Cluster Analysis: For Segmenting the Population

Market analysts are always in search of strategies responsible for buying behavior. The whole lot of customers can be grouped on the basis of their past buying behavior patterns. This segmentation of customers helps analysts in developing marketing strate

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Cluster Analysis: For Segmenting the Population

Learning Objectives After completing this chapter, you should be able to do the following: • • • • • • • • • • • •

Understand the concept of cluster analysis. Know the different terminologies used in cluster analysis. Learn to compute different distances used in the analysis. Understand different techniques of clustering. Describe the assumptions used in the analysis. Explain the situations where cluster analysis can be used. Learn the procedure of using cluster analysis. Know the use of hierarchical cluster analysis and K-means cluster analysis. Describe the situation under which two-step cluster should be used. Understand various outputs of cluster analysis. Know the procedure of using cluster analysis with SPSS. Understand different commands and its outcomes used in SPSS for cluster analysis. • Learn to interpret the outputs of cluster analysis generated by the SPSS.

Introduction Market analysts are always in search of strategies responsible for buying behavior. The whole lot of customers can be grouped on the basis of their buying behavior patterns. This segmentation of customers helps analysts in developing marketing strategy for different products in different segments of customers. These segments are developed on the basis of buying behavior of the customers in such a way so that the individuals in the segments are more alike but the individuals in different segments differ to a great extent in their characteristics. The concept of segmenting may be used to club different television serials into homogeneous categories on the basis of their characteristics. An archaeological surveyor’s may like to cluster different idol excavated from archaeological digs into the civilizations from which J.P. Verma, Data Analysis in Management with SPSS Software, DOI 10.1007/978-81-322-0786-3_10, # Springer India 2013

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Cluster Analysis: For Segmenting the Population

they originated. These idols may be clustered on the basis of their physical and chemical parameters to identify their age and civilization to which they belong. Doctors may diagnose a patient for viral infection and determine whether distinct subgroups can be identified on the basis of a clinical checklist and pathological tests. Thus, in different fields several situations may arise where it is required to segment the subjects on the basis of their behaviour pattern so that an appropriate strategy may be formed for these segments separately. Segmenting may also be done for the objects based on their similarity of features and characteristics. Such segmenting of objects may be useful for making a policy decision. For instance, all the cars can be classified into small, medium and large segments depending upon their features like engine power, price, seating capacity, luggage capacity, and fuel consumption. Different policy may be adopted to promote these segments of vehicle by the authorities. The problem of segmentation shall be discussed in this chapter by means of cluster analysis. The more emp