DCS802DataMiningProject PDF
DCS802DataMiningProject PDF
Abstract
This report evaluates a marketing opportunity for an auction business in the online
auction industry. The proposal is specific to the sale of art, antiques and collectibles and
represents sales conducted as English auctions (as opposed to other forms of auction or
retail). The analysis will consist of a Market Basket Analysis (MBA) for evaluating
cross-promotional sales and marketing opportunities in the business. The taxonomy of
the product hierarchy contains collecting categories and the analysis will determine if
customers purchase across collecting categories. The input to the MBA is a sales dataset
that has been denormalized to contain repeating groups of collecting category sales data.
The MBA utilizes the Apriori algorithm, which is a association rule discovery procedure.
It is a tabulation algorithm that determines the frequent itemsets and generates the
association rules by finding relationships between the items in the dataset. The report
concludes with the association rules determined as part of the analysis.
1. Introduction
Many businesses attempt to identify customer purchasing patterns to understand if these patterns
offer additional business opportunities. In the auction industry, the customers tend to be
classified as collectors (i.e., a person who makes a collection) who have a loyalty to a particular
product category (e.g., coin or stamp collectors). The main goal and concept description of this
report is:
To mine the database of buying activity to determine if collectors have an affinity to buy across
product categories.
The answer to this question could enable important marketing decisions in advertising, targeted
email or cross-promoted online sales. This proposal utilizes a Market Basket Analysis [5] to
determine if customers purchase across collecting categories. This same analysis is well known
by the example of customers who purchase diapers also buy beer on Thursdays. MBA is an
association rule mining technique that is used to find items that are most frequently purchased
together. It uses the Apriori algorithm [1] and generates the appropriate association rules by
pruning the itemset space by filtering on the (3) metrics of support, confidence and improvement
(support and confidence are sometimes called coverage and accuracy).
Agrawal et al. introduced the Apriori algorithm for the purpose of efficient association rule
mining [1,3]. The concept of association rules was introduced in 1993 [2]. The Apriori algorithm
is an efficient association discovery algorithm that filters item sets by incorporating item
constraints (support). Agrawal et al. actually introduced several algorithms in addition to Apriori
(e.g., AprioriTid, AprioriHybrid) that were oriented to mining association rules for large
databases. They also demonstrated performance improvements over the then accepted AIS and
SETM algorithms. Although efficient, recent progress has been made with other algorithms that
use the power of parallel processors to split the problem into multiple parts and other algorithmic
improvements. An example of one of these improved algorithms is Dynamic Itemset Counting
[4].
There are more attributes in the sales dataset than actually required for this analysis. This is to
enable the additional statistical analysis beyond the Market Basket Analysis (see research
extensions). The data file is in a relational data format and the metadata for the attributes is as
follows:
Since the results of the analysis may be used for targeted marketing campaigns, the actual buyer
is required so grouped data would not suffice. The analysis will be conducted over the past year
(2001) since the earlier data is not thought to be representative of the problem space. The date
attribute will be used to filter the data, but also could be used to do seasonal pattern analysis.
The category attribute is nominal data representing the category code. The category code is also
a codified value. The price attribute could be nominal for this analysis, but it is represented as an
integer value to enable further statistical analysis (beyond the scope of this report). The source
of the data is a corporate sales data warehouse.
To simplify and prepare the data for analysis, the relational data needs to be denormalized since
the purchases could occur over various dates (multi-category collectors may not make purchases
on the same date because of scarcity of items to buy). The denormalized file will contain the
BuyerID followed by a repeating group of (13) categories (i.e., all of the categories the buyer has
ever purchased within). The denormalized file structure is:
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In this case, the data was transformed to its denormalized state through a series of queries and
operations in Microsoft Access and Excel. As an alternative to the denormalized data structure,
the data could also be coded in the ARFF format in order to utilize the Apriori algorithm/code
that is available from the Weka web site.
Knowledge Representation
Several different types of output are appropriate for a Market Basket Analysis. For example, a
tabular representation is a two-dimensional co-occurrence matrix. The rows and columns would
represent the frequent item set combinations (i.e., categories purchased together most often) and
the data would be the frequency count of the combination. The co-occurrence matrix can be
used to calculate additional two-dimensional tables representing the metrics of support,
confidence and improvement.
The co-occurrence matrix can be “mined” by running the Apriori algorithm across the itemset
space, which will determine if any strong relationships exist between the items in the dataset.
This process can transform the matrix into association rules for easier interpretation.
3. Algorithms
Evaluation Methods
Association rule mining is a procedure that looks for relationships between items in a dataset.
