We have all read some article or another telling us how effective data mining is and how it can benefit your company to increase sales, optimize your business and such things. But are there any real life examples to put some weight behind this?
If you take a moment to look around you will find a great deal of examples on the Internet. Last year we implemented data mining at a local customer. The cost of producing product modules, shipping them and promoting them on various medias more or less canceled out the profit of selling them. We started out by installing a data mining software on their server, took all the data they had related to the products and put them into an optimized data warehouse. Then spend a few week letting the data mining tools go through all the data and find any patterns in them.
After analyzing the data we noticed a few things. The first thing that stood out was that 1/4 of the places they promoted their product never bought a single unit. In other words, they were wasting money shipping, stocking and promoting their product in those areas. So we dropped all sales in these places and allowed them to only buy the product online. We took a closer look at the best selling places and noticed that we couldn't always deliver enough products for the high demands there, so many of the units we before send to the low selling places was now rerouted to the high selling places thereby eliminating the wait time. We could also see what kinds of marketing that was working and which types wasn't working.
Based on all these “finds” we were able to optimize the whole business with about 19% changing the break even to a nice profit.
The bottom line here would be, get to know your customers, know where to sell your product and how to sell it. Using data mining is one way of getting this information if you don’t always have it.
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