Making Progress

Although quite rudimentary, the customer signature is ready for use in a model set. Having a well-defined time frame, a target variable, and input variables, it is functional, even if minimally so. Although useful and a place to get started, the signature is missing a few things.

First, the definition of customer does not take into account changes in telephone numbers. The TRANS MASTER file solves this problem, because it keeps track of these types of changes on customers accounts. To fix the definition of customer requires creating a table, which has the original telephone number on the account (with perhaps a counter, since a telephone number can actually be reused). A typical row in this table would have the following columns:

Telephone Number

Effective Date

End Date

Unique Customer Identifier

With this table, the customer identifier can be used instead of the telephone number, so the customer signatures are robust with respect to changes in telephone number.

Another shortcoming of the customer signature is its reliance on only one data source. Additional data sources should be added in, one at a time, to build a richer signature of customer behavior. The model set only has one time frame of data. Additional time frames make models that are more stable. This customer signature also lacks derived variables, which are the subject of much of the rest of this chapter.

Practical Issues

There are some practical issues encountered when building customer signatures. Customer signatures often bring together the largest sources of data and perform complex operations on them. This becomes an issue in terms of computing resources. Although the resulting model set probably has at most tens or hundreds of megabytes, the data being summarized could be thousands of times larger. For this reason, it is often a good idea to do as much of the processing as possible in relational databases, because these can take advantage of multiple processors and multiple disks at the same time.

Although the resulting queries are complicated, much of the work of putting together the signatures can be done in SQL or in the databases scripting language. This is useful not only because it increases efficiency, but also because the code then resides in only one place-reducing the possibility of

error and increasing the ability to find bugs when they occur. Alternatively, the data can be extracted from the source and pieced together. Increasingly, data mining tools are becoming better at manipulating data. However, this generally requires some amount of programming, in a language such as SAS, SPSS, S-Plus, or Perl. The additional processing not only adds time to the effort, but it also introduces a second level where bugs might creep in.

It is important when creating signatures to realize that data mining is an iterative process that often requires rebuilding the signature. A good approach is to create a template for pulling one time frame of data from the data sources, and then to do multiple such pulls to create the model set. For the score set, the same process can be used, since the score set closely resembles the model set.

Exploring Variables

Data exploration is critically intertwined with the data mining process. In many ways, data mining and data exploration are complementary ways of achieving the same goal. Where data mining tends to highlight the interesting algorithms for finding patterns, data exploration focuses more on presenting data so that people can intuit the patterns. When it comes to communicating results, pretty pictures that show what is happening are often much more effective than dry tables of numbers. Similarly, when preparing data for data mining, seeing the data provides insight into what is happening, and this insight can help improve models.

Distributions Are Histograms

The place to start when looking at data is with histograms of each field; histograms show the distribution of values in fields. Actually, there is a slight difference between histograms and distributions, because histograms count occurrences, whereas distributions are normalized. However, for our purposes, the similarities are much more important-histograms and distributions (or strictly speaking, the density function associated with the distribution) have similar shapes; it is only the scale of the Y-axis that changes.

Most data mining tools provide the ability to look at the values that a single variable takes on as a histogram. The vertical axis is the number of times each value occurs in the sample; the horizontal axis shows the various values.

Numeric variables are often binned when creating histograms. For the purpose of exploring the variables, these bins should be of equal width and not of equal height. Remember that equal-height binning creates bins that all contain the same number of values. Bins containing similar numbers of records are useful for modeling; however, they are less useful for understanding the variables themselves.

Changes over Time

Perhaps the most revealing information becomes apparent when the time element is incorporated into a histogram. In this case, only a single value of a variable is used. The chart shows how the frequency of this value changes over time.

As an example, the chart in Figure 17.10 shows fairly clearly that something happened during one March with respect to the value DN. This type of pattern is important. In this case, the DN represents duplicate accounts that needed to be canceled when two different systems were merged. In fact, we stumbled across the explanation only after seeing such a patterns and asking questions about what was happening during this time period.

The top chart shows the raw values, and that can be quite useful. The bottom one shows the standardized values. The curves in the two charts have the same shape; the only difference is the vertical scale. Remember that standardizing values converts them into the number of standard deviations from the mean, so values outside the range of -2 to 2 are unusual; values less then -3 or greater than 3 should be very rare. Visualizing the same data shows that the peaks are many standard deviations outside expected values-and 14 standard deviations is highly suspect. The likelihood of this happening randomly is so remote that the chart suggests that something external is affecting the variable-something external like the one-time even of merging of two computer systems, which is how the duplicate accounts were created.

Creating one cross-tabulation by time is not very difficult. Unfortunately, however, there is not much support in data mining tools for this type of diagram. They are easy to create in Excel or with a bit of programming in SAS, SPSS, S-Plus, or just about any other programming language. The challenge is that many such diagrams are needed-one for each value taken on by each categorical variable. For instance, it is useful to look at:

Different types of accounts opened over time.

Different reasons why customers stop over time.

Performance of certain geographies over time.

Performance of different channels over time.

Because these charts explicitly go back in time, they bring up issues of what happened when. They can be useful for spotting particularly effective combinations that might not otherwise be obvious-such as oh, our Web banner click-throughs go up after we do email campaigns.