CLUSTERING AND CLASSIFICATION: DATA MINING APPROACHES by Ed Colet

Two common data mining techniques for finding hidden patterns in data are clustering and classification analyses. Although classification and clustering are often mentioned in the same breath, they are different analytical approaches. In this column, I describe similarities and differences between these related, but distinct approaches. Imaging a database of customer records, where each record represents a customer's attributes. These can include identifiers such as name and address, demographic information such as gender and age, and financial attributes such as income and revenue spent. Clustering is an automated process to group related records together. Related records are grouped together on the basis of having similar values for attributes. This approach of segmenting the database via clustering analysis is often used as an exploratory technique because it is not necessary for the end-user/analyst to specify ahead of time how records should be related together. In fact, the objective of the analysis is often to discover segments or clusters, and then examine the attributes and values that define the clusters or segments. As such, interesting and surprising ways of grouping customers together can become apparent, and this in turn can be used to drive marketing and promotion strategies to target specific types of customers. There are a variety of algorithms used for clustering, but they all share the property of iteratively assigning records to a cluster, calculating a measure (usually similarity, and/or distinctiveness), and reassigning records to clusters until the calculated measures don't change much indicating that the process has converged to stable segments. Records within a cluster are more similar to each other, and more different from records that are in other clusters. Depending on the particular implementation, there are a variety of measures of similarity that are used (e.g. based on spatial distance, based on statistical variability, or even adaptations of Condorcet values used in voting schemes), but the overall goal is for the approach to converge to groups of related records. Classification is a different technique than clustering. Classification is similar to clustering in that it also segments customer records into distinct segments called classes. But unlike clustering, a classification analysis requires that the end-user/analyst know ahead of time how classes are defined. For example, classes can be defined to represent the likelihood that a customer defaults on a loan (Yes/No). It is necessary that each record in the dataset used to build the classifier already have a value for the attribute used to define classes. Because each record has a value for the attribute used to define the classes, and because the end-user decides on the attribute to use, classification is much less exploratory than clustering. The objective of a classifier is not to explore the data to discover interesting segments, but rather to decide how new records should be classified -- i.e. is this new customer likely to default on the loan? Classification routines in data mining also use a variety of algorithms -- and the particular algorithm used can affect the way records are classified. A common approach for classifiers is to use decision trees to partition and segment records. New records can be classified by traversing the tree from the root through branches and nodes, to a leaf representing a class. The path a record takes through a decision tree can then be represented as a rule. For example, "Income<$30,000 and age<25, and debt=High, then Default Class=Yes). But due to the sequential nature of the way a decision tree splits records (i.e. the most discriminative attribute-values [e.g. Income] appear early in the tree) can result in a decision tree being overly sensitive to initial splits. Therefore, in evaluating the goodness of fit of a tree, it is important to examine the error rate for each leaf node (proportion of records incorrectly classified). A nice property of decision tree classifiers is that because paths can be expressed as rules, then it becomes possible to use measures for evaluating the usefulness of rules such as Support,

Confidence and Lift to also evaluate the usefulness of the tree. To conclude, although clustering and classification are often used for purposes of segmenting data records, they have different objectives and achieve their segmentations through different ways. Knowing which approach to use is important for decision-making.