What Is Data Mining and Why Is It So Important?


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Data mining is a technique for sorting huge data sets. It helps in recognizing the relationships and patterns to resolve business problems. Data mining companies use tools and processes to help organizations in predicting future trends and forming decisions. The tools include powerful mathematical, analytics, and statistical capabilities whose chief purpose is to sift through huge volumes of data to identify patterns, relationships, and trends to support informed planning and decision-making.

Data mining is generally linked with marketing department inquiries and is seen by multiple executives as a method of helping them understand demand and analyze the impact of changes in products, promotions, and pricing on sales. Nevertheless, data mining offers multiple benefits in other business areas as well. Designers and engineers can understand the fruitfulness of product changes and identify potential causes of product success or failure related to how the products are being utilized. Operations concerned with service and repair are better able to plan parts inventory and staffing. Organizations that provide professional services can use data mining services for recognizing new opportunities from demographic shifts and changing economic trends.

Data mining becomes all the more useful and valuable with more user experience and with bigger sets of data. Huge sets of data are considered to possess more intelligence and insights. And, as users gain more familiarity with the data mining tools and learn to understand the database, they become more experimental and creative with their analysis and explorations.

Significance of Data Mining

The chief advantage of data mining lies in its ability to identify relationships and patterns in huge data volumes from distinct resources. With the availability of more and more data from varied sources (remote sensors, social media, detailed reports of market activity, and product movement), data mining offers tools for exploiting big data and turning it into actionable intelligence.

Data mining companies help in detecting surprising patterns and relationships in bits of information that are seemingly unrelated. As information tends to get compartmentalized, it has generally been tough to analyze it as a whole. Nevertheless, there might be a relationship between external factors like economic factors or demographics and the performance of the products of a company. Even though executives mostly consider sales numbers by product line, territory, region, and distribution channel, they generally don’t have any external context for the information. Data mining helps with this context and in understanding the ‘why’ behind things. The technology considers correlations with external factors and these correlations can be reliable indicators to guide channel, production, and product decisions. The same analysis also benefits other business parts like product design, service delivery, and operational efficiency.

Steps of Data Mining

steps of data mining

The approach to data mining depends on the type of questions being asked and the contents and organization of the data sets or database giving the raw material for analysis. The steps involved in data mining include the following:

  • Understanding the Problem
  • The decision-maker of the business needs to have a general understanding of the domain they should be working on. They should know the kind of internal and external data that need to be explored and have a deep knowledge of the business and the different functional areas involved.

  • Data Gathering
  • Begin with your databases and internal systems. Link them through multiple relational tools and data models or collect the data together in a data warehouse. This will include any data from external sources that are included in your operations, like service data and/or field sales, social media data, or IoT. You need to discover and obtain the rights to external data including economic data, demographics, and market intelligence, such as financial benchmarks and industry trends from governments and trade associations. Bring the data into your data warehouse or link it to the data mining environment.

  • Data Preparation
  • Use the subject matter experts of your business to define, categorize, and organize your data. This process is also called data wrangling or munging. Some of your data might require cleansing to remove inconsistencies, duplication, outdated formats, or incomplete records. Data cleansing and preparation can be a continuing task as new data or projects from new fields of inquiry are considered.

  • User Training
  • You need to offer training to your future data miners along with some supervised practice as they start getting familiar with the powerful data mining tools. Once your team has understood the basics, you can provide them with ongoing education so that they can move on to more advanced data mining techniques.

    Data Mining Techniques

    Data mining companies can mine the data in a range of ways and for multiple purposes. Here’s a look at the most prevalent strategies of data sorting used by data miners:

  • Classification
  • The data organizer decides the predefined classifications. The raw data is divided into multiple classes based on its qualities. A simple example to understand this is having a categorization or classification for people who are allergic to raisins and another for those who are not. This example will explain how you need to arrange a data batch using two specified classes.

  • Clustering
  • Related to classification, clustering is often mistaken for it. However, clustering is a process in which data groups are defined depending on their similarities and then sorted depending on those similarities. Clustering helps construct classes based on what is common in the data. In the classification approach, the manner in which data will be classified is already chosen.

  • Association
  • The association strategy is mostly used by retailers and people who want to market a product to their consumers. In association, information is located depending on the link between the purchase of an item and the other things purchased at the same time. It is a good methodology for determining the buying patterns of a user base.

  • Sequential Pattern
  • This strategy helps in the discovery of behavioral qualities or patterns in data across a period of time. In other words, data is categorized depending on the sequence of events that occurred during the time range when data was collected. A store can utilize the sequential pattern strategy for discovering the goods that are commonly purchased together at different times of the year.

  • Predictive
  • Organizations commonly use the predictive method for supporting new business initiatives. This technique of data mining helps in examining historical data for uncovering trends that can be used for forecasting the future of a market.

    Where is Data Mining Used?

    Data mining is vital for price optimization, credit risk management, sentiment analysis, fraud detection, training and support, risk assessment, recommendation systems, healthcare, medical diagnosis, etc. It can prove to be an efficient tool in almost any industry, including service industries, wholesale distribution, telecommunications, communications, education, insurance, manufacturing, science, banking, and social media or online marketing. Here are some vital use cases of data mining:

  • Manufacturing
  • Data mining allows manufacturers to track repair data, quality trends, product performance, and production rates from the field to recognize any production concerns. They can also identify any potential process upgrades that can save cost and time, improve product performance, or reflect the requirement for better or new factory equipment.

  • Service Industries
  • For service industries, data mining or web data mining companies can help users in discovering opportunities for product improvement. This is done by cross-referencing customer feedback with peer performance data, channels, specific services, pricing, region, economic data, peer performance data, and more.

  • Product development
  • Companies that distribute, make, or design physical products can discover opportunities to target their products better by analyzing purchasing patterns linked with demographic and economic data. The engineers and designers can also cross-reference user and customer feedback, repair records, and other data to recognize any opportunities for product improvement.

  • Marketing
  • Marketing is the one application that benefits the most from data mining. This is because the core of marketing includes targeting customers efficiently to gain the best results. The best method of targeting customers is knowing about them as much as possible. Data mining helps in bringing together data on gender, age, income level, location, spending habits, and tastes to create efficient customized loyalty campaigns. Data mining can also help in predicting which customers are highly likely to unsubscribe to a mailing list. When businesses are equipped with this information, they can take effective steps in retaining their important customers.

    Ultimately, all the findings need to be fed back to planning and forecasting so that the whole organization becomes attuned to expected changes in demand depending on deeper knowledge of the customer. This will help the organization become better equipped to exploit newly discovered opportunities.

    In Conclusion

    The popularity of data mining lies in the fact that it creates multiple commercial prospects owing to its descriptive and predictive capabilities. This technology helps in forecasting the future and making it lucrative. Web data mining companies use software to search for patterns in large volumes of data and help businesses in learning more about their customers. This allows businesses to design successful marketing campaigns, save expenses, and improve sales. Data mining allows data scientists to rapidly evaluate huge data volumes and use the information to construct risk models, improve product safety, and detect fraud.

    Richa Pokhriyal
    In her current role, Richa heads Marketing Services department as VP Marketing at Damco Solutions. As a marketing professional, she crafts and executes high impact integrated marketing programs. Richa is responsible for top-line growth, strategy, thought leadership, digital marketing, customer relationship management, and project execution. Richa is a recognized expert on marketing and loves to write, and is an avid blogger. You can visit her LinkedIn page to know about her work.


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