DATA MINING IN ISRAEL

One of the newest data-mining companies to hit the U.S. packaged goods business is three-year-old Sagarmatha (Nepalese for Mt. Everest), based in Kfar Malal, Israel, a Tel Aviv suburb that is the birthplace of Israeli Prime Minister Ariel Sharon.

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The system's origins are in the biotechnology diagnostics industry, where its founders come from, said Will Phillips, president of U.S. marketing. The founders "wrote data-mining algorithms that recognize cells in a digital image," said Phillips. "They retained the right to use the technology for other applications."

In the small high-tech community in Israel, where "most people know each other," Sagarmatha's founders were approached by IT executives from Super-Pharm Israel, a 94-store drug store chain, who asked them how to improve their marketing results. The founders saw that the biotech algorithm could be modified for retailing, and Sagarmatha was born.

"They weren't overwhelmed by the large amounts of data in retailing," Phillips said. "They were dealing with human biology, which is more complex than retailing. So terabytes of data were no problem."

The Sagarmatha software looks at 2,700 "dimensions," including time, geodemographics, and category and subcategory relationships, said Phillips. "This is the prism we look at each individual offer through. We ask, 'Is it relevant? Will it increase basket size?"'

Asked whether Israel's current problems with terrorism are a hurdle for Sagarmatha, Phillips said they "haven't been a big issue." But the difficulties in Israel have created "a kindred relationship" among some clients the firm has visited in the U.S., who place frequent calls and e-mails to Israel, he said.

Sagarmatha also uses extensive redundant systems in Europe and the U.S. to back up data, he said.