Predictive Analytics uses historical data, statistical algorithms, and machine learning techniques to forecast future outcomes. In e-commerce, it transforms past customer behavior into actionable predictions about what will happen next.
E-commerce applications:
- 1Demand forecasting: Predict which products will sell and when, optimizing inventory
- 2Churn prediction: Identify customers likely to stop purchasing before they actually do
- 3Revenue forecasting: Project future revenue based on current trends and seasonal patterns
- 4Purchase probability: Score how likely each customer is to buy within a given timeframe
- 5Product affinity: Predict which products a customer is most likely to want next
How predictive analytics builds on MBA and RFM:
RFM analysis tells you where customers are NOW. Market Basket Analysis tells you which products go together. Predictive analytics takes both of these inputs and projects forward — predicting which RFM segment each customer will be in next quarter, or which product associations are strengthening or weakening.
Data requirements:
- Clean, complete transactional history (at least 6-12 months)
- Sufficient order volume (hundreds to thousands of transactions)
- Consistent data formatting and reliable timestamps
The accuracy of predictions improves dramatically with data quality and volume. For smaller stores, simpler approaches like RFM trending may be more practical than complex machine learning models.
