Daily Archives: January 21, 2021

Customer Segmentation with K-Means Clustering

Customer segmentation is dividing your customers into groups with similar tastes or buying patterns. It can be done by gathering customer buying habits, or with responses to surveys etc. A typical question that can be answered through customer segmentation is how a new product should be positioned or offered when it’s launched.

In the following example we were provided with a customer database from a wine merchant that had tracked which of 32 promotions their customers responded to. They asked us to segment their customer base so that they could market to each group effectively and appropriately.