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Model 1 is Part of the Curriculum at Indiana's Kelley School of Business

Published
  • February 01 1999, 1:00am EST

BACKGROUND: Indiana University's Kelley School of Business is one of the country's premier business schools. The Kelley School incorporates state-of-the-art technology in its educational programs, including software for data mining, virtual-reality simulation, resource planning, financial management and decision support.

PLATFORMS: The Model 1 software runs on 32 PC-compatible computers equipped with 400 MHz Pentium II processors, 128MB RAM, 16GB hard drives, flat-panel display screens and the Windows NT Workstation operating system. The computers are networked to an IBM server running Windows NT Server software.

PROBLEM SOLVED: Model 1 is one of three data mining packages used in IU's second-year MBA course, Marketing Intelligence Management. The purpose of the course is to teach students how to leverage customer databases to identify new prospects, retain existing customers and maximize the lifetime value of customers by building enduring relationships through one-to-one marketing programs. Students analyze geodemographic data, point-of-sale transaction data, and catalog and frequent shopper data. Model 1 is specifically used to segment customers into homogeneous groups, analyze the effectiveness of past promotions, target future promotions, highlight cross-selling opportunities and identify a retailer's most valuable customers.

PRODUCT FUNCTIONALITY: Model 1 has flexible data importing capabilities and can handle most spreadsheet, DBMS and raw-data file formats. A data editor makes it easy to create new variables and scan existing data for invalid entries. The software can generate basic line, histogram and scatter charts, means and frequency distributions, and lift charts. It has modules for customer segmentation, response modeling, cross-selling analysis and customer valuation. Model 1 can fit a variety of predictive models, including RFM, Bayes, linear and logistic regression, neural network, CHAID and CART models, with or without cross-validation.

STRENGTHS: The strengths of Model 1 are its extraordinary ease of use and its extensive assortment of modeling techniques. The user is guided through the modeling process by a software wizard which asks a series of questions about the format of the data and the desired level of analysis. The sophisticated user can customize the modeling process by selecting specific modeling techniques, objective functions and sample sizes for model fitting. Model 1 is particularly well-suited for direct marketing applications.

WEAKNESSES: Model 1 is designed to analyze cross-sectional customer databases and is not suitable for conducting time-series analysis of longitudinal data. The user can only work with one data set at a time and cannot create scripts to automate sequences of frequently used commands.

SELECTION CRITERIA: The Model 1 software package was selected because of its leading-edge technology, ease of use and appropriateness for the data analysis tasks in our course, Marketing Intelligence Management. Its features complement those of the other statistical and data mining programs used in the course.

DELIVERABLES: The Kelley School of Business uses the Model 1 package to analyze the promotional data from a major magazine publisher and the frequent-shopper database of a leading shopping mall developer. The program automatically generates a report summarizing the characteristics of each of the independent variables and the strength of the relationship between the independent and dependent variables and displays a lift chart, gains chart and model coefficients for each of the best-fitting models. The segmentation and cross-selling modules also generate profiles of the estimated consumer clusters and product groupings, respectively.

VENDOR SUPPORT: Support from Group 1 Software has been excellent. The company is committed to education and has worked closely with us to ensure that our business graduates receive training in the latest data mining tools. The Model 1 software was easy to install in our networked computer laboratory and has required little effort to maintain.

DOCUMENTATION: Model 1 comes with extensive documentation on CD-ROM. Each of the four user manuals is approximately 500 pages long. The materials are clear and complete, with lots of helpful examples. Because of the significant overlap in material across manuals, the documentation could benefit from some editing.


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