Data Mining Tools
Overview & Tutorial
Ahmed Sameh
Prince Sultan University
Department of Computer Science &
Info Sys
May 2010
(Some slides belong to IBM)
1
Introduction Outline
Goal: Provide an overview of data mining.
Define data mining
Data mining vs. databases
Basic data mining tasks
Data mining development
Data mining issues
2
Introduction
Data is growing at a phenomenal
rate
Users expect more sophisticated
information
How?
UNCOVER HIDDEN INFORMATION
DATA MINING
3
Data Mining Definition
Finding hidden information in a
database
Fit data to a model
Similar terms
Exploratory data analysis
Data driven discovery
Deductive learning
4
Data Mining Algorithm
Objective: Fit Data to a Model
Descriptive
Predictive
Preference – Technique to choose
the best model
Search – Technique to search the
data
“Query”
5
Database Processing vs. Data
Mining Processing
Query
Well defined
SQL
 Data
– Operational data
 Output
– Precise
– Subset of database
Query
Poorly defined
No precise query
language
 Data
– Not operational data
 Output
– Fuzzy
– Not a subset of database
6
Query Examples
Database
– Find all credit applicants with last name of Smith.
– Identify customers who have purchased more than
$10,000 in the last month.
– Find all customers who have purchased milk
Data Mining
– Find all credit applicants who are poor credit
risks. (classification)
– Identify customers with similar buying habits.
(Clustering)
– Find all items which are frequently purchased with
milk. (association rules)
7
Related Fields
Machine
Learning
Visualization
Data Mining and
Knowledge Discovery
Statistics
Databases
8
Statistics, Machine Learning
and Data Mining
 Statistics:
 more theory-based
 more focused on testing hypotheses
 Machine learning
 more heuristic
 focused on improving performance of a learning agent
 also looks at real-time learning and robotics – areas not part
of data mining
 Data Mining and Knowledge Discovery
 integrates theory and heuristics
 focus on the entire process of knowledge discovery,
including data cleaning, learning, and integration and
visualization of results
 Distinctions are fuzzy
9
Definition
A class of database application that analyze
data in a database using tools which look
for trends or anomalies.
Data mining was invented by IBM.
Purpose
To look for hidden patterns or previously
unknown relationships among the data in a
group of data that can be used to predict future
behavior.
Ex: Data mining software can help retail
companies find customers with common
interests.
Background Information
Many of the techniques used by today's data
mining tools have been around for many years,
having originated in the artificial intelligence
research of the 1980s and early 1990s.
Data Mining tools are only now being applied
to large-scale database systems.
The Need for Data Mining
The amount of raw data stored in corporate
data warehouses is growing rapidly.
There is too much data and complexity that
might be relevant to a specific problem.
Data mining promises to bridge the analytical
gap by giving knowledgeworkers the tools to
navigate this complex analytical space.
The Need for Data Mining, cont’
The need for information has resulted in the
proliferation of data warehouses that integrate
information multiple sources to support
decision making.
Often include data from external sources, such
as customer demographics and household
information.
Definition (Cont.)
Data mining is the exploration and analysis of large quantities
of data in order to discover valid, novel, potentially useful,
and ultimately understandable patterns in data.
Valid: The patterns hold in general.
Novel: We did not know the pattern
beforehand.
Useful: We can devise actions from the
patterns.
Understandable: We can interpret and
comprehend the patterns.
Of “laws”, Monsters, and Giants…
Moore’s law: processing “capacity” doubles
every 18 months : CPU, cache, memory
It’s more aggressive cousin:
Disk storage “capacity” doubles every 9
months
Disk TB Shipped per Year
1E+7
What do the two
“laws” combined
produce?
A rapidly growing
gap between our
ability to generate
data, and our ability
1998 Disk Trend (Jim Porter)
http://www.disktrend.com/pdf/portrpkg.pdf.
ExaByte
1E+6
1E+5
disk TB
growth:
112%/y
Moore's Law:
58.7%/y
1E+4
1E+3
1988
1991
1994
1997
2000
What is Data Mining?
Finding interesting structure in
data
Structure: refers to statistical patterns,
predictive models, hidden relationships
Examples of tasks addressed by Data Mining
Predictive Modeling (classification,
regression)
Segmentation (Data Clustering )
Summarization
Major Application Areas for
Data Mining Solutions
 Advertising
 Bioinformatics
 Customer Relationship Management (CRM)
 Database Marketing
 Fraud Detection
 eCommerce
 Health Care
 Investment/Securities
 Manufacturing, Process Control
 Sports and Entertainment
 Telecommunications
 Web
19
Data Mining
 The non-trivial extraction of novel, implicit, and
actionable knowledge from large datasets.
Extremely large datasets
Discovery of the non-obvious
Useful knowledge that can improve processes
Can not be done manually
 Technology to enable data exploration, data analysis,
and data visualization of very large databases at a high
level of abstraction, without a specific hypothesis in
mind.
 Sophisticated data search capability that uses statistical
algorithms to discover patterns and correlations in data.
20
Data Mining (cont.)
21
Data Mining (cont.)
 Data Mining is a step of Knowledge Discovery
in Databases (KDD) Process
Data Warehousing
Data Selection
Data Preprocessing
Data Transformation
Data Mining
Interpretation/Evaluation
 Data Mining is sometimes referred to as KDD
and DM and KDD tend to be used as
synonyms
22
Data Mining Evaluation
23
Data Mining is Not …
Data warehousing
SQL / Ad Hoc Queries / Reporting
Software Agents
Online Analytical Processing (OLAP)
Data Visualization
24
Data Mining Motivation
 Changes in the Business Environment
Customers becoming more demanding
Markets are saturated
 Databases today are huge:
More than 1,000,000 entities/records/rows
From 10 to 10,000 fields/attributes/variables
Gigabytes and terabytes
 Databases a growing at an unprecedented
rate
 Decisions must be made rapidly
 Decisions must be made with maximum
knowledge
25
Why Use Data Mining Today?
Human analysis skills are inadequate:
Volume and dimensionality of the data
High data growth rate
Availability of:
Data
Storage
Computational power
Off-the-shelf software
Expertise
An Abundance of Data
 Supermarket scanners, POS data
 Preferred customer cards
 Credit card transactions
 Direct mail response
 Call center records
 ATM machines
 Demographic data
 Sensor networks
 Cameras
 Web server logs
 Customer web site trails
Evolution of Database Technology
 1960s: IMS, network model
 1970s: The relational data model, first relational
DBMS implementations
 1980s: Maturing RDBMS, application-specific
DBMS, (spatial data, scientific data, image data,
etc.), OODBMS
 1990s: Mature, high-performance RDBMS
technology, parallel DBMS, terabyte data
warehouses, object-relational DBMS, middleware
and web technology
 2000s: High availability, zero-administration,
seamless integration into business processes
 2010: Sensor database systems, databases on
embedded systems, P2P database systems,
large-scale pub/sub systems, ???
Much Commercial Support
Many data mining tools
http://www.kdnuggets.com/software
Database systems with data mining
support
Visualization tools
Data mining process support
Consultants
Why Use Data Mining Today?
Competitive pressure!
“The secret of success is to know something that
nobody else knows.”
Aristotle Onassis
 Competition on service, not only on price (Banks,
phone companies, hotel chains, rental car
companies)
 Personalization, CRM
 The real-time enterprise
 “Systemic listening”
 Security, homeland defense
The Knowledge Discovery Process
Steps:
1. Identify business problem
2. Data mining
3. Action
4. Evaluation and measurement
5. Deployment and integration into
businesses processes
Data Mining Step in Detail
2.1 Data preprocessing
 Data selection: Identify target
datasets and relevant fields
 Data cleaning