The relationships can be determined through statistical methods such as correlation analysis or
tabulation procedures such as Market Basket Analysis. MBA is useful for determining which
items tend to be purchased together. In this case it will be used to identify multi-category
collectors. MBA is typically expressed as association rules in the form “If Condition then
Result” (e.g., “If Item Y is purchased then Item Z is purchased”).
C. Run Apriori and determine the quality of the association rules by calculating the
support, confidence and improvement
The Apriori algorithm is an iterative process, which successively processes each k-sized itemset
(i.e., an itemset that contains k items) until no larger itemsets can be generated. The specific
steps of the algorithm are:
1. Set K=1
2. Calculate all k-sized itemsets
3. Calculate the support for all of the candidate itemsets – filter the itemsets based on a
minimum support metric
4. Join all k-sized itemsets to generate candidate itemsets for size K+1
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5. Set K = K + 1
6. Repeat steps 3 through 5 until no larger itemsets can be formed
7. Generate the final set of itemsets by creating the union of all k-sized itemsets
The Apriori algorithm utilizes the three metrics to find “strong” rules by pruning the itemset
space. The good or useful rules (rules with a quality course of action) are the ones we want to
find, and ignore the trivial (obviously known rules) and inexplicable rules (rules that seem to
have no explanation and no course of action) that Apriori will also find.
Support is the percentage of records containing the item combination compared to the total
number of records [7]. Confidence is the ratio of the number of transactions with all the items in
the rule to the number of transactions with just the items in the condition. An example of
confidence is:
If A & B => C has an 80% confidence means, if when a collector buys A and B, in 80% of
the cases, the collector also bought C.
Improvement measures how much better a rule is at predicting a result than just assuming the
result. When it is > 1, the rule is better at predicting the result than random chance.
* * * *
The Market Basket Analysis was done using a data mining software product from Megaputer
called PolyAnalyst [6]. PolyAnalyst (version 4.5) is a powerful tool for discovering patterns and
knowledge hidden in your data. This proposal used the MBA features of PolyAnalyst to
determine the association rules for this dataset. Microsoft Excel was also used to calculate the
co-occurrence, support and confidence matrices. The results were:
Category CAT01 CAT02 CAT03 CAT04 CAT05 CAT06 CAT07 CAT08 CAT09 CAT10 CAT11 CAT12 CAT13
CAT01 474 75 55 55 40 71 37 110 35 50 31 19 16
CAT02 75 814 68 77 108 185 93 155 39 81 79 35 13
CAT03 55 68 1169 170 95 162 78 212 82 137 82 39 14
CAT04 55 77 170 2049 113 185 124 198 99 118 104 54 13
CAT05 40 108 95 113 993 317 99 183 34 96 153 50 12
CAT06 71 185 162 185 317 1780 161 425 76 173 212 82 13
CAT07 37 93 78 124 99 161 1073 149 49 97 113 89 12
CAT08 110 155 212 198 183 425 149 2543 142 392 139 92 19
CAT09 35 39 82 99 34 76 49 142 783 99 32 25 4
4
CAT10 50 81 137 118 96 173 97 392 99 1647 68 50 8
CAT11 31 79 82 104 153 212 113 139 32 68 610 63 8
CAT12 19 35 39 54 50 82 89 92 25 50 63 511 5
CAT13 16 13 14 13 12 13 12 19 4 8 8 5 121
C. Run Apriori and determine the quality of the association rules by calculating the
support, confidence and improvement
PolyAnalyst allows you to input and control each of the three parameters (support, confidence
and improvement). Setting the minimum support allows you to prune the product groups (in our
case categories) that Apriori finds. For instance, if the minimum support is set high, then only
category groups found in large numbers of transactions together will be returned (which is more
likely to be groups of 2 categories). Setting it lower makes it more likely that category groups
with 3 or more categories will be returned. Confidence and improvement are used by
PolyAnalyst to prune the resultant association rules. For this analysis, category groups of 2
categories are more important since they represent clear opportunities to cross-promote
marketing for those collecting categories (typically, product groups of 3 or more are used for
organizing a store or shelf).
In addition to calculating support, confidence and improvement for each category group,
PolyAnalyst also calculates the p-value (probability). The lower the value, the less likely the
group appeared by random chance. The co-occurrence count is also displayed on the same line
displayed as the label called support.
The power of PolyAnalyst is the ability to quickly run a different analysis with different support,
confidence and improvement. If you run an analysis and it returns to many or to few groups, you
can reset the minimum support and rerun the analysis. As a result, changing the minimum
support will result in different groups being returned, which are all valid, but valid for different
purposes. For example, as mentioned, a lower minimum support will tend to return groups with
more products within them. This is particularly useful for product positioning.
