Olson & Shi, Introduction to Business Data Mining

Chapter 1: Initial Description of Data Mining in Business Exercises 1. How is micromarketing different than marketing based on Super Bowl advertising?
Super Bowl advertising reaches out to the masses (everyone who tunes in to the Super Bowl, which is extensive, at least in the U.S.). Micromarketing takes a different approach, expending resources to identify those likely to be interested in the message to be delivered, thus avoiding the waste of resources spent on reaching those who have no reason to care about the message, or who are unlikely to do business with the sender.

2. What is the relationship of data mining to classical statistical analysis?

Data mining is a broader concept, seeking to focus on the use of knowledge. Statistical analysis is a key means of identifying knowledge, and is a needed tool to accomplish data mining (along with artificial intelligence-based tools for data processing). Data mining should be based on statistically valid analysis, but extends beyond that to understanding relationships.

3. Describe the difference between customer profiling and targeting.

Customer profiling groups customers into subsets with identifiable characteristics and includes identification of how profitable on average customers in each profile would be. Targeting works in reverse, starting with identification of the most profitable customers and then identifying the profile describing them. They can end up in the same place but may have different starting points.

4. Discuss the difference between hypothesis testing and knowledge discovery.

Hypothesis testing is a traditional scientific approach where theories are developed and experiments are conducted that are statistically analyzed in a formal way. This approach is systematic and has been effectively used in the hard sciences, but it can be a slow procedure. Knowledge discovery is less rigid, where preconceived theories may or may not be present, but the focus is on seeking unexpected and useful patterns in the data.

5. Describe the difference between versatile and scalable tools.

Versatile refers to the ability to deal with many different types of analysis or cases. Scalable refers to the ability to deal with different sizes of data sets.

Olson & Shi, Introduction to Business Data Mining

6. Churn is a concept originating in the telephone industry. How can the same concept apply to banking? To human resources?
Churn involves turnover, especially of customers, and came from the tendency of customers to switch between competitive telephone services in the 1980s when AT&T was split up and new telephone companies would offer attractive programs to gain new customers quickly (at each others expense). The same phenomenon occurs in the credit card industry, or in banking in general. In human resources, churn would involve employees switching jobs from one firm in an industry to another as more attractive pay packages were offered (effective only during prosperous periods). It could be applied to professional athletes who gain free agency.

7. How is focused marketing different than mass marketing, such as network television? What is a television media analogy to focused marketing?
Focused marketing is micromarketing. In television, focused marketing can be attained through cable television or close-circuit television fed to particular areas such as airport or physician waiting areas.

8. Describe the concept of actionable information.

Actionable is useful in data mining parlance. Actionable implies information that can be used in a concrete way to better accomplish organizational objectives (such as make more money in business organizations).

Results depend on specific sites found. The site www.kdnuggets.com is a good starting point.. There also is a great deal of information at the web site www.datawarehouse.com. Alternate Web sites were given above for OLAP products.