Remove noise and outliers
Data transformation
Create common units
Generate new fields
2.2 Data mining model construction
2.3 Model evaluation
Preprocessing and Mining
Knowledge
Patterns
Preprocessed
Data
Target
Data
Interpretation
Model
Construction
Original Data
Preprocessing
Data
Integration
and Selection
Data Mining Techniques
Data Mining Techniques
Descriptive
Predictive
Clustering
Classification
Association
Decision Tree
Sequential Analysis
Rule Induction
Neural Networks
Nearest Neighbor Classification
Regression
34
Data Mining Models and Tasks
35
Basic Data Mining Tasks
Classification maps data into
predefined groups or classes
Supervised learning
Pattern recognition
Prediction
Regression is used to map a data item
to a real valued prediction variable.
Clustering groups similar data
together into clusters.
Unsupervised learning
Segmentation
Partitioning
36
Basic Data Mining Tasks (cont’d)
Summarization maps data into subsets
with associated simple descriptions.
Characterization
Generalization
Link Analysis uncovers relationships
among data.
Affinity Analysis
Association Rules
Sequential Analysis determines sequential
patterns.
37
Ex: Time Series Analysis
Example: Stock Market
Predict future values
Determine similar patterns over time
Classify behavior
38
Data Mining vs. KDD
Knowledge Discovery in
Databases (KDD): process of
finding useful information and
patterns in data.
Data Mining: Use of algorithms to
extract the information and patterns
derived by the KDD process.
39
Data Mining Development
•Similarity Measures
•Relational Data Model
•SQL
•Association Rule Algorithms
•Data Warehousing
•Scalability Techniques
•Hierarchical Clustering
•IR Systems
•Imprecise Queries
•Textual Data
•Web Search Engines
•Bayes Theorem
•Regression Analysis
•EM Algorithm
•K-Means Clustering
•Time Series Analysis
•Algorithm Design Techniques
•Algorithm Analysis
•Data Structures
•Neural Networks
•Decision Tree Algorithms
40
KDD Issues
Human Interaction
Overfitting
Outliers
Interpretation
Visualization
Large Datasets
High Dimensionality
41
KDD Issues (cont’d)
Multimedia Data
Missing Data
Irrelevant Data
Noisy Data
Changing Data
Integration
Application
42
Visualization Techniques
Graphical
Geometric
Icon-based
Pixel-based
Hierarchical
Hybrid
43
Data Mining Applications
44
Data Mining Applications:
Retail
 Performing basket analysis
Which items customers tend to purchase together. This
knowledge can improve stocking, store layout
strategies, and promotions.
 Sales forecasting
Examining time-based patterns helps retailers make
stocking decisions. If a customer purchases an item
today, when are they likely to purchase a
complementary item?
 Database marketing
Retailers can develop profiles of customers with certain
behaviors, for example, those who purchase designer
labels clothing or those who attend sales. This
information can be used to focus cost–effective
promotions.
 Merchandise planning and allocation
When retailers add new stores, they can improve
merchandise planning and allocation by examining
45
patterns in stores with similar demographic
Data Mining Applications:
Banking
 Card marketing
By identifying customer segments, card issuers and
acquirers can improve profitability with more effective
acquisition and retention programs, targeted product
development, and customized pricing.
 Cardholder pricing and profitability
Card issuers can take advantage of data mining
technology to price their products so as to maximize
profit and minimize loss of customers. Includes riskbased pricing.
 Fraud detection
Fraud is enormously costly. By analyzing past
transactions that were later determined to be
fraudulent, banks can identify patterns.
 Predictive life-cycle management
DM helps banks predict each customer’s lifetime value
and to service each segment appropriately (for example,
offering special deals and discounts).
46
Data Mining Applications:
Telecommunication
 Call detail record analysis
Telecommunication companies accumulate detailed
call records. By identifying customer segments with
similar use patterns, the companies can develop
attractive pricing and feature promotions.
 Customer loyalty
Some customers repeatedly switch providers, or
“churn”, to take advantage of attractive incentives
by competing companies. The companies can use
DM to identify the characteristics of customers who
are likely to remain loyal once they switch, thus
enabling the companies to target their spending on
customers who will produce the most profit.
47
Data Mining Applications:
Other Applications
 Customer segmentation
All industries can take advantage of DM to discover
discrete segments in their customer bases by
considering additional variables beyond traditional
analysis.
 Manufacturing
Through choice boards, manufacturers are beginning to
customize products for customers; therefore they must
be able to predict which features should be bundled to
meet customer demand.
 Warranties
Manufacturers need to predict the number of customers
who will submit warranty claims and the average cost of
those claims.
 Frequent flier incentives
Airlines can identify groups of customers that can be
48
given incentives to fly more.
A producer wants to know….
Which are our
lowest/highest margin
customers ?
Who are my customers
and what products
are they buying?
What is the most
effective distribution
channel?
What product prom-otions have the biggest
impact on revenue?
Which customers
are most likely to go
to the competition ?
What impact will
new products/services
have on revenue
and margins?
49
Data, Data everywhere
yet ...
 I can’t find the data I need
data is scattered over the
network
many versions, subtle
differences
 I can’t get the data I need
need an expert to get the data
 I can’t understand the data I
found
available data poorly documented
 I can’t use the data I found
results are unexpected
data needs to be transformed
from one form to other
50
What is a Data Warehouse?
A single, complete and
consistent store of data
obtained from a variety
of different sources
made available to end
users in a what they
can understand and use
in a business context.
[Barry Devlin]
51
What are the users saying...
Data should be integrated
across the enterprise
Summary data has a real
value to the organization
Historical data holds the
key to understanding data
over time
What-if capabilities are
required
52
What is Data Warehousing?
Information
Data
A process of
transforming data into
information and
making it available to
users in a timely
enough manner to
make a difference
[Forrester Research, April
1996]
53
Very Large Data Bases
 Terabytes -- 10^12 bytes:Walmart -- 24 Terabytes
 Petabytes -- 10^15 bytes:Geographic Information
Systems
 Exabytes -- 10^18 bytes: National Medical Records
 Zettabytes -- 10^21
bytes:
 Zottabytes -- 10^24
bytes:
Weather images
Intelligence Agency
Videos
54
Data Warehousing -It is a process
Technique for assembling and
managing data from various
sources for the purpose of
answering business
questions. Thus making
decisions that were not
previous possible
A decision support database
maintained separately from
the organization’s operational
database
55
Data Warehouse
A data warehouse is a
subject-oriented
integrated
time-varying
non-volatile
collection of data that is used primarily in
organizational decision making.
-- Bill Inmon, Building the Data Warehouse 1996
56
Data Warehousing Concepts
 Decision support is key for companies wanting
to turn their organizational data into an
information asset
 Traditional database is transaction-oriented
while data warehouse is data-retrieval
optimized for decision-support
 Data Warehouse
"A subject-oriented, integrated, time-variant,
and non-volatile collection of data in support of
management's decision-making process"
 OLAP (on-line analytical processing), Decision
Support Systems (DSS), Executive Information
Systems (EIS), and data mining applications
57
What does data warehouse do?
 integrate diverse information from
various systems which enable users to
quickly produce powerful ad-hoc queries
and perform complex analysis
 create an infrastructure for reusing the
data in numerous ways
 create an open systems environment to
make useful information easily accessible
to authorized users
 help managers make informed decisions
58
Benefits of Data Warehousing
Potential high returns on investment
Competitive advantage
Increased productivity of corporate
decision-makers
59
Comparison of OLTP and Data Warehousing
OLTP systems
systems
Holds current data
Stores detailed data
Data is dynamic
Repetitive processing
heuristic
High level of transaction throughput
throughput
Predictable pattern of usage
Transaction driven
Application oriented
Supports day-to-day decisions
Serves large number of
clerical / operational users
Data warehousing
Holds historic data
Stores detailed, lightly, and
summarized data
Data is largely static
Ad hoc, unstructured, and
processing
Medium to low transaction
Unpredictable pattern of usage
Analysis driven
Subject oriented
Supports strategic decisions
Serves relatively lower number
of managerial users
60
Data Warehouse Architecture









Operational Data
Load Manager
Warehouse Manager
Query Manager
Detailed Data
Lightly and Highly Summarized Data
Archive / Backup Data
Meta-Data
End-user Access Tools
61
End-user Access Tools
Reporting and query tools
Application development tools
Executive Information System (EIS)
tools
Online Analytical Processing (OLAP)
tools
Data mining tools
62
Data Warehousing Tools and Technologies
 Extraction, Cleansing, and Transformation
Tools
 Data Warehouse DBMS









Load performance
Load processing
Data quality management
Query performance
Terabyte scalability
Networked data warehouse
Warehouse administration
Integrated dimensional tools
Advanced query functionality
63
Data Marts
A subset of data warehouse that
supports the requirements of a
particular department or business
function
64
Online Analytical Processing (OLAP)
OLAP
The dynamic synthesis, analysis, and
consolidation of large volume of multity
i
dimensional data
C
Multi-dimensional OLAP
Product
type
Cubes of data
Time
65
Problems of Data Warehousing
Underestimation of resources for
data loading
Hidden problem with source systems
Required data not captured
Increased end-user demands
Data homogenization
High demand for resources
Data ownership
High maintenance
Long duration projects
Complexity of integration
66
Codd's Rules for OLAP












Multi-dimensional conceptual view
Transparency
Accessibility
Consistent reporting performance
Client-server architecture
Generic dimensionality
Dynamic sparse matrix handling
Multi-user support
Unrestricted cross-dimensional operations
Intuitive data manipulation
Flexible reporting
Unlimited dimensions and aggregation levels
67
OLAP Tools
Multi-dimensional OLAP (MOLAP)
Multi-dimensional DBMS (MDDBMS)
Relational OLAP (ROLAP)
Creation of multiple multi-dimensional
views of the two-dimensional relations
Managed Query Environment (MQE)
Deliver selected data directly from the
DBMS to the desktop in the form of a
data cube, where it is stored, analyzed,
and manipulated locally
68
Data Mining
 Definition
 The process of extracting valid, previously
unknown, comprehensible, and actionable
information from large database and using
it to make crucial business decisions
 Knowledge discovery
 Association rules
 Sequential patterns
 Classification trees
 Goals




