What is data mining?
Data mining — also referred to as knowledge discovery in databases (KDD) — is the process of using software, algorithms and statistical methods to analyze large datasets to discover patterns and other valuable information.
At a high level, there are typically five steps in the data mining process:
- Identification: Understanding the business question/objectives that will drive the data mining process.
- Collection: Identify which sets of data will help answer the questions posed in step one.
- Preparation: Once collected, the data must be cleansed, filtered and transformed to ensure it is in the right format and any unwanted data is removed.
- Modeling: Data scientists create, test and evaluate data mining models, as well as investigate any interesting relationships.
- Deployment: The data is prepared for analytics uses. At this stage it is essential that the data is interpreted so that it is useful and understandable to the business.
Data mining can help discover important insights that improve customer experience (CX), predict customer behavior and solve business issues. It is used in industries such as eCommerce, financial services, telecommunications, technology, healthcare and more.
Benefits of data mining
Essentially any brand can utilize the benefits of data mining for their business. It is the most effective when strategically used to solve a problem or answer an important business question. When executed effectively, data mining can help improve customer relationships, increase revenues, mitigate risk and more. Other benefits include:
- Identifying actionable insights: Hidden within big data is valuable information. Once “mined,” this information is available to help make informed business decisions.
- Increased efficiency: Brands can use mined data to automate business functions to increase efficiency and reduce manpower. For example, financial institutions use mined data to create purchase profiles and reduce fraud. Using artificial intelligence, they can quickly identify fraudulent behaviour, automatically block transactions and request account reviews.
- Gather accurate customer data: In today’s digitally connected world, brands have access to vast amounts of consumer data. Data mining allows you to collate varying data sources to give you an accurate representation of customer trends, behaviors, preferences and more. Having access to this information can help with personalization and delivering a better overall customer experience.
- Website optimization: Data mining provides a unique look at how customers are navigating your website, what purchases they are making, what may be causing churn and more.