Hierarchical clustering is a clustering method that segments data using a tree-like structure. Psychographic segmentation allows customers to be segmented based on lifestyle, interests and personality traits. In this blog post, we will perform psychographic segmentation with a hierarchical clustering algorithm using customer data and analyze the resulting insights.
The goal of the project
The aim of this project is to analyze customers' lifestyles and interests and segment them based on their similar psychographic patterns. In this way, special marketing strategies can be developed for each segment and customer satisfaction can be increased.
Data Sets to Use
Customers: Contains customer information. (CustomerID, Age, Gender, Region, Lifestyle, Interests)
Orders: Contains shopping information. (OrderID, CustomerID, PurchaseDate, PurchaseAmount)
OrderDetails: Contains shopping details. (OrderID, ProductCategory, CustomerType)
CustomerAcquisition: Contains customer acquisition information. (CustomerID, AcquisitionChannel, AcquisitionDate)
What is Hierarchical Clustering Algorithm?
Hierarchical clustering is a clustering method that segments data using a tree-like structure. There are two main types:
Agglomerative Clustering: Each data point is initially treated as its own cluster, and the two closest clusters are iteratively merged.
Divisive Clustering: All data points are initially considered as a single cluster and iteratively split the cluster into two.
In this project, we will use agglomerative clustering.
Characteristics of Segments and Benefits for Business
Customers with an Active Lifestyle and Sports Interest: This segment can be targeted for sports equipment and events.
Technology and Innovation Enthusiasts: These customers can be targeted for new technological products and innovative services.
Family and Home Oriented Customers: This segment can be targeted for household goods and family oriented products.
Social and Entertainment Enthusiasts: These customers can be targeted for social events and entertainment services.
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