Decision Tree

MKTG 660

<< Using the SPSS data, RidingMowers.sav (source: Data Mining for Business Analytics:
Concepts, Techniques, and Applications in R, answer the questions below >>

1. Make an appropriate graph for Ownership, Income, and Lot_size.

Analyze >> Descriptive Statistics >> Frequencies >> Charts
 Discrete variable: Bar charts or Pie charts
 Continuous variable: Histograms (+Show a normal curve on the histograms)

2. A marketing analyst is interested in segmenting the customers in terms of income and lot size
(X) to understand the ownership decision (Y) by the segments. For this, conduct a decision tree
analysis.
Analyze >> Classify >> Tree
 Y: Ownership
 X: Income and Lot_Size
 Growing Method: CRT
 Criteria > Growth Limits > Custom value 3, Parent Node 5, Child Node 5
 Output > Tree tab > Node Contents: Table and chart (optional)
> Statistics tab > Independent Variables: Importance to model

3. Interpret the trees

 How many terminal nodes (segments) does the tree have?
 Describe the splitting decision rules for each segment
 Which variable is more important in the decision tree than others? (Note: If the number
of observations is not sufficient, the result is not reliable)
 Compare the ownership percentages across the segments (the final/terminal nodes)
 Which segment(s) will you mainly target?
4. Save important variables
 Save >

 In the data window, explain

NodeID and Predicted Value.

5. Prediction
 Make a cross-tabulation (confusion matrix) using the actual Ownership variable (row)
and the Predicted Value (column). Select the row percentages option.
 Analyze >> Descriptive Statistics >> Crosstabs
Column: Predicted Value
Row : Ownership
Cells > Percentages: Row
 Interpret the cross-tabulation
 Calculate the correct classification ratio (hit ratio) and the misclassification ratio

6. Conclusion
 Tree structure and segmentation criteria
 Total ownership ratio vs. Segment ownership ratios
 Targeting the segments
 Expected prediction error