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CSUDS Project

The document discusses using data science techniques for customer segmentation. The goal is to divide customers into meaningful groups to enable personalized marketing strategies. The main steps are data collection, preprocessing, feature engineering, clustering algorithms, visualization, and interpreting results. K-means clustering will be used to group customers based on attributes like income and spending habits. Visualizing the segments using plots will help analyze characteristics of each group to inform targeted marketing approaches. Analyzing a mall customer dataset could provide insights like higher-income customers spending more time or females being a major spending group.

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Sheik Dawood S
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Download as PDF, TXT or read online on Scribd
34 views

CSUDS Project

The document discusses using data science techniques for customer segmentation. The goal is to divide customers into meaningful groups to enable personalized marketing strategies. The main steps are data collection, preprocessing, feature engineering, clustering algorithms, visualization, and interpreting results. K-means clustering will be used to group customers based on attributes like income and spending habits. Visualizing the segments using plots will help analyze characteristics of each group to inform targeted marketing approaches. Analyzing a mall customer dataset could provide insights like higher-income customers spending more time or females being a major spending group.

Uploaded by

Sheik Dawood S
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Customer Segmentation using Data Science

Team member
723721205014: Dinesh M
Phase-1 Document Submission
Project: Customer Segmentation Using Data Science
Customer Segmentation:
It is the process of grouping customers according to how and
why they are buy products.

Problem Definition:
The problem is to implement data science techniques to segment
customers based on their behaviour, preferences, and demographic
attributes. The goal is to enable businesses to personalize marketing
strategies and enhance customer satisfaction. This project involves data
collection, data preprocessing, feature engineering, clustering
algorithms, visualization, and interpretation of results. In customer
segmentation using data science is a critical step in the process of
leveraging data-driven techniques to divide a customer base into
meaningful and actionable segments. It involves specifying the
objectives and goals of the segmentation project, clarifying what you
aim to achieve, and setting the context for how data science will be used
to solve specific business problems.

Main Objectives:
• The main goal for the customer segmentation using data science
is to divide the customer base into distinct groups based on
similar characteristics.
• This segment will helpful for many Business purpose.

Project Steps:
1. Data Collection
2. Data Preprocessing
3. Feature Engineering
4. Visualization
5. Interpretation of Results

Step 1: Data Collection


• The main goal for the data collection phase is gathering the
necessary data sources for customer segmentation.
• Collecting the customer transaction data are should be include
here.
• This phase also collecting the data about the behavior of the
customer.
• Huge volumes of data are needed for analysis.
• Example : Considering our given Mall dataset, we have collect the
each customer’s annual income for predicting the spending time.

Step 2: Data Preprocessing


• After collecting the data that should be well prepared and clean
for analysis.
• Handling the missing values, outliers, and data inconsistencies
are should be including here.
• It transform the data through scaling, encoding categorical
variables, and feature engineering.
• It integrate the data from different sources.
• Data cleaning, Data integration, Data transformation and
Dimension reduction are the important factors in Data
Preprocessing.
Example: Considering Mall dataset we have to find out if any
outliers or any missing values. The perfect data will output a
perfect result.
Step 3: Feature Engineering
• The main objective of the feature engineering stage is to create
the relevant features that capture customer behavior and
preferences.
• It also generate new features based on customer interactions and
demographics.
• It reduce the dimensionality in case of the necessary situation.
Step 4: Clustering Algorithm
In this step I used K-Means Clustering Algorithm.
K-Means Clustering is an unsupervised learning algorithm that is used to solve
the clustering problems in machine learning or data science.
Here K defines the number of pre-defined clusters that need to be created in the
process, as if K=2, there will be two clusters, and for K=3, there will be three
clusters, and so on.

The working of the K-Means algorithm is explained in the below steps:

Step-1: Select the number K to decide the number of clusters.

Step-2: Select random K points or centroids. (It can be other from the input
dataset).

Step-3: Assign each data point to their closest centroid, which will form the
predefined K clusters.

Step-4: Calculate the variance and place a new centroid of each cluster.
Step-5: Repeat the third steps, which means reassign each datapoint to the new
closest centroid of each cluster.

Step-6: If any reassignment occurs, then go to step-4 else go to FINISH.

Step-7: The model is ready.

What is random initialization trap?


Let's say we have scatter plot which looks something like this…
If we choose K=3 clusters… we will hope the random initialization would lead us to...following this 3
clusters
Step 5: Visualization
• Visualization is one of the key concept in data science which can
be used for give the pictorial or virtual representation about the
data.
• Several plots are used for visualize the customer segments.
• Plots example:
1. Bar Chart
2. Scatter Plot
3. Pie Plot
4. Line Plot
5. Histogram
In python, Matplotlib library used for the visualization.
• Using these charts we can clearly virtualize our Mall Dataset
especially Bar chart is used in popularly for virtualize the dataset.
Syntax,
“ Import matplotlib.pyplot as plt “
Step 6: Interpretation of Results
• The goal of this phase is to interpret customer segments and
derive actionable insights.
• It identifies the distinguishing characteristics for each segment.
• Profile each customer segment regarding behavior, preferences,
and demographics.
• It also formulates the personalized marketing strategies for each
segment.

According to given Dataset:


Mall Customers Dataset
Considering the mall Customers dataset we can analysis the customer’s
spending time.

Given data,
1. Customer_Id
2. Age
3. Annual Income
4. Spending Score

• If the customer’s annual income will increases then they are


spending more time comparing to before.
• Considering our dataset, female having a majority for spending
more time in a mall.
Conclusion:
This project aims to the data science techniques to enhance
customer satisfaction and business revenue through customer
segmentation and personalized marketing. By systematically following
the outlined phases and goals, we can achieving the deeper
understanding of customer behavior and preferences, resulting in more
effective marketing strategies.

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