Profiting From Consumer Behavior

Data mining helps businesses make more money by predicting the spending habits of their customers

or whether you use a debit or credit card. Sifting through these bits of consumer information provides only a glimpse into people’s lives. But for Berry, applying data mining technology reveals not only hidden patterns about what people buy but about what they may buy tomorrow.

According to Berry, data mining is simply “the finding of patterns in data that are predictive.” The co-author of several books on the topic and considered by many in the industry to be a pioneer in the field, Berry says if you have customers, you have customer data — and probably more information than you think — to create effective and profitable marketing plans.

Berry, whose firm made more than $1 million in 2006, provides data mining services to small businesses as well as to corporations such as Bank of America, Capitol One, and Sprint/Nextel. Data Miners helps wireless carriers, for example, predict which of their customers would be more responsive to e-mail than a phone call; determine the best products to market to those customers; as well as look at which customers would be likely to cancel their service. The information gleaned, “gives you a sense of what the customer’s future value is — what it is worth to try and retain them or to try and get another customer like them,” he says.

Companies in a wide range of industries can benefit from data mining, says Berry. Retail, finance, manufacturing, and
communication businesses are already using data mining tools and techniques to take advantage of historical data. An auto dealership, for example, could use the information in invaluable ways. “Car dealers typically know a lot about their customers — everything from the size of the loan they started with, to how frequently they service the vehicle,” says Berry. “You may be able to take advantage of that information to try and predict when someone is going to trade in or to figure out the best time to reconnect with a former customer.”

For some small businesses, a Microsoft Excel or Access database is sufficient for effective data mining, says Berry. “There is a real danger in [using] data mining software sold on the basis of ‘just push a button and answers come out.’ You could end up spending a lot of money and not getting a lot of results. It’s easy to make mistakes if you don’t know a lot about data analysis,” Berry cautions. Additionally, for data mining to be truly profitable, he says, businesses “tend to need a lot of data” for the results to have any significance — something that small firms typically don’t have.

MINING THE DATA STORE
Google (http://services.google.com/websiteoptimizer) is getting in on the act with its own Website Optimizer (in Beta at press time), which allows Website owners to test visitor satisfaction with their landing pages, among other things.

Split Test Accelerator ($495; www.splittestaccelerator.com) a Taguchi method tool that allows users to conduct split tests on different headlines, graphic elements, and prices in online ads. Choose the winner based on which has the highest click-through and conversion rates.

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