Foundations of Data Mining

Process of using raw data to infer important business relationships. Collection of powerful techniques intended for analyzing large amounts of data. There is no single data mining approach, but rather a set of techniques that can be used stand alone or in combination with each other. The non-trivial extraction of novel, implicit, and actionable knowledge from large datasets. Extremely large datasets Discovery of the non-obvious Useful knowledge that can improve processes Can not be done manually

Data Mining Is NOT

Data warehousing Software Agent Online Analytical Processing Data Visualization Presenting data in different ways Blind application of algorithms Brute-force crunching of bulk data

Data Mining Applications

Applications - Retail
Performing basket analysis Sales forecasting Database marketing Merchandise planning and allocation

Applications Bank
Card marketing Cardholder pricing and profitability

Fraud detection
Predictive life-cycle management

What can be done with data mining ?

Fraud/Non-Compliance Anomaly detection
Isolate the factors that lead to fraud, waste and abuse Target auditing and investigative efforts more effectively

Service Delivery and Customer Retention Build profiles of customers likely to use which service
Recruiting/Attracting customers Maximizing profitability (cross selling, identifying profitable customers

The whole process of collecting, storing, organizing, and analyzing data using data warehouse systems is called data warehousing. Data mining, on the other hand, is the process of making use of collected data for analysis and statistics.
Enterprise Database
Customers Orders

Transactions
Vendors Etc

Etc

Data Warehouse

Data Mining

Data Warehouse
For organizational learning to take place, data from many sources must be gathered together and organized in a consistent and useful way hence, Data Warehousing (DW) DW allows an organization (enterprise) to remember what it has noticed about its data Data Mining techniques make use of the data in a DW

Data Warehousing Objectives

Keep the warehouse data current Ensure that the warehouse data is accurate Make the warehouse data secure and easily available to authorized users Maintain descriptions of the warehouse data for system developers and users can understand the meaning of each element.

A Data Warehouse System Model

Data Warehouse Security

Characteristics
Subject oriented Data are organized by how users refer to it Inconsistencies are removed in both nomenclature and conflicting information; (i.e. data are clean)

Integrated

Non-volatile

Read-only data. Data do not change over time. Data are time series, not current status

Time series

Summarized
Larger Non normalized Metadata Input

Operational data are mapped into decision usable form

Time series implies much more data is retained Data can be redundant =Data about data Unintegrated, operational en-vironment (legacy systems)

Steps in data warehousing project cycle

Requirement Gathering Physical Environment Setup Data Modeling ETL OLAP Cube Design Front End Development Report Development Performance Tuning Query Optimization Quality Assurance Rolling out to Production Production Maintenance Incremental Enhancements

 Customer relationship management (CRM) means generating high levels of profitable customer satisfaction through the use of knowledge generated from CRM applications using corporate and external data. CRM is based on the simple notion that the better one knows ones customers, the better one can maintain long-lasting, valuable relationships with them. The goal of CRM is to maximize relationships with customers over time, focusing on all aspects of the business, from marketing, sales, operations and service, to establishing and sustaining mutually beneficial customer relations. In order to accomplish that, the organization must develop a single, integrated view of each customer.

Definitions
is a business strategy with outcomes
that optimize profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer-satisfying behaviors and implementing customer-centric processes.

is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them.

History of CRM
B&S
Time line

RM

CIMS

CRM

e-CRM

Late 80s

Early 90s

Mid 90s

2002 - Future

B&S Buying & Selling RM Relationship Marketing CIMS Customer Information Management Systems CRM Customer Relationship Management

e-CRM- A subset of CRM that focuses on enabling customer interactions via e-channels

Underpinning Theory
Customers have many points of contact with an organization Retaining customers is far most cost effective than recruiting new ones Some customers are more profitable than others The 80/20 rule For most firms, 80 percent of profit comes from 20 percent of customers Use of Technology

Why CRM
Complete customer-centric end-to-end processes through Connected CRM
Seamless integration of Partners beyond enterprise boundaries through Collaborative CRM Business process support benefiting from 30 years of SAP industry experience - Industry-specific CRM

Ease of use for all employees, partners and customers involved through - People-Centric CRM

CRM A complete Solution

Three phases of CRM

Acquiring New Relationships
acquire new customers by promoting companys product and service leadership.

Enhancing Existing Relationships

enhance the relationship by encouraging excellence in crossselling and up-selling, thereby deepening and broadening the relationship.

Retaining Customer Relationships

Retention focuses on service adaptability delivering not what the market wants but what customers want.

CRM Applications

Data Mining in CRM Customer Life Cycle

The customer life cycle consists of the different stages in the relationship between a customer and a business. KEY STAGES

Prospects: people who are not yet customers but are in the target market Responders: prospects who show an interest in a product or service Active Customers: people who are currently using the product or service Former Customers: may be bad customers who did not pay their bills or who incurred high costs

What marketers want ?

- Increasing customer revenue - Customer profitability - Up-sell - Cross-sell - Keeping the customers for a longer period of time

Solution
- Applying data mining Data Mining helps to Determine the behavior surrounding a particular lifecycle event Find other people in similar life stages and determine which customers are following similar behavior patterns

PROCESSING CUSTOMER INFORMATION USING DATA WAREHOUSING

The Benefits of CRM to Industries Worldwide

Call center efficiency increases Marketing campaigns are made easier Account information Overall revenue increases Cost reduction is achieved Better customer service is achieved Organizations can gain the competitive edge Organizations can concentrate more on production Constant supply of vital customer data Customers receive satisfaction Routine tasks are easier to handle Marketing and support expenses are reduced Sales teams can be effectively monitored Teamwork within the organization is achieved Communication channels are improved

 CRM for Large Industries

CRM for Small Industries