Advantages and Disadvantages of Data Mining

Data mining is an important part of knowledge discovery process that we  can analyze an enormous set of data and get  hidden and useful knowledge. Data mining is  applied effectively not only in business environment but also in other fields such as weather forecast, medicine, transportation, healthcare, insurance, government…etc. Data mining has a lot of advantages when using in a specific industry. Besides those advantages, data mining also has its own disadvantages e.g., privacy, security and misuse of information. We will examine those advantages and disadvantages of data mining in different industries in a greater detail.

Advantages of Data Mining

Marketing / Retail

Data mining helps marketing companies build models based on historical data to predict who will respond to the new marketing campaigns such as direct mail, online marketing campaign…etc. Through the results, marketers will have appropriate approach to sell profitable products to targeted customers.

Data mining brings a lot of benefits to retail companies in the same way as marketing. Through market basket analysis, a store can have an appropriate production arrangement in a way that customers can buy frequent buying products together with pleasant. In addition, it also helps the retail companies offer certain discounts for particular products that will attract more customers.

Finance / Banking

Data mining gives financial institutions information about loan information and credit reporting. By building a model from historical customer’s data, the bank and financial institution can determine good and bad loans. In addition, data mining helps banks detect fraudulent credit card transactions to protect credit card’s owner.

Manufacturing

By applying data mining in operational engineering data, manufacturers can detect faulty equipments and determine optimal control parameters. For example semi-conductor manufacturers has a challenge that even the conditions of manufacturing environments at different wafer production plants are similar, the quality of wafer are lot the same and some for unknown reasons even has defects. Data mining has been applying to determine the ranges of control parameters that lead to the production of golden wafer. Then those optimal control parameters are used to manufacture wafers with desired quality.

Governments

Data mining helps government agency by digging and analyzing records of financial transaction to build patterns that can detect money laundering or criminal activities.

Disadvantages of data mining

Privacy Issues

The concerns about the personal privacy have been increasing enormously recently especially when internet is booming with social networks, e-commerce, forums, blogs…. Because of privacy issues, people are afraid of their personal information is collected and used in unethical way that potentially causing them a lot of troubles. Businesses collect information about their customers in many ways for understanding their purchasing behaviors trends. However businesses don’t last forever, some days they may be acquired by other or gone. At this time the personal information they own probably is sold to other or leak.

Security issues

Security is a big issue. Businesses own information about their employees and customers including social security number, birthday, payroll and etc. However how properly this information is taken care is still in questions. There have been a lot of cases that hackers accessed and stole big data of customers from big corporation such as Ford Motor Credit Company, Sony… with so much personal and financial information available, the credit card stolen and identity theft become a big problem.

Misuse of information/inaccurate information

Information is collected through data mining intended for the ethical purposes can be misused. This information may be exploited by unethical people or businesses to take benefits of vulnerable people or discriminate against a group of people.

In addition, data mining technique is not perfectly accurate. Therefore if inaccurate information is used for decision-making, it will cause serious consequence.

Conclusion

Advantages and Disadvantages of Data MiningData mining brings a lot of benefits to businesses, society, governments as well as individual. However privacy, security and misuse of information are the big problems if they are not addressed and resolved properly.