Data Mining as a Part of the Knowledge

28.1.2 Data Mining as a Part of the Knowledge

Discovery Process

Knowledge Discovery in Databases , frequently abbreviated as KDD, typically encompasses more than data mining. The knowledge discovery process comprises

six phases: 2 data selection, data cleansing, enrichment, data transformation or encoding, data mining, and the reporting and display of the discovered information.

As an example, consider a transaction database maintained by a specialty consumer goods retailer. Suppose the client data includes a customer name, ZIP Code, phone number, date of purchase, item code, price, quantity, and total amount. A variety of new knowledge can be discovered by KDD processing on this client database. During data selection, data about specific items or categories of items, or from stores in a specific region or area of the country, may be selected. The data cleansing process then may correct invalid ZIP Codes or eliminate records with incorrect phone prefixes. Enrichment typically enhances the data with additional sources of information. For example, given the client names and phone numbers, the store may purchase other data about age, income, and credit rating and append them to each record. Data transformation and encoding may be done to reduce the amount

1 The Gartner Report is one example of the many technology survey publications that corporate man- agers rely on to make their technology selection discussions. 2 This discussion is largely based on Adriaans and Zantinge (1996).

28.1 Overview of Data Mining Technology 1037

of data. For instance, item codes may be grouped in terms of product categories into audio, video, supplies, electronic gadgets, camera, accessories, and so on. ZIP Codes may be aggregated into geographic regions, incomes may be divided into ranges, and so on. In Figure 29.1, we will show a step called cleaning as a precursor to the data warehouse creation. If data mining is based on an existing warehouse for this retail store chain, we would expect that the cleaning has already been applied. It is only after such preprocessing that data mining techniques are used to mine different

rules and patterns. The result of mining may be to discover the following type of new information:

Association rules —for example, whenever a customer buys video equip- ment, he or she also buys another electronic gadget.

Sequential patterns —for example, suppose a customer buys a camera, and within three months he or she buys photographic supplies, then within six months he is likely to buy an accessory item. This defines a sequential pat- tern of transactions. A customer who buys more than twice in lean periods may be likely to buy at least once during the Christmas period.

Classification trees —for example, customers may be classified by frequency of visits, types of financing used, amount of purchase, or affinity for types of items; some revealing statistics may be generated for such classes.

We can see that many possibilities exist for discovering new knowledge about buy- ing patterns, relating factors such as age, income group, place of residence, to what and how much the customers purchase. This information can then be utilized to plan additional store locations based on demographics, run store promotions, com- bine items in advertisements, or plan seasonal marketing strategies. As this retail store example shows, data mining must be preceded by significant data preparation before it can yield useful information that can directly influence business decisions.

The results of data mining may be reported in a variety of formats, such as listings, graphic outputs, summary tables, or visualizations.