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<P>For example, new products from several large data
depositories — such as Acxiom and Experian, which have
consumer demographics on more than 95 percent of U.S.
households — make it possible to match and retrieve consumer
and household information in real time over the Web. These
products include household information such as age, education,
occupation, marital status, presence of children, household
size, income, and net worth.
<P>You can couple this household information with online
transactional data, mine it, and then develop a profile of a
your site’s most profitable and loyal customers. Not only can
e-tailers benefit from this type of analysis, but so can
content providers — by identifying their core audience and
adjusting their marketing efforts accordingly. Access to these
types of consumer demographics, coupled with data mining
technology, can significantly boost customer relationship
management in ways that directly affect online visitor
acquisition and retention.
<P>
<H3>Mining Web Data</H3>
<P>Let’s take a look at an example. Using the Clementine data
mining tool from SPSS Inc., my company performed several
analyses on a data set from an e-commerce site that sells
clothing for men and women. The transactional data from the
site included the number of purchases and type of items bought
by customers, to which we appended household demographic
information such as gender, age, income, and other consumer
attributes. (See Figure 1) Then, using Clementine’s
visualization component, we found some interesting
associations among gender, age, and number of purchases made
over time. In summary, the link analysis found strong
associations between older male customers: They tend to make a
high number of multiple purchases.
<BR><BR><!-- Caption--><B>FIGURE 1</B> Purchase and product
information appended with demographics. <BR><!--image--><IMG
border=0 height=175
src="Bringing Them Back.files/IE17July.Menafig1.gif"
width=306> <BR><BR clear=all>
<P>We next performed a segmentation analysis using the tool’s
rule generator component. Segmentation is the process of
dividing your customer base into smaller markets based on
different needs, preferences, behavior, and attributes — the
idea being that as you segment your customers into smaller and
smaller sectors, you will be able to interact with them in
different ways. For example, when you segment your customer
database so that you can find out who your most profitable
clients are, you may want to orchestrate a marketing campaign
to reward them for retention purposes.
<P>The segmentation analysis, like the prior association
analysis, found age to be a key factor affecting the number of
sales a customer was likely to make. One of the most important
market segments discovered by this analysis is simply that
when the age of a customer is equal to or greater than 45, the
number of multiple purchases tends to be quite high (nine).
Other key attributes discovered in this analysis were the
importance of a customer’s income and projected worth.
<P>One of the benefits to this type of Web mining is that it
lets the e-tailer target specific offers and incentives to a
smaller segment of all its customers based on historical
purchase patterns. In this case, the company in question can
use these type of rules to drive its email marketing campaign
more intelligently: Rather than marketing to all customers in
the same way, it can focus on rewarding those clients who are
over 45 because they are by far its most profitable ones.
<P>Finally, we constructed a predictive model from our Web
mining analysis using Clementine’s neural-network component.
First we “trained” the neural network on the historical Web
data in order to predict the number of purchases new visitors
are likely to make. After we trained the model, we viewed its
overall design to find out what attributes are the most
important inputs for predicting the output of the total
Projected Number of Purchases. A sensitivity report showed
that the network achieved a predicted accuracy of 94.67
percent, and that these input values were the most important:
<P>Customer Age .55976
<P>Customer Income .31237
<P>Marital Status .17328
<P>Projected Worth .03903
<P>Gender .03834
<P>Presence of Children .01982
<P>As you can see, the most important value for predicting the
number of sales at this site is the customer’s age, with
income, marital status, worth, gender, and presence of
children following in priority. Furthermore, Clementine, like
most other data mining tools, not only helps you construct
predictive models but also generates C code that you can
compile and incorporate into a production system, such as a
marketing or email manager. This system can then use either
the rules or formulas from a neural network for targeting
potential new sales prospects.
<P>In this Web mining analysis case study, it became clear
that certain customer features are the driving forces in
predicting online sales for the company. Characteristics such
as age, household projected income, and marital status are the
key factors in determining the number of purchases customers
would make. For this company, it is clear that its most
profitable customers are mature males over 45 years in age
with a high income.
<P>Interestingly, through the processes of segmentation and
classification, this analysis uncovered hidden patterns and
structures in this data set — such as the fact that although
this particular retailer is very popular with young people and
kids, its most profitable online customers tend to be older
consumers. (Perhaps the youngsters are doing the buying using
their parents’ credit cards.) Furthermore, we discovered that
this e-tailer’s prime customers are smack in the middle of
baby-boomer country, which according to Media Metrix, an
Internet and digital- media measurement service, represents 35
percent of the Internet’s 63 million users. These consumers
are aged 35 to 49 and have household incomes averaging $75,000
and above, compared to only $58,000 among the overall online
population. Plentiful, wired, and wealthy, these consumers are
an e-tailer’s marketing dream. Of further interest to this
particular company is the fact that these consumers are very
interested in recreational travel (given their high disposable
income), which it may leverage in its marketing promotions at
its site.
<P>
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<H3>Rate This Article</H3>
<P>Let us know what you think.
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<H3>Leveraging Web Data </H3>
<P>During the past five years, the number of U.S. households
with online access has grown from 6 million to 37 million;
with 10 million of those households coming online just within
the last year. Projections for online sales vary; however,
they all agree that this marketplace is exploding. (Forrester
Research predicts online buying will hit $185 billion by
2004.) Although online sales still account for much less than
1 percent of total retail spending, the possibility that they
might soon account for much more has produced a high number of
dot-com retailing ventures.
<P>Furthermore, not only can most items be bought online; they
can be bought online at dozens of different places. This
amount of choice translates to increased competition among
e-commerce sites for the attraction of new and existing
customers for everything from cars, books, and insurance to
pet supplies. As consumer options increase, retailers will
face pressure to improve customer service, broaden product
offerings, and reduce prices. As competition increases, so
will the need to attract and retain online customers, which is
where offline demographics and data mining come into play —
the Web offers an incredible channel for understanding
customer behavior and expectations.
<P>Indeed, customer retention will become the metric by which
e-retailers will measure themselves. (For example, the Yankee
Group estimates that new customer acquisition costs for
Amazon.com increased from $24.89 in 1998 to $37.37 in 1999.)
Web data mining is ideally positioned to give e-tailers a
methodology for acquiring and retaining customers. As the
marketplace grows and consumers become more sophisticated, Web
mining will be a key to attracting and retaining them.
<P>One caveat about mining your Web data: Tell your visitors
why you are doing it and give them a choice of opting-out from
the process. Explain your practices clearly and let your
customers have access to their own profiles. In the end, they
will realize that your objective is to service them better
than your competitors.
<P><!-- END ARTICLE CONTENT --><BR><BR><!-- AUTHOR BIO use MAILTO for email addresses--><B>Jesus
Mena</B><I> (<A
href="mailto:jmena@webminer.com">jmena@webminer.com</A>) is
the CEO of WebMiner, a Web-mining consultancy, and the author
of </I>Data Mining Your Web Site<I> (Digital Press, 2000).
</I><!--END AUTHOR BIO--><BR><BR>
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<H3>RESOURCES</H3><!--resource content here --><B>Axciom:</B>
<A href="http://www.acxiom.com/"
target=_new>http://www.acxiom.com/</A><BR><B>Experian:</B>
<A href="http://www.experian.com/"
target=_new>http://www.experian.com/</A><BR><B>SPSS:</B>
<A href="http://www.spss.com/"
target=_new>http://www.spss.com/</A>
</FONT></TD></TR></TBODY></TABLE><!--end--><!--END AUTHOR BIO-->
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