My brief summery of data mining

Overview

Generally, data mining (sometimes called data or knowledge discovery) is the process of analyzing data from different perspectives and summarizing it into useful information - information that can be used to increase revenue, cuts costs, or both. Data mining software is one of a number of analytical tools for analyzing data. It allows users to analyze data from many different dimensions or angles, categorize it, and summarize the relationships identified. Technically, data mining is the process of finding correlations or patterns among dozens of fields in large relational databases.

What can data mining do?

Data mining is primarily used today by companies with a strong consumer focus - retail, financial, communication, and marketing organizations. It enables these companies to determine relationships among 'internal' factors such as price, product positioning, or staff skills, and 'external' factors such as economic indicators, competition, and customer demographics. And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to 'drill down' into summary information to view detail transactional data.

With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments.

How does data mining work?

While large-scale information technology has been evolving separate transaction and analytical systems, data mining provides the link between the two. Data mining software analyzes relationships and patterns in stored transaction data based on open-ended user queries. Several types of analytical software are available: statistical, machine learning, and neural networks.

Different levels of analysis are available:

Artificial neural networks: Non-linear predictive models that learn through training and resemble biological neural networks in structure.

Genetic algorithms: Optimization techniques that use processes such as genetic combination, mutation, and natural selection in a design based on the concepts of natural evolution.

Nearest neighbor method: A technique that classifies each record in a dataset based on a combination of the classes of the k record(s) most similar to it in a historical dataset (where k 1). Sometimes it is called the k-nearest neighbor technique.

Rule induction: The extraction of useful if-then rules from data based on statistical significance.

Data visualization: The visual interpretation of complex relationships in multidimensional data. Graphics tools are used to illustrate data relationships.