needed.
 Reduce Operational Costs: Data analysis shows you which areas in your
business need more resources and money, and which areas are not producing
and thus should be scaled back or eliminated outright.
 Better Problem-Solving Methods: Informed decisions are more likely to be
successful decisions. Data provides businesses with information. You can see
where this progression is leading. Data analysis helps businesses make the right
choices and avoid costly pitfalls.
 You Get More Accurate Data: If you want to make informed decisions, you
need data, but there’s more to it. The data in question must be accurate. Data
analysis helps businesses acquire relevant, accurate information, suitable for
developing future marketing strategies, business plans, and realigning the
company’s vision or mission.

Benefits
To obtain the best results from data analytics, an enterprise needs to centralize its
data for easy access in a data warehouse
1. Personalize the customer experience: Businesses collect customer data from
many different channels, including physical retail, e-commerce, and social media.
By using data analytics to create comprehensive customer profiles from this data,
businesses can gain insights into customer behavior to provide a more personalized
experience.
2. Inform business decision-making: Enterprises can use data analytics to guide
business decisions and minimize financial losses.
3. Streamline operations: Organizations can improve operational efficiency
through data analytics. Gathering and analyzing data about the supply chain can
show where production delays or bottlenecks originate and help predict where
future problems may arise.
4. Mitigate risk and handle setbacks: Risks are everywhere in business. They
include customer or employee theft, uncollected receivables, employee safety, and
legal liability. Data analytics can help an organization understand risks and take
preventive measures.
5. Enhance security: All businesses face data security threats. Organizations can
use data analytics to diagnose the causes of past data breaches by processing and
visualizing relevant data.
6. More effective marketing: By using data analytics, companies can pinpoint
precisely what customers are looking for. Data enables businesses to do in-depth
analyses of client trends, which companies can then utilize to develop successful,
focused, and targeted marketing.

Different Applications of Analytics in Business

Data analytics can be applied in business in various ways.
 Used to analyze customer behavior
Business analytics can be used in customer relationship management to
understand the customer base better and therefore, implement corresponding
strategies. This helps significantly drive sales and amplifies the
organization’s profits. CRM is the process of building and managing the
organization’s relationships as well as interactions with customers.
Customers’ purchasing patterns, needs, buying behaviors, issues, feedback,
and all the other indicators can be obtained and analyzed through business
analytics methodologies.

 Optimize marketing campaigns

Business analytics helps the organization to know its users, their needs,
behaviors, and purchasing styles to design and modify suitable plans and
schemes. Sales can be optimized and user experience can be enhanced.
Business analytics can help marketers know their target audience and their
interest.It can also be used to evaluate and determine how well a product or a
marketing strategy is performing in the market. Considering these factors,
organizations can modify their strategies and implement better planning.

 Improve supply chain management

Business analysts have the technology and tools to investigate every aspect
of the supply chain operation. They can assemble real-time data to monitor
inventory and shipping. With business analytics in supply chain
management, they are able to spot cost-cutting measures and limit the waste
of resources. The company makes smart decisions that improve precision
and productivity. This in turn eliminates any extra expenses or
overproduction.

 Enhance product development

Business Analytics serves as a great tool for management and
manufacturing. It is involved in every phase of product development. It
supports analyzing the inventory measures and designing business solutions
that are most suitable for products. It can help determine the costs and gauge
 the expected sales of products. This way the organizations can adapt to the
latest styles and opportunities in the industry.

 Predict demand, identify fraud

analytics allows organizations to determine optimal inventory levels to
satisfy demand while minimizing stock. Using sophisticated models,
predictive analytics allows supply chain managers to determine detailed
inventory requirements by region, location and usage.
Fraud analytics uses machine learning to examine all the pertinent data
regarding a transaction and assigns a risk score to the transaction. Based on
the risk score it makes a recommendation to allow the transaction, block the
transaction, or ask for step-up authentication before allowing the transaction.

 Optimize pricing strategies

Data analytics and visualization tools are essential for pricing strategy, as
they can help you understand customer preferences, needs, and willingness
to pay. You can segment customers based on various criteria, such as
demographics, behavior, location, and purchase history, and tailor prices
accordingly.

 Improve overall business performance.

It can take some effort to educate employees to use the BI tools you
purchase. Education on proper tool use is necessary to ensure that users are
drawing accurate insights from the data. However, while BI application
interfaces have become more intuitive, learning how to work with a tool still
requires patience.
Business intelligence greatly enhances how a company approaches its
decision-making by using data to answer questions of the company’s past
and present. It can be used by teams across an organization to track key
metrics and organize on goals. Modern business intelligence tools use self-
service solutions to make it easier for stakeholders to access their data and
explore it for themselves.

Text Analytics
Text analytics is the process of transforming unstructured text documents into
usable, structured data. Text analysis works by breaking apart sentences and
phrases into their components, and then evaluating each part’s role and meaning
using complex software rules and machine learning algorithms. Text analytics
combines a set of machine learning, statistical and linguistic techniques to process
large volumes of unstructured text or text that does not have a predefined format,
to derive insights and patterns.
 Types of Text Analysis
 Word frequency (lists of words and their frequencies) ...
 Collocation (words commonly appearing near each other)
 Concordance (the contexts of a given word or set of words)
 N-grams (common two-, three-, etc.- word phrases)
 Entity recognition (identifying names, places, time periods, etc.)

