Data Mining – How is it Important for Business?

It has been more than a decade since we moved from the era of analogues storage to digital storage. Big Data is one of the terms that we commonly hear today whenever there is a discussion about technology and business. This transitional phase of digital age has posed many challenges to businesses and they are forced to adapt to new technologies and environment in order to survive and grow in the market. Data mining is one of the areas that businesses are concerned about in order to adapt to the new market scenario. The write-up tries to explain what data mining is and how it has impacted business in modern times.

Data Explosion and Its Impact on the Business World

According to an estimate, until 1997 there was few thousand petabytes (or few million terabytes) of information stored in various devices in the world. Data was stored mostly in tapes and floppy disks until then. These figures started to increase with the dawn of digital age and in 2002 it was estimated that about 5 exabytes (or 5 million terabytes) of new information was produced during a year. By 2007, 14.7 exabytes of information was produced and stored which was thrice as much compared to the numbers in 2002 and hard drives took over majority of storage. Today the data stored in the world amounts to more than 300 exabytes (300 million terabytes.)

The massive transformation in data storage has affected business greatly. Thanks to IT infrastructure, information is much effectively recorded and stored in every department of organizations today. On the other-hand, internet has made it possible for businesses to gather valuable information about their consumers in the market. The combination of high data storage capability and the access to personal information of consumers has pushed researchers to look for new ways to better utilize available information for growth of the company. It is a necessity to beat competition and improve efficiency of operations within the organization. Thus data, which is the central in the whole process, has become one of the most important assets of companies in the modern world. The process of extracting valuable information from the bulk data available has been termed as data mining or knowledge exploration.

Application of Data Mining in Various Areas of Business

Businesses in service and retail sector and businesses that interact with consumers the most such as media make highest use of data mining. The knowledge that can be gathered by analysing records and looking for patterns can greatly benefit companies in terms of performance improvisation, bringing up new ideas for products and setting new business strategies.

Banking

Banking is one of the sectors that makes the use of data mining the most. Consumers transact with or through banking institutes frequently. Banks also have personal details of consumers. If a bank is planning to give out credit cards to its consumers it can go through past loan records to get details of credit history and prepare a list of consumers who are most likely to purchase credit card. Similar concept holds good with the insurance sector where banks can target consumers based on their age and occupation. The knowledge that is gathered through data mining can also help banks specifically prepare financial products based on geographic locality and the salary scale of population and strike the right audience in the market through targeted marketing ideas.

Retail

Large retailers make use of data mining to understand consumer buying patterns, improvise on inventory management and look for new business opportunities. With introduction of online shopping concept, the whole idea of data mining has gained more importance since the shopping websites are seamlessly integrated with social media platforms which can act as a huge information base for companies. Online shopping companies get information about the geographic location, personal details and interests of consumers. This can help the companies tailor business ideas around the need of consumers and reach out to them through targeted ad campaigns. 

Hospitality Industry

Hospitality is an industry which is highly consumer centric. The last century may have witnessed the highest surge in mobility of people, thanks to the developments in transport sector. This along with the IT boom has increased competition in hotel industry. Today people plan their travel months or even years before and book their reservations online. The access to information of consumers is a big boon to hoteliers who use data mining to understand consumers travel pattern. Since the hospitality industry is subject to seasonal variation of consumers, data mining may be very crucial for the success of business.

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