6 Benefits Associated with Data Mining
Data has been used from time immemorial by various companies to manage their operations.Data is needed by various organizations strategically aimed at expanding their business operations, reduction of costs, improve their marketing force and above all improve profitability. Data mining is aimed at the creation of information assets and uses them to leverage their objectives.
In this article, we discuss some of the common questions asked about the data mining technology. Some of the questions we have addressed include:
- How can we define data mining?
- How can data mining affect my organization?
- How can my business get started with data mining?
Data Mining Defined
Data mining can be regarded as a new concept in the enterprise decision support system, usually abbreviated as DSS. It does more than complementing and interlocking with the DSS capabilities that may involve reporting and query. It can also be used in on-line analytical processing (OLAP), traditional statistical analysis and data visualization. The technology comes up with tables, graphs, and reports of the past business history.
We may define data mining as modeling of hidden patterns and discovering data from large volumes of data.It is important to note that data mining is very different from other retrospective technologies because it involves the creation of models. By using this technology, the user can discover patterns and use them to build models without even understanding what you are after. It gives an explanation why the past events happened and even predicting what is likely to happen.
Some of the information technologies that can be linked to data mining include neural networks, fuzzy logic, rule induction and genetic algorithms. In this article, we do not cover those technologies but focus on how data mining can be used to meet your business needs and you can translate the solutions thereafter into dollars.
Setting Your Business Solutions and Profits
One of the common questions asked about this technology is; what role can data mining play for my organization? At the start of this article, we described some of the opportunities that can be associated with the use of data. Some of those benefits include cost reduction, business expansion, sales and marketing, and profitability. In the following paragraphs, we look into some of the situations where companies have used data mining to their advantage.
Equity Financial Limited wanted to expand their customer base and also attract new customers. They used the Loan Check offer to meet their objectives. Initiating the loan, a customer had to go to any branch of Equity branch and just cash the loan. Equity introduced a $6000 LoanCheck by just mailing the promotion to their existing customers. The equity database was able to track about 400 characteristics of every customer. The characteristics were about loan history of the customer, their active credit cards, current balance on the credit cards and if they could respond to the loan offer. Equity used data mining to shift through 400 customer features and also finding the significant ones. They used the data and build a model based on the response to the Loan Check offer. They then integrated this model to 500,000 potential customers from a credit bureau. They then selectively mailed the most potential customers that were determined by the data mining model. At the end of the process, they were able to generate a total of $2.1M in extra net income from 15,000 new customers.
Reduction of Operating Costs
Empire is one of the largest insurance companies in the country. In order to compete with other insurance companies, it has to offer quality services and at the same time reducing costs.Therefore it has to attack costs that may in form of fraud and abuse. This demands a considerable investigation skills and use of data management technology. The latter calls for data mining application that can profile every physician in their network based on claims records of every patient in their data warehouse. The application is able to detect subtle deviations on the physician behavior that are linked to her/her peer group. The deviations are then reported to the intelligence and fraud investigators as “suspicion index.” With this effort derived from data mining, the company was able to save $31M, $37M, and $41M in the first three years respectively from frauds.
Sales Effectiveness and Profitability
In this case, we look into pharmaceutical sector. Their sales representatives have a wide range of assortment tools they use in promoting various products to physicians. Some of the tools include product samples, clinical literature, dinner meetings, golf outings, teleconferences and many more. Therefore getting to know the promotions methods that are ideal for a particular physician is of valuable importance and it is likely to cost the company a lot of dollars in sales call and thereby more lost revenue.
Through data mining, a drug maker was able to link eight months of promotional activity based on corresponding sales found in their database. They then used this information to build a predictive model for each physician.The model revealed that for the six promotional alternatives, only three had a significant impact. Then they used the knowledge found in the data mining models and thereby customizing the ROI.
Looking at those two case studies, then ask yourself, was data mining necessary?
All the cases presented above have revealed how data mining was used to yield results to the various businesses. Some of the results led to increased revenue and increased customer base. Others can be regarded as bottom-line improvements that impacted on cost savings and also improved productivity.In the next few paragraphs we try to answer the question; how can my company get started and start realizing the benefits of data mining.
The right time to start your data mining project is now. With the emergence of specialized data mining companies, starting the process has been simplified and the costs greatly reduced. Data mining project can offer important insights into the field and also aggregate the idea of creating a data warehouse.
In this article, we have addressed some of the common questions regarding data mining, what are the benefits associated with the process and how a company can get started. Now, with this knowledge your company should start with a pilot project and then continue building a data mining capability in your company; to improve profitability, market your products more effectively, expand your business and also reduce costs