~ Advantages & Disadvantages of Data Mining?~

December 5, 2006 at 6:37 pm (Data Mining, Topic of the Week)

ADVANTAGES OF DATA MINING

Marking/Retailing

Data mining can aid direct marketers by providing them with useful and accurate trends about their customers’ purchasing behavior.   Based on these trends, marketers can direct their marketing attentions to their customers with more precision.  For example, marketers of a software company may advertise about their new software to consumers who have a lot of software purchasing history.  In addition, data mining may also help marketers in predicting which products their customers may be interested in buying.  Through this prediction, marketers can surprise their customers and make the customer’s shopping experience becomes a pleasant one.

Retail stores can also benefit from data mining in similar ways.  For example, through the trends provide by data mining, the store managers can arrange shelves, stock certain items, or provide a certain discount that will attract their customers. 

Banking/Crediting

Data mining can assist financial institutions in areas such as credit reporting and loan information.  For example, by examining previous customers with similar attributes, a bank can estimated the level of risk associated with each given loan.  In addition, data mining can also assist credit card issuers in detecting potentially fraudulent credit card transaction.  Although the data mining technique is not a 100% accurate in its prediction about fraudulent charges, it does help the credit card issuers reduce their losses.6

Law enforcement

Data mining can aid law enforcers in identifying criminal suspects as well as apprehending these criminals by examining trends in location, crime type, habit, and other patterns of behaviors.

Researchers

Data mining can assist researchers by speeding up their data analyzing process; thus, allowing them more time to work on other projects.   

DISADVANTAGES OF DATA MINING

Privacy Issues

Personal privacy has always been a major concern in this country.  In recent years, with the widespread use of Internet, the concerns about privacy have increase tremendously.  Because of the privacy issues, some people do not shop on Internet.  They are afraid that somebody may have access to their personal information and then use that information in an unethical way; thus causing them harm. 

Although it is against the law to sell or trade personal information between different organizations, selling personal information have occurred.  For example, according to Washing Post, in 1998, CVS had sold their patient’s prescription purchases to a different company.7  In addition, American Express also sold their customers’ credit care purchases to another company.8  What CVS and American Express did clearly violate privacy law because they were selling personal information without the consent of their customers.  The selling of personal information may also bring harm to these customers because you do not know what the other companies are planning to do with the personal information that they have purchased.  

Security issues

Although companies have a lot of personal information about us available online, they do not have sufficient security systems in place to protect that information.  For example, recently the Ford Motor credit company had to inform 13,000 of the consumers that their personal information including Social Security number, address, account number and payment history were accessed by hackers who broke into a database belonging to the Experian credit reporting agency.9  This incidence illustrated that companies are willing to disclose and share your personal information, but they are not taking care of the information properly.  With so much personal information available, identity theft could become a real problem. 

Misuse of information/inaccurate information

Trends obtain through data mining intended to be used for marketing purpose or for some other ethical purposes, may be misused.  Unethical businesses or people may used the information obtained through data mining to take advantage of vulnerable people or discriminated against a certain group of people.  In addition, data mining technique is not a 100 percent accurate; thus mistakes do happen which can have serious consequence.10 

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