Prediction
Identification
Classification
Optimization
69
Data Mining Techniques
Predictive Modeling
Supervised training with two phases
Training phase : building a model using
large sample of historical data called
the training set
Testing phase : trying the model on
new data
Database Segmentation
Link Analysis
Deviation Detection
70
What are Data Mining Tasks?
Classification
Regression
Clustering
Summarization
Dependency modeling
Change and Deviation Detection
71
What are Data Mining Discoveries?
New Purchase Trends
Plan Investment Strategies
Detect Unauthorized Expenditure
Fraudulent Activities
Crime Trends
Smugglers-border crossing
72
Data Warehouse Architecture
Relational
Databases
Optimized Loader
ERP
Systems
Extraction
Cleansing
Data Warehouse
Engine
Purchased
Data
Legacy
Data
Analyze
Query
Metadata Repository
73
Data Warehouse for Decision
Support & OLAP
Putting Information technology to help the
knowledge worker make faster and better
decisions
Which of my customers are most likely to go
to the competition?
What product promotions have the biggest
impact on revenue?
How did the share price of software
companies correlate with profits over last 10
years?
74
Decision Support
Used to manage and control business
Data is historical or point-in-time
Optimized for inquiry rather than update
Use of the system is loosely defined and
can be ad-hoc
Used by managers and end-users to
understand the business and make
judgements
75
Data Mining works with Warehouse
Data
Data Warehousing
provides the Enterprise
with a memory
Data Mining provides
the Enterprise with
intelligence
76
We want to know ...
 Given a database of 100,000 names, which persons are the
least likely to default on their credit cards?
 Which types of transactions are likely to be fraudulent
given the demographics and transactional history of a
particular customer?
 If I raise the price of my product by Rs. 2, what is the
effect on my ROI?
 If I offer only 2,500 airline miles as an incentive to
purchase rather than 5,000, how many lost responses will
result?
 If I emphasize ease-of-use of the product as opposed to its
technical capabilities, what will be the net effect on my
revenues?
 Which of my customers are likely to be the most loyal?
Data Mining helps extract such information
77
Application Areas
Industry
Finance
Insurance
Telecommunication
Transport
Consumer goods
Data Service providers
Utilities
Application
Credit Card Analysis
Claims, Fraud Analysis
Call record analysis
Logistics management
promotion analysis
Value added data
Power usage analysis
78
Data Mining in Use
The US Government uses Data Mining to
track fraud
A Supermarket becomes an information
broker
Basketball teams use it to track game
strategy
Cross Selling
Warranty Claims Routing
Holding on to Good Customers
Weeding out Bad Customers
79
What makes data mining possible?
Advances in the following areas are
making data mining deployable:
data warehousing
better and more data (i.e., operational,
behavioral, and demographic)
the emergence of easily deployed data
mining tools and
the advent of new data mining
techniques.
• -- Gartner Group
80
Why Separate Data Warehouse?
 Performance
Op dbs designed & tuned for known txs & workloads.
Complex OLAP queries would degrade perf. for op txs.
Special data organization, access & implementation
methods needed for multidimensional views & queries.
 Function
Missing data: Decision support requires historical data, which
op dbs do not typically maintain.
Data consolidation: Decision support requires consolidation
(aggregation, summarization) of data from many
heterogeneous sources: op dbs, external sources.
Data quality: Different sources typically use inconsistent data
representations, codes, and formats which have to be
81
reconciled.
What are Operational Systems?
They are OLTP systems
Run mission critical
applications
Need to work with
stringent performance
requirements for
routine tasks
Used to run a
business!
82
RDBMS used for OLTP
Database Systems have been used
traditionally for OLTP
clerical data processing tasks
detailed, up to date data
structured repetitive tasks
read/update a few records
isolation, recovery and integrity are
critical
83
Operational Systems
 Run the business in real time
 Based on up-to-the-second data
 Optimized to handle large
numbers of simple read/write
transactions
 Optimized for fast response to
predefined transactions
 Used by people who deal with
customers, products -- clerks,
salespeople etc.
 They are increasingly used by
customers
84
Examples of Operational Data
Data
Industry Usage
Technology
Customer
File
All
Legacy application, flat Small-medium
files, main frames
Account
Balance
Point-ofSale data
Call
Record
Track
Customer
Details
Finance
Control
account
activities
Retail
Generate
bills, manage
stock
Telecomm- Billing
unications
Production ManufactRecord
uring
Control
Production
Volumes
Legacy applications,
Large
hierarchical databases,
mainframe
ERP, Client/Server,
Very Large
relational databases
Legacy application,
Very Large
hierarchical database,
mainframe
ERP,
Medium
relational databases,
AS/400
85
Application-Orientation vs.
Subject-Orientation
Application-Orientation
Subject-Orientation
Operational
Database
Loans
Credit
Card
Data
Warehouse
Customer
Vendor
Trust
Savings
Product
Activity
86
OLTP vs. Data Warehouse
OLTP systems are tuned for known
transactions and workloads while
workload is not known a priori in a data
warehouse
Special data organization, access methods
and implementation methods are needed
to support data warehouse queries
(typically multidimensional queries)
e.g., average amount spent on phone calls
between 9AM-5PM in Pune during the month
of December
87
OLTP vs Data Warehouse
OLTP
Application
Oriented
Used to run
business
Detailed data
Current up to date
Isolated Data
Repetitive access
Clerical User
Warehouse (DSS)
Subject Oriented
Used to analyze
business
Summarized and
refined
Snapshot data
Integrated Data
Ad-hoc access
Knowledge User
(Manager)
88
OLTP vs Data Warehouse
 OLTP
Performance Sensitive
Few Records accessed at
a time (tens)
Read/Update Access
No data redundancy
Database Size
100MB
-100 GB
 Data Warehouse
Performance relaxed
Large volumes accessed
at a time(millions)
Mostly Read (Batch
Update)
Redundancy present
Database Size
100 GB - few terabytes
89
OLTP vs Data Warehouse
OLTP
Transaction
throughput is the
performance metric
Thousands of users
Managed in
entirety
Data Warehouse
Query throughput
is the performance
metric
Hundreds of users
Managed by
subsets
90
To summarize ...
OLTP Systems are
used to “run” a
business
The Data
Warehouse helps
to “optimize” the
business
91
Why Now?
Data is being produced
ERP provides clean data
The computing power is available
The computing power is affordable
The competitive pressures are
strong
Commercial products are available
92
Myths surrounding OLAP Servers
and Data Marts
 Data marts and OLAP servers are departmental
solutions supporting a handful of users
 Million dollar massively parallel hardware is
needed to deliver fast time for complex queries
 OLAP servers require massive and unwieldy
indices
 Complex OLAP queries clog the network with
data
 Data warehouses must be at least 100 GB to be
effective
– Source -- Arbor Software Home Page
93
II. On-Line Analytical Processing (OLAP)
Making Decision
Support Possible
Typical OLAP Queries
 Write a multi-table join to compare sales for each
product line YTD this year vs. last year.
 Repeat the above process to find the top 5
product contributors to margin.
 Repeat the above process to find the sales of a
product line to new vs. existing customers.
 Repeat the above process to find the customers
that have had negative sales growth.
95
What Is OLAP?
 Online Analytical Processing - coined by
EF Codd in 1994 paper contracted by
Arbor Software*
 Generally synonymous with earlier terms such as
Decisions Support, Business Intelligence, Executive
Information System
 OLAP = Multidimensional Database
 MOLAP: Multidimensional OLAP (Arbor Essbase,
Oracle Express)
 ROLAP: Relational OLAP (Informix MetaCube,
Microstrategy DSS Agent)
* Reference: http://www.arborsoft.com/essbase/wht_ppr/coddTOC.html
96
The OLAP Market
Rapid growth in the enterprise market
1995: $700 Million
1997: $2.1 Billion
Significant consolidation activity among
major DBMS vendors
10/94: Sybase acquires ExpressWay
7/95: Oracle acquires Express
11/95: Informix acquires Metacube
1/97: Arbor partners up with IBM
10/96: Microsoft acquires Panorama
Result: OLAP shifted from small vertical
niche to mainstream DBMS category
97
Strengths of OLAP
It is a powerful visualization paradigm
It provides fast, interactive response
times
It is good for analyzing time series
It can be useful to find some clusters and
outliers
Many vendors offer OLAP tools
98
OLAP Is FASMI
Fast
Analysis
Shared
Multidimensional
Information
Nigel Pendse, Richard Creath - The OLAP Report
99
Multi-dimensional Data
“Hey…I sold $100M worth of goods”
Dimensions: Product, Region, Time
Hierarchical summarization paths
Product
W
S
N
Juice
Cola
Milk
Cream
Toothpaste
Soap
1 2 34 5 6 7
Product
Industry
Region
Country
Time
Year
Category
Region
Quarter
Product
City
Month
Week
Month
Office
Day100
A Visual Operation: Pivot (Rotate)
Juice
10
Cola
47
Milk
30
Cream 12
Product
3/1 3/2 3/3 3/4
Date
101
“Slicing and Dicing”
The Telecomm Slice
Product
Household
Telecomm
Video
Audio
Europe
Far East
India
Retail Direct
Special
Sales Channel
102
Roll-up and Drill Down
Higher Level of
Aggregation
Sales Channel
Region
Country
State
Location Address
Sales
Representative
Low-level
Details
103
Results of Data Mining Include:
Forecasting what may happen in the
future
Classifying people or things into
groups by recognizing patterns
Clustering people or things into
groups based on their attributes
Associating what events are likely to
occur together
Sequencing what events are likely to
lead to later events
Data mining is not
Brute-force crunching of
bulk data
“Blind” application of
algorithms
Going to find relationships
where none exist
Presenting data in different
ways
A database intensive task
A difficult to understand
technology requiring an
advanced degree in
computer science
Data Mining versus OLAP
OLAP - On-line
Analytical
Processing
Provides you
with a very
good view of
what is
happening,
but can not
predict what
will happen in
the future or
why it is
happening
Data Mining Versus Statistical
Analysis
Data Analysis
Data Mining
for statistical
 Originally developed to act  Tests
correctness
of models
as expert systems to solve
 Are statistical
problems
assumptions of models
 Less interested in the
correct?
mechanics of the
 Eg Is the R-Square
technique
good?
 If it makes sense then
 Hypothesis testing
let’s use it
 Is the relationship
 Does not require
significant?
assumptions to be made
about data
 Use a t-test to validate
significance
 Can find patterns in very
 Tends to rely on sampling
large amounts of data
 Techniques are not
 Requires understanding
optimised for large
of data and business
amounts of data
problem
 Requires strong statistical
skills
Examples of What People are
Doing with Data Mining:
Fraud/Non-Compliance
Anomaly detection
Recruiting/Attracting
customers
 Isolate the factors that Maximizing
lead to fraud, waste and profitability (cross
selling, identifying
abuse
profitable customers)
 Target auditing and
Service Delivery and
investigative efforts
Customer Retention
more effectively
Credit/Risk Scoring
Intrusion detection
Parts failure prediction
 Build profiles of
customers likely
to use which
services
Web Mining
What data mining has done for...
The US Internal Revenue Service
needed to improve customer
service and...
Scheduled its workforce
to provide faster, more accurate
answers to questions.
What data mining has done for...
The US Drug Enforcement
Agency needed to be more
effective in their drug “busts”
and
analyzed suspects’ cell phone
usage to focus investigations.
What data mining has done for...
HSBC need to cross-sell more
effectively by identifying profiles
that would be interested in higher
yielding investments and...
Reduced direct mail costs by 30%
while garnering 95% of the
campaign’s revenue.
Suggestion:Predicting Washington
C-Span has lunched a digital
archieve of 500,000 hours of audio
debates.
Text Mining or Audio Mining of these
talks to reveal cwetrain questions
such as….
Example Application: Sports
IBM Advanced Scout analyzes
NBA game statistics
Shots blocked
Assists
Fouls
Google: “IBM Advanced Scout”
Advanced Scout
Example pattern: An analysis of the
data from a game played between
the New York Knicks and the Charlotte
Hornets revealed that “When Glenn Rice
played the shooting guard position, he
shot 5/6 (83%) on jump shots."
Pattern is interesting:
The average shooting percentage for the
Charlotte Hornets during that game was
54%.
Data Mining: Types of Data
Relational data and transactional data
Spatial and temporal data, spatiotemporal observations
Time-series data
Text
Images, video
Mixtures of data
Sequence data
Features from processing other data
sources
Data Mining Techniques
Supervised learning
Classification and regression
Unsupervised learning
Clustering
Dependency modeling
Associations, summarization, causality
Outlier and deviation detection
Trend analysis and change detection
Different Types of Classifiers
Linear discriminant analysis (LDA)
Quadratic discriminant analysis
(QDA)
Density estimation methods
Nearest neighbor methods
Logistic regression
Neural networks
Fuzzy set theory
Decision Trees
Test Sample Estimate
Divide D into D1 and D2
Use D1 to construct the classifier d
Then use resubstitution estimate
R(d,D2) to calculate the estimated
misclassification error of d
Unbiased and efficient, but removes
D2 from training dataset D
V-fold Cross Validation
Procedure:
Construct classifier d from D
Partition D into V datasets D1, …, DV
Construct classifier di using D \ Di
Calculate the estimated misclassification
error R(di,Di) of di using test sample Di
Final misclassification estimate:
Weighted combination of individual
misclassification errors:
R(d,D) = 1/V Σ R(di,Di)
Cross-Validation: Example
d
d1
d2
d3
Cross-Validation
Misclassification estimate obtained
through cross-validation is usually
nearly unbiased
Costly computation (we need to
compute d, and d1, …, dV);
computation of di is nearly as
expensive as computation of d
Preferred method to estimate quality
of learning algorithms in the
machine learning literature
Decision Tree Construction
 Three
Split
algorithmic components:
selection (CART, C4.5, QUEST,
CHAID, CRUISE, …)
Pruning (direct stopping rule, test
dataset pruning, cost-complexity
pruning, statistical tests, bootstrapping)
Data access (CLOUDS, SLIQ, SPRINT,
RainForest, BOAT, UnPivot operator)
Goodness of a Split
Consider node t with impurity phi(t)
The reduction in impurity through
splitting predicate s (t splits into
children nodes tL with impurity
phi(tL) and tR with impurity phi(tR))
is:
Δphi(s,t) = phi(t) – pL phi(tL) – pR
phi(tR)
Pruning Methods
Test dataset pruning
Direct stopping rule
Cost-complexity pruning
MDL pruning
Pruning by randomization testing
Stopping Policies
A stopping policy indicates when further
growth of the tree at a node t is
counterproductive.
All records are of the same class
The attribute values of all records are
identical
All records have missing values
At most one class has a number of
records larger than a user-specified
number
All records go to the same child node if t
is split (only possible with some split
Test Dataset Pruning
Use an independent test sample D’
to estimate the misclassification cost
using the resubstitution estimate
R(T,D’) at each node
Select the subtree T’ of T with the
smallest expected cost
Missing Values
What is the problem?
During computation of the splitting
predicate, we can selectively ignore
records with missing values (note that
this has some problems)
But if a record r misses the value of the
variable in the splitting attribute, r can
not participate further in tree
construction
Algorithms for missing values address
this problem.
Mean and Mode Imputation
Assume record r has missing value
r.X, and splitting variable is X.
Simplest algorithm:
If X is numerical (categorical), impute
the overall mean (mode)
Improved algorithm:
If X is numerical (categorical), impute
the mean(X|t.C) (the mode(X|t.C))
Decision Trees: Summary
Many application of decision trees
There are many algorithms available for:
Split selection
Pruning
Handling Missing Values
Data Access
Decision tree construction still active
research area (after 20+ years!)
Challenges: Performance, scalability,
evolving datasets, new applications
Supervised vs. Unsupervised Learning
Supervised
 y=F(x): true function
 D: labeled training set
 D: {xi,F(xi)}
 Learn:
G(x): model trained to
predict labels D
 Goal:
E[(F(x)-G(x))2] ≈ 0
 Well defined criteria:
Accuracy, RMSE, ...
Unsupervised
 Generator: true model
 D: unlabeled data
sample
 D: {xi}
 Learn
??????????
 Goal:
??????????
 Well defined criteria:
??????????
Clustering: Unsupervised Learning
Given:
Data Set D (training set)
Similarity/distance metric/information
Find:
Partitioning of data
Groups of similar/close items
Similarity?
Groups of similar customers
Similar demographics
Similar buying behavior
Similar health
Similar products
Similar cost
Similar function
Similar store
…
Similarity usually is domain/problem
specific
Clustering: Informal Problem
Definition
Input:
A data set of N records each given as a ddimensional data feature vector.
Output:
Determine a natural, useful “partitioning”
of the data set into a number of (k)
clusters and noise such that we have:
High similarity of records within each cluster
(intra-cluster similarity)
Low similarity of records between clusters
(inter-cluster similarity)
Types of Clustering
Hard Clustering:
Each object is in one and only one
cluster
Soft Clustering:
Each object has a probability of being
in each cluster
Clustering Algorithms
Partitioning-based clustering
K-means clustering
K-medoids clustering
EM (expectation maximization) clustering
Hierarchical clustering
Divisive clustering (top down)
Agglomerative clustering (bottom up)
Density-Based Methods
Regions of dense points separated by sparser
regions of relatively low density
K-Means Clustering Algorithm
Initialize k cluster centers
Do
Assignment step: Assign each data point to its closest
cluster center
Re-estimation step: Re-compute cluster centers
While (there are still changes in the cluster centers)
Visualization at:
 http://www.delftcluster.nl/textminer/theory/kmeans/kmeans.html
Issues
Why is K-Means working:
 How does it find the cluster centers?
 Does it find an optimal clustering
 What are good starting points for the algorithm?
 What is the right number of cluster centers?
 How do we know it will terminate?
Agglomerative Clustering
Algorithm:
 Put each item in its own cluster (all singletons)
 Find all pairwise distances between clusters
 Merge the two closest clusters
 Repeat until everything is in one cluster
Observations:
 Results in a hierarchical clustering
 Yields a clustering for each possible number of
clusters
 Greedy clustering: Result is not “optimal” for any
cluster size
Density-Based Clustering
 A cluster is defined as a connected dense
component.
 Density is defined in terms of number of
neighbors of a point.
 We can find clusters of arbitrary shape
Market Basket Analysis
Consider shopping cart filled with
several items
Market basket analysis tries to
answer the following questions:
Who makes purchases?
What do customers buy together?
In what order do customers purchase
items?
Market Basket Analysis
Given:
A database of
customer
transactions
Each transaction is
a set of items
Example:
Transaction with
TID 111 contains
items {Pen, Ink,
Milk, Juice}
TID
111
111
111
111
112
112
112
113
113
114
114
114
CID
201
201
201
201
105
105
105
106
106
201
201
201
Date
5/1/99
5/1/99
5/1/99
5/1/99
6/3/99
6/3/99
6/3/99
6/5/99
6/5/99
7/1/99
7/1/99
7/1/99
Item
Pen
Ink
Milk
Juice
Pen
Ink
Milk
Pen
Milk
Pen
Ink
Juice
Qty
2
1
3
6
1
1
1
1
1
2
2
4
Market Basket Analysis (Contd.)
Coocurrences
80% of all customers purchase items X,
Y and Z together.
Association rules
60% of all customers who purchase X
and Y also buy Z.
Sequential patterns
60% of customers who first buy X also
purchase Y within three weeks.
Confidence and Support
We prune the set of all possible
association rules using two
interestingness measures:
Confidence of a rule:
X  Y has confidence c if P(Y|X) = c
Support of a rule:
X  Y has support s if P(XY) = s
We can also define
Support of an itemset (a
coocurrence) XY:
Market Basket Analysis:
Applications
Sample Applications
Direct marketing
Fraud detection for medical insurance
Floor/shelf planning
Web site layout
Cross-selling
Applications of Frequent Itemsets
Market Basket Analysis
Association Rules
Classification (especially: text, rare
classes)
Seeds for construction of Bayesian
Networks
Web log analysis
Collaborative filtering
Association Rule Algorithms
More abstract problem redux
Breadth-first search
Depth-first search
Problem Redux
Abstract:
 A set of items {1,2,…,k}
 A dabase of transactions
(itemsets) D={T1, T2, …,
Tn},
Tj subset {1,2,…,k}
GOAL:
Find all itemsets that appear in
at least x transactions
(“appear in” == “are subsets
of”)
I subset T: T supports I
For an itemset I, the number of
transactions it appears in is
called the support of I.
Concrete:
 I = {milk, bread, cheese,
…}
 D={
{milk,bread,cheese},
{bread,cheese,juice}, …}
GOAL:
Find all itemsets that appear
in at least 1000
transactions
{milk,bread,cheese}
supports {milk,bread}
Problem Redux (Contd.)
Definitions:
 An itemset is frequent if it
is a subset of at least x
transactions. (FI.)
 An itemset is maximally
frequent if it is frequent
and it does not have a
frequent superset. (MFI.)
GOAL: Given x, find all
frequent (maximally
frequent) itemsets (to be
stored in the FI (MFI)).
Obvious relationship:
MFI subset FI
Example:
D={ {1,2,3}, {1,2,3},
{1,2,3}, {1,2,4} }
Minimum support x = 3
{1,2} is frequent
{1,2,3} is maximal frequent
Support({1,2}) = 4
All maximal frequent
itemsets: {1,2,3}
Applications
Spatial association rules
Web mining
Market basket analysis
User/customer profiling
ExtenSuggestionssions: Sequential
Patterns
In the “Market Itemset Analysis”
replace Milk, Pen, etc with names of
medications and use the idea in
Hospital Data mining new proposal
The idea of swaem intelligence – add
to it the extra analysis pf the
inducyion rules in this set of slides.
 Kraft Foods: Direct Marketing
 Company maintains a large database of purchases by customers.
 Data mining
1. Analysts identified associations among groups of products
bought by particular segments of customers.
2. Sent out 3 sets of coupons to various households.
• Better response rates: 50 % increase in sales for one its
products
• Continue to use of this approach
 Health Insurance Commission of Australia: Insurance Fraud
 Commission maintains a database of insurance claims,including
laboratory tests ordered during the diagnosis of patients.
 Data mining
1. Identified the practice of "up coding" to reflect more
expensive tests than are necessary.
2. Now monitors orders for lab tests.
• Commission expects to save US$1,000,000 / year by
eliminating the practice of "up coding”.

