Data warehouse and data mining

DATA WAREHOUSE
AND
DATA MINING

Which are our
lowest/highest margin
customers ?
Who are my customers
and what products
are they buying?
Which customers
are most likely to go
to the competition ?
What impact will
new products/services
have on revenue
and margins?
What product prom-
-otions have the biggest
impact on revenue?
What is the most
effective distribution
channel?
A PRODUCER WANTS TO KNOW….

DATA, DATA EVERYWHERE
YET ...
 I can’t get the data I need
 need an expert to get the data
 I can’t understand the data I found
 available data poorly documented
 I can’t use the data I found
 results are unexpected
 data needs to be transformed from
one form to other
 I can’t find the data I need
 data is scattered over the network
 many versions, subtle differences

 1960s:
 Data collection, database creation, IMS and network DBMS
 1970s:
 Relational data model, relational DBMS implementation
 1980s:
 RDBMS, advanced data models (extended-
relational, OO, deductive, etc.) and application-oriented DBMS
(spatial, scientific, engineering, etc.)
 1990s—2000s:
 Data mining and data warehousing, multimedia databases, and
Web databases
7

DATA WAREHOUSE
The data warehouse is that portion of an overall
Architected Data Environment that serves as the
single integrated source of data for processing
information.

CHARACTERISTICS
DATA
WAREHOUSE
Subject
Oriented
Integrated
Non
Volatile
Time
variant
Accessible
Process
Oriented

TERMS RELATED
TO DATA WAREHOUSE
DATA MART
STAGING AREA
OLAP
OLAP TOOLS

Data
Acquisition
Warehouse
Design
Analytical
Data Store
Enterprise
Warehouse
Data Marts
Metadata
Directory
Metadata
Repository
DATA
MANAGEMENT
METADATA
MANAGEMENT
Data
Analysis
Web
Information
Systems
Operational,
External &
other
Databases
COMPONENTS OF
DATAWAREHOUSE SYSTEM

HOW IS THE WAREHOUSE
DIFFERENT?
The data warehouse is distinctly different from
the operational data used and maintained by day-
to-day operational systems. Data warehousing is
not simply an “access wrapper” for operational
data, where data is simply “dumped” into tables
for direct access.

OPERATIONAL DATA
Application oriented
Detailed
Accurate, as of the moment
of access
Serves the clerical
community
Performance sensitive
(immediate response required
when entering a transaction)
Flexible structure; variable
contents
Small amount of data used in
a process
DATA WAREHOUSE
Subject oriented
Summarized
Represents values over time
Serves the managerial
community
Performance relaxed
(immediacy not required)
Static structure
large amount of data used in
a process

 Data explosion problem
 Automated data collection tools and mature database
technology lead to tremendous amounts of data stored in
databases, data warehouses and other information
repositories
 We are drowning in data, but starving for knowledge!
 Solution: Data warehousing and data mining
 Extraction of interesting knowledge (rules, regularities,
patterns, constraints) from data in large databases
15

 Data mining (knowledge discovery in databases):
 Extraction of interesting (non-trivial, implicit, previously
unknown and potentially useful) information or patterns
from data in large databases
 Alternative names:
 Data mining: a misnomer?
 Knowledge discovery(mining) in databases (KDD),
knowledge extraction, data/pattern analysis, data
archeology, data dredging, information harvesting, business
intelligence, etc.
 What is not data mining?
 (Deductive) query processing.
 Expert systems or small ML/statistical programs
16

 Database analysis and decision support
 Market analysis and management
 target marketing, customer relation management, market
basket analysis, cross selling, market segmentation
 Risk analysis and management
 Forecasting, customer retention, improved
underwriting, quality control, competitive analysis
 Fraud detection and management
 Other Applications
 Text mining (news group, email, documents)
 Stream data mining
 Web mining.
 DNA data analysis
17

 Where are the data sources for analysis?
 Credit card transactions, loyalty cards, discount coupons,
customer complaint calls, plus (public) lifestyle studies
 Target marketing
 Find clusters of “model” customers who share the same
characteristics: interest, income level, spending habits, etc.
 Determine customer purchasing patterns over time
 Conversion of single to a joint bank account: marriage, etc.
 Cross-market analysis
 Associations/co-relations between product sales
 Prediction based on the association information
18

19
 Customer profiling
 data mining can tell you what types of customers buy what
products (clustering or classification)
 Identifying customer requirements
 identifying the best products for different customers
 use prediction to find what factors will attract new customers
 Provides summary information
 various multidimensional summary reports
 statistical summary information (data central tendency and
variation)

 Finance planning and asset evaluation
 cash flow analysis and prediction
 contingent claim analysis to evaluate assets
 cross-sectional and time series analysis (financial-ratio, trend
analysis, etc.)
 Resource planning:
 summarize and compare the resources and spending
 Competition:
 monitor competitors and market directions
 group customers into classes and a class-based pricing procedure
 set pricing strategy in a highly competitive market
20

 Applications
 widely used in health care, retail, credit card services,
telecommunications (phone card fraud), etc.
 Approach
 use historical data to build models of fraudulent behavior and use
data mining to help identify similar instances
 Examples
 auto insurance: detect a group of people who stage accidents to
collect on insurance
 money laundering: detect suspicious money transactions (US
Treasury's Financial Crimes Enforcement Network)
 medical insurance: detect professional patients and ring of
doctors and ring of references
21

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 Detecting inappropriate medical treatment
 Australian Health Insurance Commission identifies that in many
cases blanket screening tests were requested (save Australian
$1m/yr.).
 Detecting telephone fraud
 Telephone call model: destination of the call, duration, time of
day or week. Analyze patterns that deviate from an expected
norm.
 British Telecom identified discrete groups of callers with frequent
intra-group calls, especially mobile phones, and broke a
multimillion dollar fraud.
 Retail
 Analysts estimate that 38% of retail shrink is due to dishonest
employees.

 Sports
 IBM Advanced Scout analyzed NBA game statistics (shots
blocked, assists, and fouls) to gain competitive advantage for
New York Knicks and Miami Heat
 Astronomy
 JPL and the Palomar Observatory discovered 22 quasars with the
help of data mining
 Internet Web Surf-Aid
 IBM Surf-Aid applies data mining algorithms to Web access logs
for market-related pages to discover customer preference and
behavior pages, analyzing effectiveness of Web
marketing, improving Web site organization, etc.
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Data warehouse and data mining

Data warehouse and data mining

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