What is data mining?
Data mining is the process of analyzing enormous amounts of information and datasets, extracting (or “mining”) useful intelligence to help organizations solve problems, predict trends, mitigate risks, and find new opportunities. Data mining is like actual mining because, in both cases, the miners are sifting through mountains of material to find valuable resources and elements.
For example, if a business has a lot of data on customer churn, it could apply a data mining algorithm to find unknown patterns in the data and identify new associations that could indicate customer churn in the future. In this way, data mining is frequently used in retail to spot patterns and trends.
What Are the Benefits of Data Mining?
Since we live and work in a data-centric world, it’s essential to get as many advantages as possible. Data mining provides us with the means of resolving problems and issues in this challenging information age. Data mining benefits include:
- It helps companies gather reliable information
- It’s an efficient, cost-effective solution compared to other data applications
- It helps businesses make profitable production and operational adjustments
- Data mining uses both new and legacy systems
- It helps businesses make informed decisions
- It helps detect credit risks and fraud
- It helps data scientists easily analyze enormous amounts of data quickly
- Data scientists can use the information to detect fraud, build risk models, and improve product safety
- It helps data scientists quickly initiate automated predictions of behaviors and trends and discover hidden patterns
What Can Data Mining Be Used For?
Data mining is used for many purposes, depending on the company and its needs. Here are some possible uses
- Forecasting and Risk: Analyzing data to determine where something went wrong in the past — the number of online visitors that didn't purchase an item after looking at it, for example — could help a retailer make better decisions about inventory to purchase in the future. Similarly, seeing what time of day a system has been overloaded with web traffic in the past could help a business prepare by assigning more resources or investing in server upgrades.
- Grouping: Data provided by customers allows companies to group users together in a range of ways, including demographically based on gender, age, income, where they live, and their spending habits. This allows them to efficiently target the appropriate users for specific offers or messages.
- Analyzing Behavior: Examining data allows companies to understand the kind of stimuli customers respond to. Do certain groups respond to specific offers or emails at a certain time of day or on a certain day of the week, for example? Or maybe it provides clarity on why users visit one website and not another or why they abandon sales at the last minute. Analysis helps them determine what they can do to prevent negative consumer behaviors that hurt their company.