HNC Software: Credit Card Fraud
 Payment Fraud
 Large issuers of cards may lose


$10 million / year due to fraud
Difficult to identify the few transactions among thousands which
reflect potential fraud
 Falcon software
 Mines data through neural networks
 Introduced in September 1992
 Models each cardholder's requested transaction against the customer's
past spending history.

processes several hundred requests per second

compares current transaction with customer's history

identifies the transactions most likely to be frauds

enables bank to stop high-risk transactions before they are
authorized
 Used by many retail banks: currently monitors

160 million card accounts for fraud
New Account Fraud
 New Account Fraud
 Fraudulent applications for credit cards are growing at 50 %
per year
 Falcon Sentry software
Mines data through neural networks and a rule base
Introduced in September 1992
Checks information on applications against data from
credit bureaus
Allows card issuers to simultaneously:


increase the proportion of applications received
reduce the proportion of fraudulent applications
authorized
Quality Control
 IBM Microelectronics: Quality Control
 Analyzed manufacturing data on Dynamic Random Access Memory
(DRAM) chips.
 Data mining
1. Built predictive models of


manufacturing yield (% non-defective)
effects of production parameters on chip performance.
2. Discovered critical factors behind

production yield &

product performance.
3. Created a new design for the chip

increased yield saved millions of dollars in direct
manufacturing costs

enhanced product performance by substantially lowering the
memory cycle time
Retail Sales
 B & L Stores
 Belk and Leggett Stores =
one of largest retail chains
280 stores in southeast U.S.
data warehouse contains 100s of gigabytes (billion
characters) of data
 data mining to:
increase sales
reduce costs
 Selected DSS Agent from MicroStrategy, Inc.
analyize merchandizing (patterns of sales)
manage inventory
Market Basket Analysis

DSS Agent
 uses intelligent agents data mining
 provides multiple functions
 recognizes sales patterns among stores
 discovers sales patterns by

time of day

day of year

category of product

etc.
 swiftly identifies trends & shifts in customer tastes
 performs Market Basket Analysis (MBA)

analyzes Point-of-Sale or -Service (POS) data

identifies relationships among products and/or services purchased
E.g. A customer who buys Brand X slacks has a 35% chance of
buying Brand Y shirts.
 Agent tool is also used by other Fortune 1000 firms
 average ROI > 300 %
Case Based Reasoning
(CBR)
case A
case B
target
General scheme for a case based reasoning (CBR) model. The target case
matched against similar precedents in the historical database, such as case
Case Based Reasoning (CBR)
 Learning through the accumulation of experience
 Key issues
 Indexing:
storing cases for quick, effective access of precedents
 Retrieval:
accessing the appropriate precedent cases
 Advantages
 Explicit knowledge form recognizable to humans
 No need to re-code knowledge for computer processing
 Limitations
 Retrieving precedents based on superficial features
E.g. Matching Indonesia with U.S. because both have similar population size
 Traditional approach ignores the issue of generalizing knowledge
Genetic Algorithm


