Data Mining

Data
Data are any facts, numbers, or text about organizations that can be stored as units. 1. Operational or transactional data such as, sales, cost, inventory, payroll, and accounting

2. Non-operational data, such as industry sales, forecast data, and macro economic data

Information
Data combined to provide useful patterns, associations, or relationships gives information.
e.g. analysis of retail point of sale transaction data can yield information on which products are selling and when.

Knowledge
Information can be converted into knowledge about historical patterns and future trends. E.g summary information on retail supermarket sales can be analyzed and used in promotional efforts and schemes, to provide knowledge of consumer buying behavior. Thus, a manufacturer or retailer could determine which items are most susceptible to promotional efforts.

Data Mining
Data mining is the process of extracting informative patterns from data, co-relating, analyzing and summarizing it into useful information. It is an analytical tool for analyzing data. It allows users to analyze data from many different dimensions or angles, categorize it, and summarize the relationships identified.

Uses
It is widely used in profiling practices, such as marketing and advertising, increasing revenue, cutting costs, analysis of buying behavior. Also used in fields like surveillance, high-level government intelligence, fraud detection and biological scientific discovery.

 Data mining is primarily used today by companies with a strong consumer focus - retail, financial, communication, and marketing organizations. Enables determination of relationships among internal and external factors. Internal factors - price, product positioning, staff skills, external factors - economic indicators, competition, customer demographics. Enables organizations to determine the impact on sales, customer satisfaction, and corporate profits. Provides the tools to retrieve summary information to view detailed transactional data.

Data Mining in CRM

WalMart has pioneered massive data mining to transform its supplier relationships. WalMart captures point-of-sale transactions from over 2,900 stores in 6 countries and continuously transmits this data to its massive 7.5 terabyte Teradata data warehouse. WalMart allows more than 3,500 suppliers, to access data on their products and perform data analyses. These suppliers use this data to identify customer buying patterns at the store display level. They use this information to manage local store inventory and identify new merchandising opportunities.

Steps in Data Mining

Five major steps : Extract, transform, and load transaction data onto the data warehouse system. Store and manage the data in a multidimensional database system. Provide data access to business analysts and information technology professionals. Analyze the data by application software. Present the data in a useful format, such as a graph or table.

Common Relationships
Classes : Stored data is used to locate data in predetermined groups. For example, a restaurant chain could mine customer purchase data to determine when customers visit and what they typically order. This information could be used to increase traffic by having daily specials. Clusters: Data items are grouped according to logical relationships or consumer preferences. For example, data can be mined to identify market segments or consumer affinities. Associations:Data can be mined to identify associations. For example, Grocery stores associate beer with diaper purchase. Special Patterns :Data is mined to anticipate behavior patterns and trends. For example, an outdoor equipment retailer could predict the likelihood of a backpack being purchased based on a consumer's purchase of sleeping bags and hiking shoes.

Market basket analysis

Market basket analysis relates to its use in retail sales. If a clothing store records the purchases of customers, a data-mining system could identify those customers who favour silk shirts over cotton ones. It has also been used to identify the purchase patterns of the Alpha consumer. Alpha Consumers are people that play a key roles in connecting with the concept behind a product, then adopting that product, and finally validating it for the rest of society. Analyzing the data collected on these type of users has allowed companies to predict Future buying trends and forecast supply demands.

Some tools used in Data Mining

Early methods of identifying patterns in data include Bayes' theorem (1700s) and Regression analysis (1 8 00s). This has been aided by other discoveries in computer science, such as Neural networks, Clustering, Genetic algorithms (1950s), Decision trees(1960s) and Support vector machines (1980s). Data mining is the process of applying these methods to data with the intention of uncovering hidden patterns.

 Data mining in can contribute significantly to profits. Rather than randomly contacting a prospect or customer through a call center or sending mail, a company can concentrate its efforts on prospects that are predicted to have a high likelihood of responding to an offer. More sophisticated methods may be used to optimize resources across campaigns so that one may predict which channel and which offer an individual is most likely to respond to across all potential offers. Additionally, sophisticated applications could be used to automate the mailing. Once the results from data mining (potential prospect/customer and channel/offer) are determined, this "sophisticated application" can either automatically send an e-mail or regular mail. Follow ups based on the patterns of buying behavior and subsequent successful sales , adds to the profit maximization aims of organizations

Conclusion