The following matrices were calculated in Microsoft Excel to crosscheck the results of
PolyAnalyst (in step D.)
Support
Category CAT01 CAT02 CAT03 CAT04 CAT05 CAT06 CAT07 CAT08 CAT09 CAT10 CAT11 CAT12 CAT13
CAT01 4.5% 0.7% 0.5% 0.5% 0.4% 0.7% 0.4% 1.0% 0.3% 0.5% 0.3% 0.2% 0.2%
CAT02 0.7% 7.7% 0.6% 0.7% 1.0% 1.8% 0.9% 1.5% 0.4% 0.8% 0.8% 0.3% 0.1%
CAT03 0.5% 0.6% 11.1% 1.6% 0.9% 1.5% 0.7% 2.0% 0.8% 1.3% 0.8% 0.4% 0.1%
CAT04 0.5% 0.7% 1.6% 19.5% 1.1% 1.8% 1.2% 1.9% 0.9% 1.1% 1.0% 0.5% 0.1%
CAT05 0.4% 1.0% 0.9% 1.1% 9.4% 3.0% 0.9% 1.7% 0.3% 0.9% 1.5% 0.5% 0.1%
CAT06 0.7% 1.8% 1.5% 1.8% 3.0% 16.9% 1.5% 4.0% 0.7% 1.6% 2.0% 0.8% 0.1%
CAT07 0.4% 0.9% 0.7% 1.2% 0.9% 1.5% 10.2% 1.4% 0.5% 0.9% 1.1% 0.8% 0.1%
CAT08 1.0% 1.5% 2.0% 1.9% 1.7% 4.0% 1.4% 24.1% 1.3% 3.7% 1.3% 0.9% 0.2%
CAT09 0.3% 0.4% 0.8% 0.9% 0.3% 0.7% 0.5% 1.3% 7.4% 0.9% 0.3% 0.2% 0.0%
CAT10 0.5% 0.8% 1.3% 1.1% 0.9% 1.6% 0.9% 3.7% 0.9% 15.6% 0.6% 0.5% 0.1%
CAT11 0.3% 0.8% 0.8% 1.0% 1.5% 2.0% 1.1% 1.3% 0.3% 0.6% 5.8% 0.6% 0.1%
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CAT12 0.2% 0.3% 0.4% 0.5% 0.5% 0.8% 0.8% 0.9% 0.2% 0.5% 0.6% 4.9% 0.0%
CAT13 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.0% 0.1% 0.1% 0.0% 1.1%
Confidence
Category CAT01 CAT02 CAT03 CAT04 CAT05 CAT06 CAT07 CAT08 CAT09 CAT10 CAT11 CAT12 CAT13
CAT01 100.0% 15.8% 11.6% 11.6% 8.4% 15.0% 7.8% 23.2% 7.4% 10.5% 6.5% 4.0% 3.4%
CAT02 9.2% 100.0% 8.4% 9.5% 13.3% 22.7% 11.4% 19.0% 4.8% 10.0% 9.7% 4.3% 1.6%
CAT03 4.7% 5.8% 100.0% 14.5% 8.1% 13.9% 6.7% 18.1% 7.0% 11.7% 7.0% 3.3% 1.2%
CAT04 2.7% 3.8% 8.3% 100.0% 5.5% 9.0% 6.1% 9.7% 4.8% 5.8% 5.1% 2.6% 0.6%
CAT05 4.0% 10.9% 9.6% 11.4% 100.0% 31.9% 10.0% 18.4% 3.4% 9.7% 15.4% 5.0% 1.2%
CAT06 4.0% 10.4% 9.1% 10.4% 17.8% 100.0% 9.0% 23.9% 4.3% 9.7% 11.9% 4.6% 0.7%
CAT07 3.4% 8.7% 7.3% 11.6% 9.2% 15.0% 100.0% 13.9% 4.6% 9.0% 10.5% 8.3% 1.1%
CAT08 4.3% 6.1% 8.3% 7.8% 7.2% 16.7% 5.9% 100.0% 5.6% 15.4% 5.5% 3.6% 0.7%
CAT09 4.5% 5.0% 10.5% 12.6% 4.3% 9.7% 6.3% 18.1% 100.0% 12.6% 4.1% 3.2% 0.5%
CAT10 3.0% 4.9% 8.3% 7.2% 5.8% 10.5% 5.9% 23.8% 6.0% 100.0% 4.1% 3.0% 0.5%
CAT11 5.1% 13.0% 13.4% 17.0% 25.1% 34.8% 18.5% 22.8% 5.2% 11.1% 100.0% 10.3% 1.3%
CAT12 3.7% 6.8% 7.6% 10.6% 9.8% 16.0% 17.4% 18.0% 4.9% 9.8% 12.3% 100.0% 1.0%
CAT13 13.2% 10.7% 11.6% 10.7% 9.9% 10.7% 9.9% 15.7% 3.3% 6.6% 6.6% 4.1% 100.0%
Output
Three different analyses were run in PolyAnalyst to determine which produced the most
appropriate association rules for this particular business opportunity. By evaluating the
calculated support matrix, it is obvious that in general the category relationships have a low
support. The three runs set support at .5, 1 and 2. No other runs produced any additional
association rules. The results were:
Argument Value
Numeric values has been binarized
Minimum support, % 0.5
Minimum improvement 1
Minimum confidence, % 1
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group #2 contains 2 products
p_value: 0.000000 (log = -17.876041); support 75
CAT02
CAT01
Argument Value
Numeric values has been binarized
Minimum support, % 1
Minimum improvement 1
Minimum confidence, % 1
2 group(s) of associated products were found.