Generation of candidate solutions using the procedures of biological
evolution.
Procedure
0. Initialize.
Create a population of potential solutions ("organisms").
1. Evaluate.
Determine the level of "fitness" for each solution.
2. Cull.
Discard the poor solutions.
3. Breed.
a. Select 2 "fit" solutions to serve as parents.
b. From the 2 parents, generate offspring.
* Crossover:
Cut the parents at random and switch the 2 halves.
* Mutation:
Randomly change the value in a parent solution.
4. Repeat.
Go back to Step 1 above.
Genetic Algorithm (Cont.)
 Advantages
 Applicable to a wide range of problem domains.
 Robustness:
can obtain solutions even when the performance
function is highly irregular or input data are noisy.
 Implicit parallelism:
can search in many directions concurrently.
 Limitations
 Slow, like neural networks.
But: computation can be distributed
over multiple processors
(unlike neural networks)
Source: www.pathology.washington.edu
Multistrategy Learning
 Every technique has advantages & limitations
 Multistrategy approach
 Take advantage of the strengths of diverse techniques
 Circumvent the limitations of each methodology
Types of Models
Prediction Models for
Descriptive Models for
Predicting and Classifying Grouping and Finding
 Regression algorithms
Associations
(predict numeric
outcome): neural
 Clustering/Grouping
networks, rule induction,
algorithms: K-means,
CART (OLS regression,
Kohonen
GLM)
 Association algorithms:
 Classification algorithm
predict symbolic
apriori, GRI
outcome): CHAID, C5.0
(discriminant analysis,
logistic regression)
Neural Networks
Description
Difficult interpretation
Tends to ‘overfit’ the data
Extensive amount of training time
A lot of data preparation
Works with all data types
Rule Induction
Description
Intuitive output
Handles all forms of numeric data,
as well as non-numeric (symbolic)
data
C5 Algorithm a special case of rule
induction
Apriori
Description
 Seeks association rules
in dataset
 ‘Market basket’ analysis
 Sequence discovery
Data Mining Is
The automated process of finding
relationships and patterns in stored
data
 It is different from the use of SQL
queries and other business
intelligence tools
Data Mining Is
Motivated by business need, large
amounts of available data, and
humans’ limited cognitive processing
abilities
Enabled by data warehousing,
parallel processing, and data mining
algorithms
Common Types of Information
from Data Mining
Associations -- identifies occurrences
that are linked to a single event
Sequences -- identifies events that
are linked over time
Classification -- recognizes patterns
that describe the group to which an
item belongs
Common Types of Information
from Data Mining
Clustering -- discovers different
groupings within the data
Forecasting -- estimates future
values
Commonly Used Data Mining
Techniques
Artificial neural networks
Decision trees
Genetic algorithms
Nearest neighbor method
Rule induction
The Current State of Data Mining
Tools
Many of the vendors are small companies
IBM and SAS have been in the market for
some time, and more “biggies” are
moving into this market
BI tools and RDMS products are
increasingly including basic data mining
capabilities
Packaged data mining applications are
becoming common
The Data Mining Process
Requires personnel with domain,
data warehousing, and data mining
expertise
Requires data selection, data
extraction, data cleansing, and data
transformation
Most data mining tools work with
highly granular flat files
Is an iterative and interactive
process
Why Data Mining
 Credit ratings/targeted marketing:
Given a database of 100,000 names, which persons are
the least likely to default on their credit cards?
Identify likely responders to sales promotions
 Fraud detection
Which types of transactions are likely to be fraudulent,
given the demographics and transactional history of a
particular customer?
 Customer relationship management:
Which of my customers are likely to be the most loyal,
and which are most likely to leave for a competitor? :
Data Mining helps extract such
information
Applications
Banking: loan/credit card approval
predict good customers based on old customers
Customer relationship management:
identify those who are likely to leave for a competitor.
Targeted marketing:
identify likely responders to promotions
Fraud detection: telecommunications,
financial transactions
from an online stream of event identify fraudulent
events
Manufacturing and production:
automatically adjust knobs when process parameter
changes
Applications (continued)
Medicine: disease outcome, effectiveness
of treatments
analyze patient disease history: find
relationship between diseases
Molecular/Pharmaceutical: identify new
drugs
Scientific data analysis:
identify new galaxies by searching for sub
clusters
Web site/store design and promotion:
find affinity of visitor to pages and modify
The KDD process
 Problem fomulation
 Data collection
subset data: sampling might hurt if highly skewed data
feature selection: principal component analysis,
heuristic search
 Pre-processing: cleaning
name/address cleaning, different meanings (annual,
yearly), duplicate removal, supplying missing values
 Transformation:
map complex objects e.g. time series data to features
e.g. frequency
 Choosing mining task and mining method:
 Result evaluation and Visualization:
Knowledge discovery is an iterative process
Relationship with other fields
Overlaps with machine learning, statistics,
artificial intelligence, databases,
visualization but more stress on
scalability of number of features and instances
stress on algorithms and architectures
whereas foundations of methods and
formulations provided by statistics and
machine learning.
automation for handling large, heterogeneous
data
Some basic operations
Predictive:
Regression
Classification
Collaborative Filtering
Descriptive:
Clustering / similarity matching
Association rules and variants
Deviation detection
Classification
Given old data about customers and
payments, predict new applicant’s
loan eligibility.
Previous customers
Classifier
Decision rules
Salary > 5 L
Age
Salary
Profession
Location
Customer type
Prof. = Exec
New applicant’s data
Good/
bad
Classification methods
Goal: Predict class Ci = f(x1, x2, ..
Xn)
Regression: (linear or any other
polynomial)
a*x1 + b*x2 + c = Ci.
Nearest neighour
Decision tree classifier: divide decision
space into piecewise constant regions.
Probabilistic/generative models
Neural networks: partition by non-
Nearest neighbor
Define proximity between instances,
find neighbors of new instance and
assign majority class
Case based reasoning: when
attributes are more complicated than
• Cons
• Pros
real-valued.
+ Fast training
– Slow during application.
– No feature selection.
– Notion of proximity vague
Clustering
Unsupervised learning when old data with
class labels not available e.g. when
introducing a new product.
Group/cluster existing customers based on
time series of payment history such that
similar customers in same cluster.
Key requirement: Need a good measure of
similarity between instances.
Identify micro-markets and develop
policies for each
Applications
Customer segmentation e.g. for targeted
marketing
Group/cluster existing customers based on
time series of payment history such that
similar customers in same cluster.
Identify micro-markets and develop policies
for each
Collaborative filtering:
group based on common items purchased
Text clustering
Compression
Distance functions
Numeric data: euclidean, manhattan
distances
Categorical data: 0/1 to indicate
presence/absence followed by
Hamming distance (# dissimilarity)
Jaccard coefficients: #similarity in 1s/(# of
1s)
data dependent measures: similarity of A and
B depends on co-occurance with C.
Combined numeric and categorical data:
weighted normalized distance:
Clustering methods
Hierarchical clustering
agglomerative Vs divisive
single link Vs complete link
Partitional clustering
distance-based: K-means
model-based: EM
density-based:
Partitional methods: K-means
Criteria: minimize sum of square of
distance
Between each point and centroid of the
cluster.
Between each pair of points in the
cluster
Algorithm:
Select initial partition with K clusters:
random, first K, K separated points
Repeat until stabilization:
Assign each point to closest cluster
center
Collaborative Filtering
Given database of user preferences,
predict preference of new user
Example: predict what new movies you will
like based on
your past preferences
others with similar past preferences
their preferences for the new movies
Example: predict what books/CDs a person
may want to buy
(and suggest it, or give discounts to
tempt customer)
Association rules
Given set T of groups of items
Example: set of item sets
purchased
Goal: find all rules on itemsets
of the form a-->b such that
T
Milk, cereal
Tea, milk
Tea, rice, bread
 support of a and b > user
threshold s
conditional probability (confidence)
of b given a > user threshold c
cereal
Example: Milk --> bread
Purchase of product A -->
Prevalent  Interesting
Analysts already
know about
prevalent rules
Interesting rules
are those that
deviate from prior
expectation
Mining’s payoff is
in finding
surprising
phenomena
Zzzz...
1995
Milk and
cereal sell
together!
1998
Milk and
cereal sell
together!
Applications of fast itemset
counting
Find correlated events:
Applications in medicine: find
redundant tests
Cross selling in retail, banking
Improve predictive capability of
classifiers that assume attribute
independence
 New similarity measures of
categorical attributes [Mannila et al,
Application Areas
Industry
Finance
Insurance
Telecommunication
Transport
Consumer goods
Data Service providers
Utilities
Application
Credit Card Analysis
Claims, Fraud Analysis
Call record analysis
Logistics management
promotion analysis
Value added data
Power usage analysis
Usage scenarios
Data warehouse mining:
assimilate data from operational sources
mine static data
Mining log data
Continuous mining: example in process
control
Stages in mining:
 data selection  pre-processing:
cleaning  transformation  mining 
result evaluation  visualization
Mining market
Around 20 to 30 mining tool vendors
Major tool players:
Clementine,
IBM’s Intelligent Miner,
SGI’s MineSet,
SAS’s Enterprise Miner.
All pretty much the same set of tools
Many embedded products:
fraud detection:
electronic commerce applications,
health care,
customer relationship management: Epiphany
Vertical integration:
Mining on the web
Web log analysis for site design:
what are popular pages,
what links are hard to find.
Electronic stores sales enhancements:
recommendations, advertisement:
Collaborative filtering: Net perception,
Wisewire
Inventory control: what was a shopper
looking for and could not find..
State of art in mining OLAP integration
Decision trees [Information discovery,
Cognos]
find factors influencing high profits
Clustering [Pilot software]
segment customers to define hierarchy on that
dimension
Time series analysis: [Seagate’s Holos]
Query for various shapes along time: eg. spikes,
outliers
Multi-level Associations [Han et al.]
find association between members of dimensions
Data Mining in Use
The US Government uses Data Mining to
track fraud
A Supermarket becomes an information
broker
Basketball teams use it to track game
strategy
Cross Selling
Target Marketing
Holding on to Good Customers
Weeding out Bad Customers
Some success stories
 Network intrusion detection using a combination
of sequential rule discovery and classification
tree on 4 GB DARPA data
Won over (manual) knowledge engineering approach
http://www.cs.columbia.edu/~sal/JAM/PROJECT/
provides good detailed description of the entire process
 Major US bank: customer attrition prediction
First segment customers based on financial behavior:
found 3 segments
Build attrition models for each of the 3 segments
40-50% of attritions were predicted == factor of 18
increase
 Targeted credit marketing: major US banks
find customer segments based on 13 months credit
balances
What is KnowledgeSeeker?
Produced by ANGOSS Software Corporation,
who focus “solely” on data mining software.
Offer training and consulting services
Produce data mining add-ins which accepts
data from all major databases
Works with popular query and reporting,
spreadsheet, statistical and OLAP & ROLAP
tools.
Data Mining
19
9
