What Is Data Mining Software?

History

Data collection using computer technology has existed since the 1960s. Large corporations used data collection to calculate profits and revenue. The development of more sophisticated computer databases in the 1980s allowed sales to be broken down into regions and months. Online analytical processing allowed sales to be broken down into cities. The current evolution of data computing results from advanced computer algorithms featuring predictive software that can calculate future sales.

Most companies keep computerized lists (databases) of customer information. If a telephone company wants to find out its most profitable demographic, it will data mine by using a series of computers to find out what these customers have in common. A specialized computer algorithm (formula) will sort through massive amounts of customer information in order to find the most profitable market. If the most profitable customers for a telephone company are in New York with an age range of 35 to 40, the telephone company can run ads which appeal directly to this market.

Retail stores use data mining to identify products that aren't selling well, allowing them to make room for more products that their customers want. By predicting how many units of a product will be sold a day, retail stores can stock less inventory. By identifying repeat customers, businesses can upsell products or offer similar goods that will appeal to customers.

Businesses focus on particular areas of data mining when improving their approach. Market segmentation allows businesses to determine their target audience. Customer churn identifies which customers are likely to go over to a competitor. Trend analysis helps businesses determine future sales potential. Direct marketing provides information on what customers have a high response rate to direct mailings. Businesses use fraud detection data to determine what types of transactions have the highest probability of being fraudulent.

Data mining presents a privacy concern because the rapid spread of personal information on the Internet and the use of credit cards. Personal information may be sold by a business to a third party for marketing purposes. As computer systems become more advanced, they will be able to draw correlations between extremely large databases of information, allowing businesses to put together a much more detailed profile of consumers.