Data Mining

Overview

Introduction Explanation of Data Mining Techniques Advantages Applications Privacy

Data Mining

What is Data Mining? The process of semi automatically analyzing large databases to find useful patterns (Silberschatz) KDD Knowledge Discovery in Databases (3) Attempts to discover rules and patterns from data Discover Rules Make Predictions Areas of Use

Internet Discover needs of customers Economics Predict stock prices Science Predict environmental change Medicine Match patients with similar problems cure

Example of Data Mining

Credit Card Company wants to discover information about clients from databases. Want to find:

Clients who respond to promotions in Junk Mail Clients that are likely to change to another competitor Clients that are likely to not pay Services that clients use to try to promote services affiliated with the Credit Card Company Anything else that may help the Company provide/ promote services to help their clients and ultimately make more money.

Data Mining & Data Warehousing

Data Warehouse: is a repository (or archive) of information gathered from multiple sources, stored under a unified schema, at a single site. (Silberschatz)

Collect data Store in single repository Allows for easier query development as a single repository can be queried.

Data Mining:

Analyzing databases or Data Warehouses to discover patterns about the data to gain knowledge. Knowledge is power.

Discovery of Knowledge

Data Mining Techniques

Classification Clustering Regression Association Rules

Classification

Classification: Given a set of items that have several classes, and given the past instances (training instances) with their associated class, Classification is the process of predicting the class of a new item. Therefore to classify the new item and identify to which class it belongs Example: A bank wants to classify its Home Loan Customers into groups according to their response to bank advertisements. The bank might use the classifications Responds Rarely, Responds Sometimes, Responds Frequently. The bank will then attempt to find rules about the customers that respond Frequently and Sometimes. The rules could be used to predict needs of potential customers.

Technique for Classification

Decision-Tree Classifiers
Job
Carpenter Engineer

Doctor

Income
<30K >50K <40K

Income
>90K

Income
<50K >100K

Bad

Good

Bad

Good

Bad

Good

Predicting credit risk of a person with the jobs specified.

Clustering

Clustering algorithms find groups of items that are similar. It divides a data set so that records with similar content are in the same group, and groups are as different as possible from each other. (2)

Example: Insurance company could use clustering to group clients by their age, location and types of insurance purchased.
The categories are unspecified and this is referred to as unsupervised learning

Clustering

Group Data into Clusters

Similar data is grouped in the same cluster Dissimilar data is grouped in the same cluster

How is this achieved ? K-Nearest Neighbor A classification method that classifies a point by calculating the distances between the point and points in the training data set. Then it assigns the point to the class that is most common among its k-nearest neighbors (where k is an integer).(2)

Hierarchical

Group data into t-trees

Regression

Regression deals with the prediction of a value, rather than a class. (1, P747) Example: Find out if there is a relationship between smoking patients and cancer related illness.

Given values: X1, X2... Xn Objective predict variable Y One way is to predict coefficients a0, a1, a2

Y = a0 + a1X1 + a2X2 + anXn Linear Regression

Regression

Example graph:

Line of Best Fit Curve Fitting

Association Rules

An association algorithm creates rules that describe how often events have occurred together. (2) Example: When a customer buys a hammer, then 90%

of the time they will buy nails.

Association Rules

Support: is a measure of what fraction of the population satisfies both the antecedent and the consequent of the rule(1, p748) Example:

People who buy hotdog buns also buy hotdog sausages in 99% of cases. = High Support People who buy hotdog buns buy hangers in 0.005% of cases. = Low support

Situations where there is high support for the antecedent are worth careful attention

E.g. Hotdog sausages should be placed in near hotdog buns in supermarkets if there is also high confidence.

Association Rules

Confidence: is a measure of how often the consequent is true when the antecedent is true. (1, p748) Example:

90% of Hotdog bun purchases are accompanied by hotdog sausages. High confidence is meaningful as we can derive rules.

Hotdog bun Hotdog sausage 2 rules may have different confidence levels and have the same support. E.g. Hotdog sausage Hotdog bun may have a much lower confidence than Hotdog bun Hotdog sausage yet they both can have the same support.

Advantages of Data Mining

Provides new knowledge from existing data

Public databases Government sources Company Databases

Old data can be used to develop new knowledge New knowledge can be used to improve services or products Improvements lead to:

Bigger profits More efficient service

Uses of Data Mining

Sales/ Marketing

Diversify target market Identify clients needs to increase response rates

Identify Customers that pose high credit risk Identify people misusing the system. E.g. People who have two Social Security Numbers Identify customers likely to change providers Identify customer needs

Risk Assessment

Fraud Detection

Customer Care

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. 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 email program might attempt to classify an email as legitimate or 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.

Applications of Data Mining

(4)

Source IDC 1998