Tech moves fast! Stay ahead of the curve with Techopedia!
Join nearly 200,000 subscribers who receive actionable tech insights from Techopedia.
Data mining is the process of analyzing hidden patterns of data according to different perspectives in order to turn that data into useful and often actionable information. Data is collected and assembled in common areas, such as data warehouses, and data mining algorithms look for patterns that businesses can use to make better decisions, such as decisions that help cut costs, increase revenue, or better serve customers or clients.
Data mining is also known as data discovery or knowledge discovery. It's critical in business intelligence to establish data-driven decisions.
The major steps involved in a data mining process are:
The first step in data mining is gathering relevant data critical for business. Company data is either transactional, non-operational or metadata. Transactional data deals with day-to-day operations like sales, inventory and cost. Non-operational data is normally forecast, while metadata is concerned with logical database design. Patterns and relationships among data elements can often render relevant information for improving business processes. Organizations with a strong consumer focus deal with data mining techniques providing clear pictures of products sold, price, competition and customer demographics.
For instance, the retail giant Walmart transmits all its relevant information to a data warehouse with terabytes of data. This data can easily be accessed by suppliers, enabling them to identify customer buying patterns. They can generate patterns on shopping habits, most-shopped days, most-sought-after products and other insights using data mining techniques.
The second step in data mining is selecting a suitable algorithm - a mechanism producing a data mining model. The general working of the algorithm involves identifying trends in a set of data and using the output for parameter definition. The most popular algorithms used for data mining are classification algorithms and regression algorithms, which are used to identify relationships among data elements. Major database vendors like Oracle and SQL incorporate data mining algorithms, such as clustering and regression trees, to meet the demand for data mining.