A data mining expert explains how to generate all the business intelligence you need to understand what your customers want
The seeming simplicity of a term like business intelligence belies the rich potential that its implementation can provide to a small or midsize company. Data mining is the backbone of BI -- it means sorting through company data and identifying and extracting valuable information about operations. In a customer-centric business the information can be particularly compelling. We turned to Gordon Linoff, a principal at Data Miners, to learn what data mining for BI can do for small and midsize businesses.
bMighty: What is it about the current business climate that makes mining data for BI about a company's customers so vital?
Gordon Linoff: Once upon a time, and this is a rosy view of the ancient world, the hardware store owner knew you. If you went to the grocery store, someone there knew what items you needed. If a woman walked into a bank to make a deposit and she was pregnant, [the bank manager] knew and offered her a car loan. We traded all that for lower interest rates and lower prices, we traded all that for more efficiency, but we lost the intimacy with our customers. How can we get to know our customers again? That's one component of business intelligence.
bMighty: Where do small and midsize companies fit into this BI picture?
Linoff: Well, it depends upon their relationship with their customers. If they only have a handful of larger clients, they know them. But one of our clients, The Vermont Country Store, is a cataloguer that sends to several million people. The company has about 400 employees. How are 400 people going to know about several million people? They need to use the information they collect in order to better serve their customers and increase revenue. But there's not an overall approach because businesses are different and there are several different levels that businesses operate on. Some are campaign-driven to encourage customers to buy and [business intelligence helps] them optimize each campaign and [some use] traditional predictive models associated with data mining, tailoring aspects of their Web sites to their customers or sending e-mails to their customers to return to their site.
For example on Amazon, which is not a small company, if I bought Harry Potter IV, [they know] I will buy Harry Potter V, VI, and VII, [because they're asking] what's the next type of thing that I'll buy? You can get associations or market basket analysis. For companies in retail, association rules are something they're interested in. What things sell together?
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