Major Competitors
Company
Software
Clementine 6.0
Enterprise Miner 3.0
Intelligent Miner
Data Mining
20
0
Major Competitors
Company
Software
Mineset 3.1
Darwin
Scenario
Data Mining
20
1
Current Applications
Manufacturing
Used by the R.R. Donnelly & Sons commercial
printing company to improve process control, cut
costs and increase productivity.
Used extensively by Hewlett Packard in their
United States manufacturing plants as a process
control tool both to analyze factors impacting
product quality as well as to generate rules for
production control systems.
Data Mining
20
2
Current Applications
Auditing
Used by the IRS to combat fraud,
reduce risk, and increase collection
rates.
Finance
Used by the Canadian Imperial Bank
of Commerce (CIBC) to create
models for fraud detection and risk
management.
Data Mining
20
3
Current Applications
CRM
Telephony
Used by US West to reduce churning and
increase customer loyalty for a new voice
messaging technology.
Data Mining
20
4
Current Applications
Marketing
Used by the Washington Post to
improve their direct mail targeting
and to conduct survey analysis.
Health Care
Used by the Oxford Transplant
Center to discover factors affecting
transplant survival rates.
Used by the University of Rochester
Cancer Center to study the effect of
anxiety on chemotherapy-related
nausea.
Data Mining
20
5
More Customers
Data Mining
20
6
Questions
1.
What percentage of people in the test group have high blood pressure
with these characteristics: 66-year-old male regular smoker that has
low to moderate salt consumption?
2.
Do the risk levels change for a male with the same characteristics who
quit smoking? What are the percentages?
3.
If you are a 2% milk drinker, how many factors are still interesting?
4.
Knowing that salt consumption and smoking habits are interesting
factors, which one has a stronger correlation to blood pressure levels?
5.
Grow an automatic tree. Look to see if gender is an interesting factor
for 55-year-old regular smoker who does not each cheese?
Data Mining
20
7
Association
Classic market-basket analysis, which treats the
purchase of a number of items (for example, the
contents of a shopping basket) as a single transaction.
This information can be used to adjust inventories,
modify floor or shelf layouts, or introduce targeted
promotional activities to increase overall sales or
move specific products.
Example : 80 percent of all transactions in which
beer was purchased also included potato chips.
Sequence-based analysis
Traditional market-basket analysis deals with
a collection of items as part of a point-in-time
transaction.
to identify a typical set of purchases that might
predict the subsequent purchase of a specific
item.
Clustering
Clustering approach address segmentation
problems.
These approaches assign records with a large
number of attributes into a relatively small set of
groups or "segments."
Example : Buying habits of multiple population
segments might be compared to determine which
segments to target for a new sales campaign.
Classification
Most commonly applied data mining
technique
Algorithm uses preclassified examples to
determine the set of parameters required for
proper discrimination.
Example : A classifier derived from the
Classification approach is capable of
identifying risky loans, could be used to aid in
the decision of whether to grant a loan to an
individual.
Issues of Data Mining
Present-day tools are strong but require
significant expertise to implement effectively.
Issues of Data Mining
Susceptibility to "dirty" or irrelevant data.
Inability to "explain" results in human terms.
Issues
susceptibility to "dirty" or irrelevant data
Data mining tools of today simply take everything
they are given as factual and draw the resulting
conclusions.
Users must take the necessary precautions to
ensure that the data being analyzed is "clean."
Issues, cont’
inability to "explain" results in human terms
Many of the tools employed in data mining
analysis use complex mathematical algorithms that
are not easily mapped into human terms.
what good does the information do if you don’t
understand it?
Comparison with reporting, BI and
OLAP
Data Mining
Reporting
 Complex
 Simple
relationships
relationships
 Automatically find
 Choose the
the relevant factors
relevant factors
 Show only relevant
 Examine all
details
details
 Prediction…
(Also applies to
visualisation &
simple statistics)
Comparison with Statistics
Statistical analysis
 Mainly about
hypothesis testing
 Focussed on
precision
Data mining
 Mainly about
hypothesis
generation
 Focussed on
deployment
Example: data mining and customer
processes
Insight: Who are my customers and
why do they behave the way they
do?
Prediction: Who is a good prospect,
for what product, who is at risk,
what is the next thing to offer?
Uses: Targeted marketing, mailshots, call-centres, adaptive websites
Example: data mining and fraud
detection
Insight: How can (specific
method of) fraud be
recognised? What constitute
normal, abnormal and
suspicious events?
Prediction: Recognise
similarity to previous frauds –
how similar?
Spot abnormal events – how
suspicious?
Example: data mining and
diagnosing cancer
Complex data from genetics
Challenging data mining problem
Find patterns of gene activation
indicating different diseases / stages
“Changed the way I think about
cancer” Oncologist from Chicago Children’s
Memorial Hospital
Example: data mining and policing
Knowing the patterns helps plan
effective crime prevention
Crime hot-spots understood better
Sift through mountains of crime
reports
Identify crime series
“Other people save money using
data mining – we save lives.” Police
force homicide specialist and data miner
Data mining tools:
Clementine and its philosophy
How to do data mining
Lots of data mining operations
How do you glue them together to
solve a problem?
How do we actually do data mining?
Methodology
Not just the right way, but any way…
Myths about Data Mining (1)
Data, Process and Tech
Data mining is all about
massive data
It can be, but some important
datasets are very small, and
sampling is often appropriate
Data mining is a
technical process
Business analysts perform
data mining every day
It is a business process
Data mining is all
about algorithms
Algorithms are a key tool
But data mining is done by
people, not by algorithms
Data mining is all
about predictive accuracy
It's about usefulness
Accuracy is only a small
component
Myths about Data Mining (2)
Data Quality
Data mining only works
with clean data
Cleaning the data is part
of the data mining process
Need not be clean initially
Data mining only works
with complete data
Data mining works with
whatever data you have.
Complete is good,
incomplete is also ok.
Data mining only works
with correct data
Errors in data are inevitable.
Data mining helps you deal
with them.
One last exploding myth
Neural Networks are not useful
when you need to understand the
patterns that you find
(which
nearly always
Relatedis
to over-simplistic
views of in
datadata
mining
mining)
Data mining techniques form a toolkit
We often use techniques in surprising ways
E.g. Neural nets for field selection
Neural nets for pattern confirmation
Neural nets combined with other techniques
for cross-checking
What use is a pair of pliers?
Related Concepts Outline
Goal: Examine some areas which are related to data
mining.
Database/OLTP Systems
Fuzzy Sets and Logic
Information Retrieval(Web Search
Engines)
Dimensional Modeling
Data Warehousing
OLAP/DSS
Statistics
Machine Learning
Pattern Matching
226
Fuzzy Sets and Logic
 Fuzzy Set: Set membership function is a real
valued function with output in the range [0,1].
 f(x): Probability x is in F.
 1-f(x): Probability x is not in F.
 EX:
T = {x | x is a person and x is tall}
Let f(x) be the probability that x is tall
Here f is the membership function
DM: Prediction and classification are
fuzzy.
227
Information Retrieval
 Information Retrieval (IR): retrieving desired
information from textual data.
 Library Science
 Digital Libraries
 Web Search Engines
 Traditionally keyword based
 Sample query:
Find all documents about “data mining”.
DM: Similarity measures;
Mine text/Web data.
228
Dimensional Modeling
View data in a hierarchical manner more
as business executives might
Useful in decision support systems and
mining
Dimension: collection of logically
related attributes; axis for modeling
data.
Facts: data stored
Ex: Dimensions – products, locations,
date
Facts – quantity, unit price
DM: May view data as dimensinoal.
© Prentice Hall
229
Dimensional Modeling Queries
Roll Up: more general dimension
Drill Down: more specific
dimension
Dimension (Aggregation) Hierarchy
SQL uses aggregation
Decision Support Systems
(DSS): Computer systems and
tools to assist managers in making
decisions and solving problems.
230
Cube view of Data
231
Data Warehousing
“Subject-oriented, integrated, time-variant,
nonvolatile” William Inmon
 Operational Data: Data used in day to day
needs of company.
 Informational Data: Supports other functions
such as planning and forecasting.
 Data mining tools often access data warehouses
rather than operational data.
DM: May access data in
warehouse.
232
OLAP
 Online Analytic Processing (OLAP): provides
more complex queries than OLTP.
 OnLine Transaction Processing (OLTP):
traditional database/transaction processing.
 Dimensional data; cube view
 Visualization of operations:
Slice: examine sub-cube.
Dice: rotate cube to look at another dimension.
Roll Up/Drill Down
DM: May use OLAP queries.
233
OLAP Operations
Roll Up
Drill Down
Single Cell
Multiple Cells
Slice
Dice
234
Statistics
Simple descriptive models
Statistical inference: generalizing a
model created from a sample of the data
to the entire dataset.
Exploratory Data Analysis:
Data can actually drive the creation of
the model
Opposite of traditional statistical view.
Data mining targeted to business user
DM: Many data mining methods
come from statistical
techniques.
235
Machine Learning
 Machine Learning: area of AI that examines
how to write programs that can learn.
 Often used in classification and prediction
 Supervised Learning: learns by example.
 Unsupervised Learning: learns without
knowledge of correct answers.
 Machine learning often deals with small static
datasets.
DM: Uses many machine learning
techniques.
236
Pattern Matching (Recognition)
Pattern Matching: finds
occurrences of a predefined pattern
in the data.
Applications include speech
recognition, information retrieval,
time series analysis.
DM: Type of classification.
© Prentice Hall
237
DM vs. Related Topics
Area
Query
Data
DB/OLTP Precise Database
IR
OLAP
DM
Results Output
Precise DB Objects
or
Aggregation
Precise Documents
Vague Documents
Analysis Multidimensional Precise DB Objects
or
Aggregation
Vague Preprocessed
Vague KDD
Objects
238
Data Mining Techniques Outline
Goal: Provide an overview of basic data
mining techniques
 Statistical
Point Estimation
Models Based on Summarization
Bayes Theorem
Hypothesis Testing
Regression and Correlation
 Similarity Measures
 Decision Trees
 Neural Networks
Activation Functions
 Genetic Algorithms
© Prentice Hall
239
Point Estimation
Point Estimate: estimate a population
parameter.
May be made by calculating the
parameter for a sample.
May be used to predict value for missing
data.
Ex:
R contains 100 employees
99 have salary information
Mean salary of these is $50,000
Use $50,000 as value of remaining
employee’s salary.
Is this a good idea?
240
Estimation Error
Bias: Difference between expected value
and actual value.
Mean Squared Error (MSE): expected
value of the squared difference between
the estimate and the actual value:
Why square?
Root Mean Square Error (RMSE)
241
Expectation-Maximization (EM)
Solves estimation with incomplete
data.
Obtain initial estimates for
parameters.
Iteratively use estimates for
missing data and continue until
convergence.
242
Models Based on Summarization
 Visualization: Frequency distribution, mean,
variance, median, mode, etc.
 Box Plot:
243
Bayes Theorem
Posterior Probability: P(h1|xi)
Prior Probability: P(h1)
Bayes Theorem:
Assign probabilities of hypotheses given a
data value.
244
Hypothesis Testing
Find model to explain behavior by
creating and then testing a
hypothesis about the data.
Exact opposite of usual DM
approach.
H0 – Null hypothesis; Hypothesis to
be tested.
