Applications

Three major areas of business that utilize data mining are discussed below.

1.    Retail/Marketing
In a highly competitive consumer atmosphere, companies use data mining to help understand needs of existing customers and address these needs for products and services effectively to grow existing customers ( and increase market share), Determining why customers switch to another company and which customers are most likely to switch helps companies to keep these clients by adjusting strategy as needed. Identification of new market prospects with high probability of success and customers most likely to respond to these new products may also be accomplished through data mining. The effectiveness of coupons and sales may also be assessed by this method. The main avenues for data gathering and dissemination in retain data mining are:

    *    direct mailings/mail order
    *    online shopping
    *    telecommunications/telemarketing

2.    Banking/Finance
Identifying trends in banking enables managers to determine the likelihood of an applicant defaulting on a loan or face difficulty making payments. The mining process used in this arena is very logical, and easily justified to applicants who are turned down for loans, either based on past difficulties or potential fraud risk. Specific areas for application of data mining in banking and finance include:

    *    credit scoring
    *    fraud detection
    *    forecasting in financial markets

3.    Insurance/Health Care and Medicine
Data mining has proved effective in aiding fraud detection and deterrence in this field as well. Past data may be used to predict the probability of future fraud and thus identify risky policy decisions. Data mining techniques have also been used for:

    *    diagnostic aides for physicians
    *    analysis of pap smears

Applications for data mining techniques continue to expand into new arenas as the field grows. Current areas of use include:

      *    transportation analysis
    *    engineering
    *    scientific discovery
    *    knowledge acquisition
    *    operations analysis,
    *    model development
    *    analysis of energy efficiency
    *    control system performance analysis