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PRODUCT ASSOCIATION RULES
Argument Value
Numeric values has been binarized
Minimum support, % 2
Minimum improvement 1
Minimum confidence, % 1
The (3) runs of the MBA essentially produced six category groups (along with their related
directional groups). One group contains 3 categories, which for this analysis is less interesting
(because it is hard to cross-promote on the fact of a customer purchasing within 2 categories).
The relationships aren’t particularly strong by evidence of the low support and moderately low
confidence results. This indicates that there are minimal cross-promotion opportunities within
this business. These results do support the anecdotal business opinion that customers of these
types of items have a “collectors” mentality, which enforces a strong loyalty to a particular
collecting category. To the extent that there are opportunities, the association rules can be
interpreted as:
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• If a client collects (purchases) CAT01, then they also collect CAT02. The confidence is
15.82% (meaning the chance of purchasing the CAT02 is 15.88%). Also, it is 2.047
(improvement) times more likely than random chance that this association rule is valid (i.e.,
statistically sound). The additional rule is the same (lower confidence at 9.21%), but
opposite in the direction of the relationship.
• If a client collects CAT07, then they also collect CAT12. The rule of opposite direction is
valid as well.
• If a client collects CAT05, then they also collect CAT11. The rule of opposite direction is
valid as well.
• If a client collects CAT02, then they also collect CAT06. The rule of opposite direction is
valid as well.
• If a client collects CAT05, then they also collect CAT06. The rule of opposite direction is
valid as well.
4. Research Extensions
Beyond the Market Basket Analysis, the dataset has additional attributes, which could be used
for additional analysis. For example, since the dataset has a time dimension, seasonal pattern
analysis could be done with additional statistical techniques. Also, given that the price is
numeric, additional descriptive statistics could be calculated including an analysis of variance
(ANOVA). Correlation coefficients could also be calculated between the combinations to
determine statistical correlation between the purchasing patterns.
References
[1] Rakesh Agrawal, and Ramakrishnan Srikant. 1994. Fast algorithms for mining association
rules in large databases. In Proceedings of the 20th International Conference on Very Large
Data Bases, vol. 2, pp. 478-499, Santiago, Chile, September 1994.
[2] Rakesh Agrawal, Tomasz Imielinski, and Arun Swami, Mining association rules between sets
of items in large databases. In Proceedings of the ACM SIGMOD International Conference on
Management of Data, Vol. 22, pp. 207-216, June 1993.
[3] Rakesh Agrawal, Heikki Mannila, Ramakrishnan Srikant, Hannu Toivonen, and Inkeri
Verkamo. Fast discovery of association rules. In Usama M. Fayyad, Gregory Piatetsky-Shapiro,
Padhraic Smyth, and Ramasamy Uthurusamy, editors, Advances in Knowledge Discovery and
Data Mining, Chapter 12, AAAI Press, 1996.
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[4] Sergey Brin, Rajeev Motwani, Jeffrey Ullman, and Shalom Tsur. Dynamic itemset counting
and implication rules for market basket data. In Proceedings of the ACM SIGMOD International
Conference on Management of Data, New York, May 1997. http://www-
db.stanford.edu/~sergey/dic.html , [2002, April]
[5] Grant Bugher, Market Basket Analysis of the Sales Data for a Client of Cambridge
Technology Partners, http://www.megaputer.com/company/cases/cambridge_mba.php3, [2003,
March]
[7] Ian Witten, and Eibe Frank. 2000. Data Mining – Practical Machine Learning Tools and
Techniques with Java Implementations, San Francisco, CA: Morgan Kaufmann.
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