H1 – Alternative hypothesis
245
Regression
Predict future values based on past
values
Linear Regression assumes linear
relationship exists.
y = c0 + c1 x1 + … + cn xn
Find values to best fit the data
246
Correlation
Examine the degree to which the
values for two variables behave
similarly.
Correlation coefficient r:
• 1 = perfect correlation
• -1 = perfect but opposite correlation
• 0 = no correlation
247
Similarity Measures
Determine similarity between two objects.
Similarity characteristics:
Alternatively, distance measure measure
how unlike or dissimilar objects are.
© Prentice Hall
248
Distance Measures
Measure dissimilarity between
objects
249
Decision Trees
Decision Tree (DT):
Tree where the root and each internal
node is labeled with a question.
The arcs represent each possible answer
to the associated question.
Each leaf node represents a prediction
of a solution to the problem.
Popular technique for classification;
Leaf node indicates class to which the
corresponding tuple belongs.
250
Decision Trees
A Decision Tree Model is a
computational model consisting of three
parts:
Decision Tree
Algorithm to create the tree
Algorithm that applies the tree to data
Creation of the tree is the most difficult
part.
Processing is basically a search similar
to that in a binary search tree (although
DT may not be© binary).
Prentice Hall
251
Neural Networks
Based on observed functioning of
human brain.
(Artificial Neural Networks
(ANN)
Our view of neural networks is very
simplistic.
We view a neural network (NN)
from a graphical viewpoint.
Alternatively, a NN may be viewed
from the perspective of matrices.
Used in pattern recognition, speech
recognition, computer vision, and
classification.© Prentice Hall
252
Generating Rules
Decision tree can be converted into a
rule set
Straightforward conversion:
each path to the leaf becomes a rule –
makes an overly complex rule set
More effective conversions are not
trivial
(e.g. C4.8 tests each node in root-leaf
path to see if it can be eliminated
without loss in accuracy)
253
Covering algorithms
Strategy for generating a rule set
directly: for each class in turn find
rule set that covers all instances in it
(excluding instances not in the class)
This approach is called a covering
approach because at each stage a
rule is identified that covers some of
the instances
254
Rules vs. trees
Corresponding decision tree:
(produces exactly the same
predictions)
But: rule sets can be more clear
when decision trees suffer from
replicated subtrees
Also: in multi-class situations,
covering algorithm concentrates on
one class at a time
whereas decision
255
A simple covering algorithm
Generates a rule by adding tests that
maximize rule’s accuracy
Similar to situation in decision trees:
problem of selecting an attribute to
split on
space of
But: decision tree inducer maximizes
examples
overall purity
rule s o far
Each new test reduces
rule’s coverage:
256
witten&eibe
rule after
adding new
term
Algorithm Components
1. The task the algorithm is used to address (e.g.
classification, clustering, etc.)
2. The structure of the model or pattern we are fitting to
the data (e.g. a linear regression model)
3. The score function used to judge the quality of the
fitted models or patterns (e.g. accuracy, BIC, etc.)
4. The search or optimization method used to search over
parameters and/or structures (e.g. steepest descent,
MCMC, etc.)
5. The data management technique used for storing,
indexing, and retrieving data (critical when data too large
to reside in memory)
Models and Patterns
Models
Prediction
•Linear
regression
•Piecewise linear
Probability
Distributions
Structured
Data
Models
Prediction
•Linear
regression
•Piecewise linear
•Nonparamatric
regression
Probability
Distributions
Structured
Data
Models
Prediction
•Linear
regression
Probability
Distributions
Structured
Data
logistic regression
•Piecewise linear
naïve bayes/TAN/bayesian networks
•Nonparametric
regression
NN
support vector machines
•Classification
Trees
etc.
Models
Prediction
•Linear
regression
•Piecewise linear
•Nonparametric
regression
•Classification
Probability
Distributions
•Parametric models
•Mixtures of
parametric models
•Graphical Markov
models (categorical,
continuous, mixed)
Structured
Data
Models
Prediction
•Linear
regression
•Piecewise linear
•Nonparametric
regression
•Classification
Probability
Distributions
•Parametric models
•Mixtures of
parametric models
•Graphical Markov
models (categorical,
continuous, mixed)
Structured
Data
•Time series
•Markov models
•Mixture Transition
Distribution models
•Hidden Markov
models
•Spatial models
Bias-Variance Tradeoff
High Bias - Low Variance
Score function should
embody the compromise
Low Bias - High Variance
“overfitting” - modeling
the random component
Patterns
Local
Global
•Clustering via
partitioning
•Outlier
detection
•Hierarchical
Clustering
•Changepoint
detection
•Mixture Models
•Bump hunting
•Scan statistics
•Association
rules
Scan Statistics via Permutation Tests
xx
x
xx x
x xx
x
x
xx
xx x
x
x
x
x
xxxx
x
x
x
xxxx
The curve represents a road
Each “x” marks an accident
Red “x” denotes an injury accident
Black “x” means no injury
Is there a stretch of road where there is an unually large
fraction of injury accidents?
xxx x x
Scan with Fixed Window
If we know the length of the “stretch
of road” that we seek, e.g.,
we could slide this window long the
road and find the most “unusual”
window location
xxx x x
x xx
x xx x
xx
x
x
xx
xx x
x
x
x
x
xxxx
x
x
x
xxxx
Spatial-Temporal Scan Statistics
Spatial-temporal scan statistic use
cylinders where the height of the cylinder
represents a time window
Major Data Mining Tasks
Classification: predicting an item
class
Clustering: finding clusters in data
Associations: e.g. A & B & C occur
frequently
Visualization: to facilitate human
discovery
Summarization: describing a group
Deviation Detection: finding changes
Estimation: predicting a continuous
value
270
Link Analysis: finding relationships
Classification
Learn a method for predicting the instance class from
pre-labeled (classified) instances
Many approaches:
Statistics,
Decision Trees,
Neural Networks,
...
271
Clustering
Find “natural” grouping of
instances given un-labeled data
272
Association Rules &
Frequent Itemsets
Transactions
Frequent Itemsets:
TID Produce
1
MILK, BREAD, EGGS
2
BREAD, SUGAR
3
BREAD, CEREAL
4
MILK, BREAD, SUGAR
5
MILK, CEREAL
6
BREAD, CEREAL
7
MILK, CEREAL
8
MILK, BREAD, CEREAL, EGGS
9
MILK, BREAD, CEREAL
Milk, Bread (4)
Bread, Cereal (3)
Milk, Bread, Cereal (2)
…
Rules:
Milk => Bread (66%)
273
Visualization & Data Mining
Visualizing the
data to facilitate
human discovery
Presenting the
discovered
results in a
visually "nice"
way
274
Summarization
 Describe features of the
selected group
 Use natural language
and graphics
 Usually in Combination
with Deviation detection
or other methods
Average length of stay in this study area rose 45.7 percent,
from 4.3 days to 6.2 days, because ...
275
Data Mining Central Quest
Find true patterns
and avoid overfitting
(finding seemingly signifcant
but really random patterns due
to searching too many possibilites)
276
Classification
Learn a method for predicting the instance class from
pre-labeled (classified) instances
Many approaches:
Regression,
Decision Trees,
Bayesian,
Neural Networks,
...
Given a set of points from classes
what is the class of new point ?
277
Classification: Linear Regression
 Linear Regression
w0 + w1 x + w2 y >= 0
 Regression computes
wi from data to
minimize squared error
to ‘fit’ the data
 Not flexible enough
278
Classification: Decision Trees
if X > 5 then blue
else if Y > 3 then blue
else if X > 2 then green
else blue
Y
3
2
X
5
279
DECISION TREE
An internal node is a test on an
attribute.
A branch represents an outcome of
the test, e.g., Color=red.
A leaf node represents a class label
or class label distribution.
At each node, one attribute is chosen
to split training examples into distinct
classes as much as possible
A new instance is280classified by
Classification: Neural Nets
 Can select more
complex regions
 Can be more accurate
 Also can overfit the
data – find patterns in
random noise
281
Evaluating which method works
the best for classification
No model is uniformly the best
Dimensions for Comparison
speed of training
speed of model application
noise tolerance
explanation ability
Best Results: Hybrid, Integrated
models
282
Comparison of Major Classification
Approaches
Train Run Noise Can Use
time Time Toler Prior
ance Knowledge
Decision fast
fast poor no
Trees
Rules
med fast poor no
Accuracy
Underon Customer standable
Modelling
Neural
slow
Networks
Bayesian slow
medium
medium
medium
good
fast
good no
good
poor
fast
good yes
good
good
A hybrid method will have higher accuracy
283
Evaluation of Classification
Models
How predictive is the model we
learned?
Error on the training data is not a
good indicator of performance on
future data
The new data will probably not be
exactly the same as the training data!
Overfitting – fitting the training data
too precisely - usually leads to poor
284
results on new data
Classification:
Train, Validation, Test split
Results Known
+
+
+
Data
Model
Builder
Training set
Evaluate
Model Builder
Y
N
Validation set
Final Test Set
Final Model
285
Predictions
+
+
+
- Final Evaluation
+
-
Cross-validation
Cross-validation avoids overlapping
test sets
First step: data is split into k subsets of
equal size
Second step: each subset in turn is
used for testing and the remainder for
training
This is called k-fold cross-validation
Often the subsets are stratified
before the cross-validation
is
286
Cross-validation example:
—Break up data into groups of the same size
—
—
—Hold aside one group for testing and use the rest to build model
Test
—
—Repeat
287
287
More on cross-validation
Standard method for evaluation:
stratified ten-fold cross-validation
Why ten? Extensive experiments
have shown that this is the best
choice to get an accurate estimate
Stratification reduces the estimate’s
variance
Even better: repeated stratified
cross-validation
288
E.g. ten-fold cross-validation is
Clustering Methods
Many different method and
algorithms:
For numeric and/or symbolic data
Deterministic vs. probabilistic
Exclusive vs. overlapping
Hierarchical vs. flat
Top-down vs. bottom-up
289
Clustering Evaluation
Manual inspection
Benchmarking on existing labels
Cluster quality measures
distance measures
high similarity within a cluster, low
across clusters
290
The distance function
Simplest case: one numeric attribute
A
Distance(X,Y) = A(X) – A(Y)
Several numeric attributes:
Distance(X,Y) = Euclidean distance
between X,Y
Nominal attributes: distance is set to
1 if values are different, 0 if they are
equal
291
Are all attributes equally important?
Simple Clustering: K-means
Works with numeric data only
1) Pick a number (K) of cluster
centers (at random)
2) Assign every item to its nearest
cluster center (e.g. using Euclidean
distance)
3) Move each cluster center to the
mean of its assigned items
4) Repeat steps 2,3 until convergence
(change in cluster
assignments less
292
than a threshold)
Data Mining in CRM:
Customer Life Cycle
 Customer Life Cycle
The stages in the relationship between a customer
and a business
 Key stages in the customer lifecycle
Prospects: people who are not yet customers but
are in the target market
Responders: prospects who show an interest in a
product or service
Active Customers: people who are currently
using the product or service
Former Customers: may be “bad” customers who
did not pay their bills or who incurred high costs
 It’s important to know life cycle events (e.g.
retirement)
293
Data Mining in CRM:
Customer Life Cycle
What marketers want: Increasing
customer revenue and customer
profitability
Up-sell
Cross-sell
Keeping the customers for a longer
period of time
Solution: Applying data mining
294
Data Mining in CRM
DM helps to
Determine the behavior surrounding a
particular lifecycle event
Find other people in similar life stages
and determine which customers are
following similar behavior patterns
295
Data Mining in CRM (cont.)
Data Warehouse Customer Profile
Data Mining
Customer Life Cycle Info.
Campaign Management
296
CRISP-DM: Benefits of a standard
methodology
Communication
A common
language
Repeatability
Rational structure
Education
How do I start?
www.crisp-dm.org
CRISP-DM Overview

