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ACCA Strategic Professional · Strategic Business Leader · Big data and data analytics

Norvik Telecom wants to reduce customer churn. Its analysts use five years of customer records, including usage, complaints and contract length, to build a model giving each current customer a probability of leaving within six months. Management will use the scores only to rank customers by risk; no action rules are yet defined. Which description best fits this analysis?

This is predictive analytics. The model uses historical data to estimate each customer's probability of leaving in the next six months, which is a forecast of a future outcome. It is not prescriptive because it does not recommend or optimise specific actions, and it is not descriptive because it goes beyond reporting past events.

  1. ADescriptive analytics, because it uses historical customer records
  2. BDiagnostic analytics, because it examines complaints as a cause of churn
  3. CPredictive analytics, because it estimates the likelihood of a future outcomeCorrect
  4. DPrescriptive analytics, because it ranks customers for management attention

Explanation

The model uses historical data to estimate the probability of a future event (churn), which is predictive analytics. It is not prescriptive because no recommended actions or optimised decisions are generated; ranking is only a risk score. Use of historical data does not make it merely descriptive.

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