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CMA Intermediate · Financial Management and Business Data Analytics · Introduction to Data Science for Business Decision-making

A retail chain in India wants to identify which customers are likely to stop buying from it in the next six months, using past purchase history to assign each customer a probability of leaving. Which type of analytics does this activity represent?

This is predictive analytics. The retailer uses past purchase data to estimate the probability that each customer will leave in the future. Descriptive analytics only summarises history, diagnostic explains causes, and prescriptive recommends actions, so none of those fits a forward-looking probability estimate.

  1. ADescriptive analytics
  2. BPredictive analyticsCorrect
  3. CDiagnostic analytics
  4. DPrescriptive analytics

Explanation

Assigning a probability of a future event (customer churn) from historical data is forecasting, which is predictive analytics. Descriptive analytics only summarises what has already happened, and diagnostic analytics explains why it happened. Prescriptive analytics would go further and recommend the action to take.

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