An industry-standard
process model for data
mining.

Not sector-specific

CRISP-DM Phases:
 Business
Understanding
 Data Understanding
 Data Preparation
 Modeling
 Evaluation
 Deployment

Not strictly ordered respects iterative
aspect of data mining
Non-proprietary
www.crisp-dm.org
Rules vs. decision lists
PRISM with outer loop removed
generates a decision list for one class
Subsequent rules are designed for rules
that are not covered by previous rules
But: order doesn’t matter because all
rules predict the same class
Outer loop considers all classes
separately
No order dependence implied
Problems: overlapping
rules, default
299
Process Standardization
CRISP-DM:
 CRoss Industry Standard Process for Data
Mining
 Initiative launched Sept.1996
 SPSS/ISL, NCR, Daimler-Benz, OHRA
 Funding from European commission
 Over 200 members of the CRISP-DM SIG
worldwide
 DM Vendors - SPSS, NCR, IBM, SAS, SGI, Data Distilleries,
Syllogic, Magnify, ..
 System Suppliers / consultants - Cap Gemini, ICL Retail,
Deloitte & Touche, …
 End Users - BT, ABB, Lloyds Bank, AirTouch, Experian, ...
CRISP-DM
Non-proprietary
Application/Industry
neutral
Tool neutral
Focus on business
issues
 As well as technical
analysis
Framework for guidance
Experience base
 Templates for
Analysis
Why CRISP-DM?
•The data mining process must be reliable and repeatable by
people with little data mining skills
•CRISP-DM provides a uniform framework for
–guidelines
–experience documentation
•CRISP-DM is flexible to account for differences
–Different business/agency problems
–Different data