Data mining is the practice of gathering and examining large databases to produce new information and predict future outcomes. Modern businesses rely on massive amounts of data, so much so that an IDG survey of 70 IT and business leaders recently found that 92% of respondents want to deploy advanced analytics more broadly across their organizations. This post will discuss some of the benefits of data mining that these leaders saw within their organizations.
Possibly the biggest benefit of data mining is improved decision making. Data mining helps businesses and organizations build models based on historical data to predict future behavior. For example, these models can provide insight into who will respond to new marketing campaigns and on what platform (mail, television campaign, or online campaign). With that information, they can now determine what products sell best and what customers to target.
Financial institutions can use data mining to gain more information about loans and credit reporting. This can be done by building a model based on historical customer data to determine good loans and bad loans. These models can also be helpful in detecting fraudulent transactions and activity.
Target Customer Optimization
Even retail stores can reap the benefits of data mining. A 2014 Infosys survey reported that 78% of consumers said they’d be more likely to purchase from a retailer again if they provided more offers targeted to their interests, wants, or needs. A majority of customers (86%) said they’d be willing to pay up to 25% more for a better experience. Through data mining, retail stores can use their customer shopping habits to optimize their store layout. This is will improve the customer experience and subsequently increase profits.
Commercial groups aren’t the only ones utilizing data mining practices. Governing bodies have used data mining practices to detect suspicious tax returns, money laundering, and other criminal activities. Data mining has also been used in the manufacturing industry to improve product and employee safety.
If you are still having a hard time buying into the benefits of utilizing these practices, there are other benefits that could peak your interest. Respondents from the IDG survey that was mentioned earlier identified 30 different ways that data mining impacts their business. I have listed the top 10 below:
- Improved decision-making
- Improved security risk procedure
- Improved planning and forecasting
- Competitive advantage
- Cost reduction
- Customer acquisition
- New revenue streams
- New customer acquisition/retention
- Improved customer relationships
- Development of new products
It has been proven that data mining has the power to transform enterprises. The effective use of data is an important part of any business and if properly leveraged, can give an organization a rigorous advantage over its competitors.
If you have questions related to any of the aforementioned content or on how to start implementing a specific data collection strategy successfully for your business, give us a shout!