Uses Text Analytics

1. Sports Trading
2. Financial Trading
3. Voice of the Customer (VOC)
4. Fraud
5. Manufacturing or Warranty Analysis
6. Customer Service Routing
7. Lead Generation
8. TV Advertising & Audience Analysis
Recruitment
10. Review Sites
Web Analytics
Web analytics refers to the process of collecting website data and then
processing, reporting, and analyzing it to create an online strategy for
improving the website experience. The purpose of web analytics is to
measure user behavior, optimize the website’s user experience and flow,
and gain insights that help meet business objectives like increasing
conversions and sales.
Importance of Web Analytics
Web analytics is critical to the success of your business. It enables you to
better understand your site visitors and use those insights to improve the
experience on your site. For example, if you discover that the majority of
users on your site are using a mobile device, then you can focus on making
your website more mobile-friendly.
Web analytics can also shape your content and SEO strategy. Looking at
your top viewed posts, you can begin to identify what types of content and
topics perform best with your audience.
Importance of Web Analytics
We need Web Analytics to assess the success rate of a website and its associated
business. Using Web Analytics, we can −
 Assess web content problems so that they can be rectified
 Have a clear perspective of website trends
 Monitor web traffic and user flow
 Demonstrate goals acquisition
 Figure out potential keywords
 Identify segments for improvement
 Find out referring sources

Web Analytics Process

The primary objective of carrying out Web Analytics is to optimize the website in
order to provide better user experience. It provides a data-driven report to measure
visitors’ flow throughout the website.
Take a look at the following illustration. It depicts the process of web analytics.
 Set the business goals.
 To track the goal achievement, set the Key Performance Indicators (KPI).
 Collect correct and suitable data.
 To extract insights, Analyze data.
 Based on assumptions learned from the data analysis, Test alternatives.
 Based on either data analysis or website testing, Implement insights.

Ex; Google Analytics

Skills for Business Analytics

Business Analyst: Business analysis has less to do with data and instead
focuses on analyzing and optimizing the processes and functions that
make up a business. A business analyst may work with both the client, who
has a particular requirement in their business, and the development team,
which either builds a product or delivers a service to fulfill that requirement.

Business Analytics Professional: Focuses on data, statistical analysis

and reporting to help investigate and analyze business performance,
provide insights, and drive recommendations to improve performance.
They may also work with internal or external clients, but their focus is to
improve the product, marketing or customer experience by using insights
from data, rather than analyzing processes and functions.
Skills for Business Analytics
A great business analytics professional could be described as:

 A good communicator
Being able to present findings in a clear and concise manner is fundamental to
making sure that all players understand insights and can put recommendations
into practice. People working in analysis must be able to tell a story with data
through strong writing and presentation skills.

 Inquisitive
People in this field should have natural curiosity and drive to continue learning
and figuring out how things fit together. Even as analysts become managers, it’s
important to stay in touch with the industry and its changes.

 A problem solver
Professionals in analytics use a combination of logical thinking, predictive
analytics and statistics to make recommendations that will solve problems and
propel a business forward. In a profession that seeks to turn data into solutions,
being a natural problem solver helps connect the dots.

 A critical thinker
Business analytics professionals need to think critically about not only the
implications of the data they collect, but about what data they should be
collecting in the first place. They are expected to analyze and highlight only the
data that can be helpful in making decisions.

 A visualizer
Disorganized data doesn’t help anyone. To create worth from data, analytics
professionals need to be able to translate and visualize data in a concise and
accurate way that’s easy to digest.

While business analytics professionals have to be able to handle complex data,

they also need to understand how their recommendations will affect the bottom
line of a business. There’s no point in having access to large quantities of
information without knowing how it can be harnessed to analyze and improve
tactics, processes and strategies.
Technical Skills for Business Analytics
In a business landscape quickly becoming governed by big data, great analytics
professionals are fulfilling the demand for technical expertise by wearing the hats
of both developer and analyst. Having both a conceptual and working
understanding of tools and programming languages is important to translate data
sources into tangible solutions.

Below are some of the top tools for business analytics professionals:

 SQL
SQL is the coding language of databases and one of the most important tools in
an analytics professional’s toolkit. Professionals write SQL queries to extract
and analyze data from the transactions database and develop visualizations to
present to stakeholders.

 Statistical languages
The two most common programming languages in analytics are R, for statistical
analysis, and Python, for general programming. Knowledge in either of these
languages can be beneficial when analyzing big data sets, but is not vital.

 Statistical software
While the ability to program is helpful for a career in analytics, being able to
write code isn’t necessarily required to work as an analytics professional. Apart
from the above languages, statistical software such as SPSS, SAS, Sage,
Mathematica, and even Excel can be used when managing and analyzing data.

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