Data analysis is an essential part of modern business strategy, providing insights that drive decision-making and innovation. There are various methods of analysing data, each suited to different types of data and objectives. Below are six key types of data analysis.
1. Descriptive Analysis
Descriptive analysis is the simplest form of data analysis, focusing on summarising historical data to understand what has happened. This method uses measures such as mean, median, mode and standard deviation to provide insights into past performance
- Diagnostic AnalysisWhile descriptive analysis looks at what happened, diagnostic analysis seeks to explain why it happened. This method involves drilling down into data to identify patterns and relationships. For example, a retail company might use diagnostic analysis to determine why sales spiked during a particular period, considering factors such as marketing campaigns, seasonal trends and economic conditions.
3. Predictive Analysis
Predictive analysis uses historical data and statistical algorithms to forecast future outcomes. By identifying trends and patterns, businesses can make informed predictions about future events. Common applications include demand forecasting, risk assessment and customer churn prediction.
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4. Prescriptive Analysis
According to IBM, prescriptive analysis goes a step further than predictive analysis by recommending actions to achieve desired outcomes. This method uses complex algorithms, optimisation techniques and simulations to suggest the best course of action.
- Exploratory AnalysisExploratory analysis is used to delve into data sets to uncover hidden patterns, relationships and anomalies without prior hypotheses. This method is particularly useful in the early stages of research or when dealing with new data sources. It involves visualisation tools and techniques to make data more accessible and understandable.
6. Inferential Analysis
Inferential analysis involves making inferences about a population based on a sample of data. This method uses statistical tests to determine relationships and predict trends. Businesses use inferential analysis to make generalisations from survey results or to test hypotheses in market research.