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APPLIED ANALYTICS WORKSHOP

NMIMS MPE 04 T4 COURSE: LECTURES 9-11

Emerging CRM
Emerging CRM has high end value added components This is highly demandable in current market

Emerging CRM Data Mining


Data Mining a field at the intersection of computer science and
statistics,is the process that attempts to discover patterns in large data sets. It utilizes methods at the intersection of artificial intelligence, machine learning, statistics, and database systems. The overall goal of the data mining process is to extract information from a data set and transform it into an understandable structure for further use. Aside from the raw analysis step, it involves database and data management aspects, data preprocessing, model and inference considerations, interestingness metrics, complexity considerations, post-processing of discovered structures, visualization, and online updating.

Data Mining Common tasks


Data mining involves six common classes of tasks: Anomaly detection (Outlier/change/deviation detection) The
identification of unusual data records, that might be interesting or data errors and require further investigation.

Association rule learning (Dependency modeling) Searches for


relationships between variables. For example a supermarket might gather data on customer purchasing habits. Using association rule learning, the supermarket can determine which products are frequently bought together and use this information for marketing purposes. This is sometimes referred to as market basket analysis.

Data Mining Common tasks


Clustering is the task of discovering groups and structures in the
data that are in some way or another "similar", without using known structures in the data.

Classification is the task of generalizing known structure to apply to


new data. For example, an e-mail program might attempt to classify an e-mail as "legitimate" or as "spam".

Regression Attempts to find a function which models the data with


the least error.

Summarization providing a more compact representation of the data


set, including visualization and report generation.

Data Mining Noteable uses


Games Business

Science and Engineering


Human Rights Medical and Spatial Data Mining Sensor/Visual/Music Data Mining Pattern Mining

Knowledge Grid

Data Mining Application


Data mining tools take data and construct a representation of reality in
the form of a model. The resulting model describes patterns and relationships present in the data. From a process orientation, data mining activities fall into three general categories.

Discoverythe process of looking in a database to find hidden patterns without a predetermined idea or hypothesis about what the patterns may be.

Data Mining Application


Forensic Analysisthe process of applying the extracted patterns to
find anomalous or unusual data elements.

Prediction - Classification

RFM Churn Prediction Cross/Up Selling Modeling Credit Risk Propensity Model Acquisition modeling

Segmentation

Value based segmentation Present value VS Potential value Present value VS Risk Behavioral segmentation Multi Attribute Segmentation

Data Mining Application


Campaigning

Campaign testing using control groups Next Best Activity

Logistic Regression Models


Predict like hood of purchase Statistical knowledge for linear correlations

Association Detection

Groups of products typically held together Very popular as Market basket Analysis

Sequence Detection

Actions and events which indicate next purchase Web- mining taking into account the time order

Data Mining Application


Campaigning

Campaign testing using control groups Next Best Activity

Logistic Regression Models


Predict like hood of purchase Statistical knowledge for linear correlations

Association Detection

Groups of products typically held together Very popular as Market basket Analysis

Sequence Detection

Actions and events which indicate next purchase Web- mining taking into account the time order

Data Mining - SAP HANA PRODUCT

SAP is coming with the In-memory data computing engine which is purely based on CRM Data mining concepts.

Data Mining SAP HANA PRODUCT

Data Mining Application


RETAIL - Through the use of store-branded credit cards and point-ofsale systems, retailers can keep detailed records of every shopping transaction. This enables them to better understand their various customer segments. Some retail applications include

Performing basket analysis Sales forecasting Database marketing Merchandise planning and allocation

BANKING - Banks can utilize knowledge discovery for various


applications, including

Card Marketing Cardholder pricing and profitability Fraud detection Predictive life-cycle management

Data Mining Application


TELECOMMUNICATIONS - Telecommunication companies around
the world face escalating competition which is forcing them to aggressively market special pricing programs aimed at retaining existing customers and attracting new ones. Knowledge discovery in telecommunications include the following

Call detail record analysis Customer loyalty

Other applications

Customer segmentation Manufacturing Warranties Frequent flier incentives

Data Mining Technologies Block DIAGRAM

CRM Data Mining Techniques


Neural Networks -

CRM Data Mining Techniques


CHAID VS Neural Networks

Both CHAID and neural networks can create predictive models. Such models include attrition, churn, propensity to purchase, and customer lifetime value. Yet in general, the application of neural networks is wider than CHAID. The reason for this is that neural networks can be applied to both directed (supervised) and undirected (unsupervised) data mining. Neural networks can handle both categorical (e.g., marital status) and continuous (e.g., income) independent variables, but these have to be transformed to 0/1 input variables. Neural networks can be used to solve estimation problems (with continuous outcomes); whereas CHAID provides good solutions to classification problems, can be used for exploratory analysis (perhaps prior to another modeling technique), and can provide descriptive rules. CHAID models are easier to build and implement than neural networks and also are less costly. Theoretically, neural networks should provide models that are better than CHAID in terms of power and accuracy. That means they should be more powerful at discriminating between groups that fit the target (for instance, churn) and that they should predict correctly more often. Currently, this is not the case, perhaps because of the problems of over-fitting and sub-optimal solutions.

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