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Unit 9: Data Mining

A diversified transportation company with a large direct sales force can apply data mining Notes
to identify the best prospects for its services. Using data mining to analyze its own customer
experience, this company can build a unique segmentation identifying the attributes of
high-value prospects. Applying this segmentation to a general business database such as
those provided by Dun & Bradstreet can yield a prioritized list of prospects by region.
A large consumer package goods company can apply data mining to improve its sales
process to retailers. Data from consumer panels, shipments, and competitor activity can
be applied to understand the reasons for brand and store switching. Through this analysis,
the manufacturer can select promotional strategies that best reach their target customer
segments.
Each of these examples have a clear common ground. They leverage the knowledge about
customers implicit in a data warehouse to reduce costs and improve the value of customer
relationships. These organizations can now focus their efforts on the most important (profitable)
customers and prospects, and design targeted marketing strategies to best reach them.

Self Assessment

Fill in the blanks:
14. With ..........................., you will be able to find behaviors that are common among your
customers.

15. ........................... will allow you to estimate which customers are the most likely to stop
purchasing your products or services and go to one of your competitors.

Case Study Jaeger Uses Data Mining to Reduce Losses from

Crime and Waste

eg of lamb is the most stolen item at Iceland. Thieves also like cheese, bacon and
coffee. With the UK in recession, shoplifters appear to be switching their sights
Lfrom alcohol, electric toothbrushes and perfume to food. Tesco, Marks & Spencer
and Iceland have all reported an increase in shoplifting since the economy began to
contract in the second quarter of 2008. Tesco alone caught some 43,000 would-be thieves in
the first half of 2008, up 36% from the same period in 2007.

The impact of the recession on retailers is yet to be reflected in any of the major surveys of
shoplifting. The Centre for Retail Research’s Retail Theft Barometer only has figures up to
the end of 2007. Those figures show that shrinkage – losses from crime and waste – cost
retailers 1.3% of sales in 2007, down from 1.34% in 2006. Even though 2007 was the peak of
the boom, the losses were still huge. Customers stole some £1.6bn and employees another
£1.3bn. Suppliers took £209m fraudulently. Some £73m was lost through card fraud and
another £39m through robberies or burglaries. Retailers lost £666m through waste. The
systems and security guards intended to reduce losses cost £785m. The total bill was
£4.6bn.
Retailers have used a variety of technologies to reduce their losses. Closed-Circuit
Television (CCTV) and Electronic Article Surveillance (EAS) – the tags attached to
individual items – are all visible in stores. Some retailers, however, are using a different
type of technology to reduce losses data mining.
Contd....

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