CHAPTER 2 – DATA MINING PROCEDURES AND KNOWLEDGE SYSTEMS Zikmund & Babin Essentials of Marketing Research – 5 th Edition © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–1

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–2 LEARNING OUTCOMES 1.Know why concepts like data, information and intelligence represent value 2.Understand the four characteristics that describe data 3.Know what a decision support system is and does 4.Describe marketing research’s role in predictive analytics 5.Recognize the major categories of databases 6.Be sensitive to the potential ethical abuse of tracking consumers electronically After studying this chapter, you should

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–3 Data, Information, and Intelligence Data  Facts or recorded measures of certain phenomena (things or events). Information  Data formatted (structured) to support decision making or define the relationship between two facts. Market intelligence  The subset of data and information that actually has some explanatory power enabling effective decisions to be made. So there is more data than information, and more information than intelligence.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–4 Characteristics of Valuable Information Relevance  Reflects how pertinent these particular facts are to the situation at hand.  Will a change in the data coincide with a change in some important outcome? Completeness  Information completeness refers to having the right amount of information.

Characteristics of Valuable Information Quality  Reflects how accurately the gathered data actually match reality. Timeliness  The data are not so old that they are irrelevant.  Market dynamism  Represents the rate of change in environmental and competitive factors. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–5

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–6 Functions of Marketing Research Foundational—answers basic questions such as what consumer segments should be served and with what types of products. Testing—addresses things like new product concepts or promotional ideas. How effective will they be? Issues—examines how specific issues impact the firm, such as organizational structure. Performance—which metrics are critical in real-time management and what insights can be gained from “what-if” analyses of policy changes?

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–7 Decision Support Systems (DSS) Helps decision makers confront problems through direct interaction with computerized databases and analytical software programs.  Stores data and transforms them into organized information that is easily accessible to marketing managers.  A customer relationship management (CRM) system is the part of the DSS that addresses exchanges between the firm and its customers.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–8 Databases and Data Warehousing Database  A collection of raw data arranged logically and organized in a form that can be stored and processed by a computer. Data warehousing  The process allowing important day-to-day operational data to be stored and organized for simplified access. Data warehouse  The multitiered computer storehouse of current and historical data.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–9 Input Management Input  All numerical, text, voice, and image data entered into the decision support system. Major Sources of Input  Internal records  Proprietary marketing research  Salesperson input  Behavioral tracking  Web tracking  Outside vendors and external distributors

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–10 Data Archives Data Wholesalers  Companies that put together consortia of data sources into packages that are offered to municipal, corporate, and university libraries for a fee.  Wilson Business Center  Hoovers  PROQUEST  INFOTRAC  DIALOG  LEXIS-NEXIS,  Dow Jones News Retrieval Services

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–11 Types of Databases Statistical databases  Contain numerical data for market analysis and forecasting.  Geographic information systems use geographical databases and powerful software to prepare computer maps of relevant variables. Financial databases  Includes competitors and customers’ financial data, such as income statements and balance sheets.  Example: CompuStat Video databases  Video databases and streaming media are having a major impact.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–12 Networks and Electronic Data Interchange Electronic Data Interchange (EDI)  Systems that integrate one company’s computer system with another company’s system to exchange business information with suppliers or customers.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–13 Navigating the Internet Content providers  Parties that furnish information on the World Wide Web. Uniform Resource Locator (URL)  A Web site address that Web browsers recognize. Keyword Search  Takes place as the search engine searches through millions of Web pages for documents containing the keywords.  Google revolutionized search engines based on graph theory.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–14 Environmental Scanning Entails all information gathering designed to detect changes in the external operating environment of the firm.

Information Technology Pull Technology  Consumers request information from a Web page and the browser then determines a response.  The consumer is essentially asking for the data. Push Technology  Sends data to a user’s computer without a request being made.  Software is used to guess what information might be interesting to consumers based on the pattern of previous responses. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–15

Information Technology Smart Agent Software  Software capable of learning an Internet user’s preferences and automatically searching out information and distributing it to a user’s computer. Cookies  Small computer files that record a user’s Web usage history. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–16

Intranets A company’s private data network that uses Internet standards and technology.  The information—data, graphics, video, and voice—is available only inside the organization or to those individuals whom the organization deems as appropriate participants. Firewall  Security software installed to limit access to only those persons authorized to enter an Intranet. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–17

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–18 Predictive Analytics Refers to linking computerized data sources to statistical tools that can search for predictive relationships and trends which allow more accurate prediction of consumers’ opinions and actions.  Software companies like SPSS and SAS offer products that look for data and then use statistical tools to reveal key predictive relationships.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–19 Data Technology and Ethics Geolocation technologies  Technologies that work through smartphone apps to broadcast a person’s location through an electronic network. History sniffing  Activities that covertly discover and record the websites that a consumer visits.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2–20 Data Technology and Ethics Factors relevant for considering the ethics of data gathered through data technology:  Has the consumer implicitly or explicitly consented to being traced?  Does the tracking behavior violate any explicit or implicit contracts or agreements?  Can researchers enable users to know what information is available to data miners?  Open data partnership – researchers agree to make the information they collect from Web tracking available to the consumers from which they gather the information.  Do the benefits to consumers balance out any potential invasion of privacy?