Data mining, a process that involves identifying patterns and anomalies in large data sets, is widespread among many of today’s companies. Experts predict the big data market will reach $103 billion in revenue by 2027, far exceeding 2019’s predicted $49 billion.
One of the main reasons why data mining is so pervasive is the wide variety of applications it has. Brands across nearly all industries can utilize it in multiple ways to improve decision-making and enhance overall operations. Here are five ways modern people and businesses are using data mining, and the impact it’s having.
1. Fraud detection
Fraud is a growing issue for both businesses and their customers. 45% of business executives reported that they were significantly more concerned about fraud in 2018 than they were just one year earlier, and that concern has likely only increased since. And 27% of digital shoppers abandoned a transaction due to a lack of visible security.
But data mining is proving to be an effective way to combat fraud. A good example comes from a group of Iowa State graduate students who created a mathematical model to identify potential instances of fraud at self-checkout stations in grocery stores without having to inspect innocent customers.
Part of the 20th Annual Mining Cup competition, the Iowa State group beat nearly 150 teams from 28 countries. Although the model was simple and straightforward, it was wildly successful and could greatly reduce the number of instances of retail fraud in the future.
2. Online travel
The travel industry is notoriously competitive, with brands not only being up against other travel agents but also large-scale website aggregators. One company that’s taken full advantage of data mining is TripAdvisor, whose entire business model is based on crunching numbers to help its users find the best deals on flights, hotels, restaurants, and attractions. This is what’s helped them become a leading travel platform and grow their inventory more than 16x since they launched in 2008.
One particular aspect of data mining the travel industry can benefit from is web data integration – a process that aggregates and normalizes data so that information can be understood intuitively through visuals and reporting.
For the travel industry, information publicly available on the web is one of the best data sources they can tap into to analyze competitors, the market, and their customer base. The travel industry values the end-to-end experience they get with the web data as they collect, transform, normalize, and analyze data to inform seasonal travel routes, price comparisons, consumer reviews, tourist volume, and many other indicators that keep them competitive in such a dynamic market.
With the mind-boggling amount of data that’s generated (2.5 quintillion bytes every day), it’s easy to see how it could be used for surveillance purposes. In fact, many companies have found themselves in legal hot water because of it, such as DISNEY.
“DISNEY has been accused of spying on families, including children, through its smartphone apps and the ‘MagicBands’ that are used in its parks,” writes Chris Perez for the New York Post. “According to reports, the company is not only collecting information on what its guests are buying but also on what rides their kids like and who their favorite characters are.”
Although ethically questionable, this personal access to customer data led to DISNEY massively increasing its operating profits by 18% from 2018 to 2019.
4. Hedge funds
Success as a hedge fund manager is largely dependent upon having access to the most robust, up-to-date data, so it should come as no surprise that data mining plays a vital role in this form of investing. Many managers use processes like web scraping and web data integration to gain an edge over the competition.
For example, Point72 Asset Management, a hedge fund that’s run by billionaire investor Steve Cohen, specifically uses satellite imagery to monitor how busy parking lots are at major retailers. A lot that is consistently full is a good sign of a business’s health, while an empty parking lot often indicates poor store performance. “It’s not magic,” says Matthew Granade, the chief market intelligence officer at Point72 Asset Management. “It’s just another input.”
Finally, data mining can also be used by savvy marketers in a variety of ways. Everything from lead generation and market research, to better understanding a company’s demographic and monitoring competitors’ campaigns can be optimized through data mining.
One company that’s taking full advantage is NetApp, a hybrid data services and data management company. “Today, data is constant, data is real-time, it’s 24/7, it’s unstructured and structured, so it’s dynamic, so it’s on us to look at the constant volume of data and keep it always on to uncover insights,” says Sue Pulendran, Head of Marketing and Communications at NetApp. “We build campaigns and a customer engagement journey around what the data is telling us.”
No matter the industry, gathering data from a wide variety of sources and breaking it down into digestible reporting through data mining can help optimize a brand’s marketing efforts, enable them to reach their target audience more efficiently, and improve ROI.
There’s certainly no lack of data these days. It’s constantly being generated by search engines, social media, the Internet of Things, and more. Regardless of industry, the goal of business leaders is to effectively harness this data and put it to use in a practical way.
The five applications mentioned above show some specific ways data mining is currently being used – and the potential it has in many different scenarios. It’s just a matter of understanding how to properly leverage data and apply it in a way that creates a competitive advantage.