Data Mining

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.

Definition of 'Data Mining'

A process used by companies to turn raw data into useful information. By using software to look for patterns in large batches of data, businesses can learn more about their customers and develop more effective marketing strategies as well as increase sales and decrease costs. Data mining depends on effective data collection and warehousing as well as computer processing

Data Mining Techniques

There are several major data mining techniques have been developing and using in data mining projects recently including association, classification, clustering, prediction, sequential patterns and decision tree. We will briefly examine those data mining techniques in the following sections.

Association

Association is one of the best known data mining technique. In association, a pattern is discovered based on a relationship between items in the same transaction. That’s is the reason why association technique is also known as relation technique. The association technique is used in market basket analysis to identify a set of products that customers frequently purchase together.
Retailers are using association technique to research customer’s buying habits. Based on historical sale data, retailers might find out that customers always buy crisps when they buy beers, and therefore they can put beers and crisps next to each other to save time for customer and increase sales.

Classification

Classification is a classic data mining technique based on machine learning. Basically classification is used to classify each item in a set of data into one of predefined set of classes or groups. Classification method makes use of mathematical techniques such as decision trees, linear programming, neural network and statistics. In classification, we develop the software that can learn how to classify the data items into groups. For example, we can apply classification in application that “given all records of employees who left the company, predict who will probably leave the company in a future period.” In this case, we divide the records of employees into two groups that named “leave” and “stay”. And then we can ask our data mining software to classify the employees into separate groups.

Clustering

Clustering is a data mining technique that makes meaningful or useful cluster of objects which have similar characteristics using automatic technique. The clustering technique defines the classes and puts objects in each class, while in the classification techniques, objects are assigned into predefined classes. To make the concept clearer, we can take book management in library as an example. In a library, there is a wide range of books in various topics available. The challenge is how to keep those books in a way that readers can take several books in a particular topic without hassle. By using clustering technique, we can keep books that have some kinds of similarities in one cluster or one shelf and label it with a meaningful name. If readers want to grab books in that topic, they would only have to go to that shelf instead of looking for entire library.

Prediction

The prediction, as it name implied, is one of a data mining techniques that discovers relationship between independent variables and relationship between dependent and independent variables. For instance, the prediction analysis technique can be used in sale to predict profit for the future if we consider sale is an independent variable, profit could be a dependent variable. Then based on the historical sale and profit data, we can draw a fitted regression curve that is used for profit prediction.

Sequential Patterns

Sequential patterns analysis is one of data mining technique that seeks to discover or identify similar patterns, regular events or trends in transaction data over a business period.
In sales, with historical transaction data, businesses can identify a set of items that customers buy together a different times in a year. Then businesses can use this information to recommend customers buy it with better deals based on their purchasing frequency in the past.

Decision trees

Decision tree is one of the most used data mining techniques because its model is easy to understand for users. In decision tree technique, the root of the decision tree is a simple question or condition that has multiple answers. Each answer then leads to a set of questions or conditions that help us determine the data so that we can make the final decision based on it. For example, We use the following decision tree to determine whether or not to play tennis:

Starting at the root node, if the outlook is overcast then we should definitely play tennis. If it is rainy, we should only play tennis if the wind is week. And if it is sunny then we should play tennis in case the humidity is normal.
We often combine two or more of those data mining techniques together to form an appropriate process that meets the business needs.