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What is Data Mining?

Making Informed Predictions with Existing Data

Data mining is the practice of examining existing data for patterns and relationships that may seem unrelated, but that actually hold useful information, and from which predictions about future behavior can be formed. Such predictions can impact many vital aspects of business operation like revenue, spending, or customer acquisition and retention.

To better explain data mining, let’s look at a specific example of how it can inform decisions and strategy.

A Pennsylvania financial institution wanted to acquire new customers through a direct-mail loan check. The bank’s customer database keeps track of hundreds of customer traits like how many open lines of credit they have, what their credit card balances are, and if they have ever taken advantage of a loan check sent to them in the mail. The bank turned to data mining to examine these customer traits for patterns and commonality. The results were then used to create a predictive model, or a strategy for the type of person to target the direct-mail loan check campaign to maximize chances of acquiring new business. Thanks to the insight from data mining and the resulting predictive model, the financial institution knew to send their loan checks to married couples in the 35-40 year old age range, with an income of less than $65,000 annually who have over $15,000 in credit card debt, possess no fewer than 4 open credit lines, and who have taken advantage of loan checks in the past.

Don’t Doom Your Data Analysis to Failure

As the Internet has enjoyed tremendous and ever-growing popularity, the volume of data available to most businesses has increased greatly. Data mining, while it has been a useful practice for a long time, is in greater demand. Technological advances have made data mining simpler and its benefits clearer than ever before. However, it’s important to not rush to adopt a data mining solution, such as a suite of software, without understanding the principles and practices behind predictive analysis. An ill-informed analytics campaign will be at best a hindered campaign, and at worst doomed to fail before it begins.

Make the most of your data analysis with a solid foundation of understanding and actionable wisdom. Sign up today for one of The Modeling Agency’s free webinars, or consider one of TMA’s comprehensive training courses.

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