Building Data Mining Applications for CRM
This overview provides a description of some of the most common data mining algorithms in use today. We have broken the discussion into two sections, each with a specific theme: • Classical Techniques: Statistics, Neighborhoods and Clustering • Next Generation Techniques: Trees, Networks and Rules Each section will describe a number of data mining algorithms at a high level, focusing on the "big picture" so that the reader will be able to understand how each algorithm fits into the landscape of data mining techniques. Overall, six broad classes of data mining algorithms are covered. Although there are a number of other algorithms and many variations of the techniques described, one of the algorithms from this group of six is almost always used in real world deployments of data mining systems. I. Classical Techniques: Statistics, Neighborhoods and Clustering 1.1. The Classics
These two sections have been broken up based on when the data mining technique was developed and when it became technically mature enough to be used for business, especially for aiding in the optimization of customer relationship management systems. Thus this section contains descriptions of techniques that have classically been used for decades the next section represents techniques that have only been widely used since the early 1980s. This section should help the user to understand the rough differences in the techniques and at least enough information to be dangerous and well armed enough to not be baffled by the vendors of different data mining tools. The main techniques that we will discuss here are the ones that are used 99.9% of the time on existing business problems. There are certainly many other ones as well as proprietary techniques from particular vendors - but in general the industry is converging to those techniques that work consistently and are understandable and explainable. 1.2. Statistics
By strict definition "statistics" or statistical techniques are not data mining. They were being used long before the term data mining was coined to apply to business applications. However, statistical techniques are driven by the data and are used to discover patterns and build predictive models. And from the users perspective you will be faced with a conscious choice when solving a "data mining" problem as to whether you wish to attack it with statistical methods or other data mining techniques. For this reason it is important to have some idea of how statistical techniques work and how they can be applied. What is different between statistics and data mining?
I flew the Boston to Newark shuttle recently and sat next to a professor from one the Boston area Universities. He was going to discuss the drosophila (fruit flies) genetic makeup to a pharmaceutical company in New Jersey. He had compiled the world's largest database on the genetic makeup of the fruit fly and had made it available to other researchers on the internet through Java applications accessing a larger relational database. He explained to me that they not only now were storing the information on the flies but also were doing "data mining" adding as an aside "which seems to be very important these days whatever that is". I mentioned that I had written a book on the subject and he was interested in knowing what the difference was between "data mining" and statistics. There was no easy answer. The techniques used in data mining, when successful, are successful for precisely the same reasons that statistical techniques are successful (e.g. clean data, a well defined target to predict and good validation to avoid overfitting). And for the most part the techniques are used in the same places for the same types of problems (prediction, classification discovery). In fact some of the techniques that are classical defined as "data mining" such as CART and CHAID arose from statisticians. So what is the...
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