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Cluster Analysis: Prepared By: (Group-5) Ashish Goyal Jitendra Jain Nitesh Sadani

Cluster analysis is a technique used to classify objects into relatively homogeneous groups called clusters. It can be used to segment markets, understand buyer behavior, identify new opportunities, and reduce data. The key steps are formulating the problem, selecting a distance measure, choosing a clustering procedure, deciding the number of clusters, interpreting the results, and validating the clusters. An example analysis used consumer attitudes towards shopping across six variables to identify three distinct clusters with different characteristic averages for each variable. Cluster analysis has various applications including social network analysis, image segmentation, and data mining.

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1K views

Cluster Analysis: Prepared By: (Group-5) Ashish Goyal Jitendra Jain Nitesh Sadani

Cluster analysis is a technique used to classify objects into relatively homogeneous groups called clusters. It can be used to segment markets, understand buyer behavior, identify new opportunities, and reduce data. The key steps are formulating the problem, selecting a distance measure, choosing a clustering procedure, deciding the number of clusters, interpreting the results, and validating the clusters. An example analysis used consumer attitudes towards shopping across six variables to identify three distinct clusters with different characteristic averages for each variable. Cluster analysis has various applications including social network analysis, image segmentation, and data mining.

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ashishmission2020
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CLUSTER ANALYSIS

Prepared By: (Group-5)


Ashish Goyal
Jitendra Jain
Nitesh Sadani
Definition
• “Cluster analysis helps us to identify the
groups or segments that are more likely to
each other then they are like members of
other groups or segments”

• “It is the technique that is used to classify


objects In to relatively in to homogenous
groups called clusters.”
The diagram below illustrates the results of a survey that studied
drinkers’ perceptions of spirits (alcohol). Each point represents the
results from one respondent. The research indicates there are four
clusters in this market.
Purpose for cluster analysis
• Segmenting the market
• Understanding buyers behavior
• Identify new market opportunities
• Selecting test markets
• Reducing data
Statistical terms
• Agglomeration Schedule
• Cluster Centroids
• Cluster Centers
• Cluster membership
• Dendrograms
• Distance between cluster centers
• Icicle diagram
• Coefficient matrix
Procedure
Formulate the problem
●

Select a distance measure


●

Select a clustering procedure


●

Decide on the number of clusters


●

Interpret the profile clusters


●

Assess the validity of clustering


●
Formulate the problem
• Select the variables that you wish to apply
the clustering technique to.
• The set of variables should show some
similarity or difference between
themselves.
• Variables should be selected on the basis
of past research theory.
• The sample size should be taken as large
as possible.
Select a distance measure

• The selected data should have either some


similarity or difference.

–There are various ways of computing distances:


–Euclidean distance - the square root of the sum of
the squared differences in value for each variable
–Manhattan distance - the sum of the absolute
differences in value for any variable
–Chebyshev distance - the maximum absolute
difference in values for any variable
Select a clustering procedure

Clustering Procedures

Hierarchical Non - Hierarchical Others

Agglomerative

Sequential Parallel Optimizing


Li nkage Method Variance Method
Divise
CentroidMethods

Threshold Threshold Partioning Two step


Sources : Marketing Research/Naresh Malhotra/Cluster Analysis/P-643
Sources : Marketing Research/Naresh Malhotra/Cluster Analysis/P-644
Decide on number of clusters
• Theoretical, practical or conceptual consideration
may suggest a certain no. of clusters.
• The distance at which clusters are combined can
be used as the criteria. (Hierarchical)
• The elbow shaped curve indicates the no. of
clusters. (Non - hierarchical)
• The relative size of the clusters should be
meaningful.
Interpret and profile the clusters
• Use of illustrative techniques like:
• Dendrograms
• Icicle plots
• Perceptual maps
Assess Reliability and Validity
• repeat analysis but use different distance
measure
• repeat analysis but use different clustering
technique
• split the data randomly into two halves and
analyze each part separately
• repeat analysis several times, deleting one
variable each time
• repeat analysis several times, using a
different order each time
Example
• We consider a clustering of consumers based on
attitudes towards shopping. Consumers were asked for
their degree of agreement on a 7-point scale (1=disagree,
7=agree):

• V1 : shopping is fun
• V2 : shopping is bad for your budget
• V3 : I combine shopping with eating out
• V4 : I try to get the best ways when shopping
• V5 : I don’t care about shopping
• V6 : You can save a lot of money by comparing
prices
Sources : Marketing Research/Naresh Malhotra/Cluster Analysis/P-641
Cluster Centroids
Means of Variables
Cluster V1 V2 V3 V4 V5 V6
No.

1 5.750 3.625 6.000 3.125 1.750 3.875

2 1.667 3.000 1.833 3.5000 5.5000 3.333

3 3.500 5.833 3.333 6.000 3.500 6.000

Sources : Marketing Research/Naresh Malhotra/Cluster Analysis/P-648


Other clustering applications
• Social network analysis
• Image segmentation
• Data mining
• IMRT segmentation
• Grouping of Shopping Items
• Petroleum Geology
• Crime Analysis
References
• Marketing Research/Naresh Malhotra/Ch-
20/P-637
• http://www.wikipedia.com\Cluster analysis (in
marketing) - Wikipedia, the free
encyclopedia.htm
• http://www.scribd.com/cluster/2341235.htm
Feel Free to revert me at
[email protected]

Thank You

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