sushantdhumak/creating-customer-segments

Machine Learning Nano-degree Project : To identify customer segments hidden in product spending data collected for customers of a wholesale distributor

Project: Creating Customer Segments

Machine Learning Engineer Nanodegree - Unsupervised Learning

Disclaimer:

The given solutions in this project are only for reference purpose.

Kaggle Competition Link:

https://www.kaggle.com/samratp/creating-customer-segments

Project Overview

In this project we will apply unsupervised learning techniques on product spending data collected for customers of a wholesale distributor in Lisbon, Portugal to identify customer segments hidden in the data. You will first explore the data by selecting a small subset to sample and determine if any product categories highly correlate with one another. Afterwards, you will preprocess the data by scaling each product category and then identifying (and removing) unwanted outliers. With the good, clean customer spending data, we will apply PCA transformations to the data and implement clustering algorithms to segment the transformed customer data. Finally, you will compare the segmentation found with an additional labeling and consider ways this information could assist the wholesale distributor with future service changes.

Project Highlights

This project is designed to give a hands-on experience with unsupervised learning and work towards developing conclusions for a potential client on a real-world dataset. Many companies today collect vast amounts of data on customers and clientele, and have a strong desire to understand the meaningful relationships hidden in their customer base. Being equipped with this information can assist a company engineer future products and services that best satisfy the demands or needs of their customers.

Things we will learn by completing this project:

• How to apply preprocessing techniques such as feature scaling and outlier detection.
• How to interpret data points that have been scaled, transformed, or reduced from PCA.
• How to analyze PCA dimensions and construct a new feature space.
• How to optimally cluster a set of data to find hidden patterns in a dataset.
• How to assess information given by cluster data and use it in a meaningful way.

Description

A wholesale distributor recently tested a change to their delivery method for some customers, by moving from a morning delivery service five days a week to a cheaper evening delivery service three days a week. Initial testing did not discover any significant unsatisfactory results, so they implemented the cheaper option for all customers. Almost immediately, the distributor began getting complaints about the delivery service change and customers were canceling deliveries, losing the distributor more money than what was being saved. We've been hired by the wholesale distributor to find what types of customers they have to help them make better, more informed business decisions in the future. Our task is to use unsupervised learning techniques to see if any similarities exist between customers, and how to best segment customers into distinct categories.

Software and Libraries

This project uses the following software and Python libraries:

• Python 3
• NumPy
• pandas
• scikit-learn
• matplotlib

We will also need to have software installed to run and execute a Jupyter Notebook.

Starting the Project

This project contains three files:

• customer_segments.ipynb: This is the main file where we will be performing our work on the project.
• customers.csv: The project dataset. We'll load this data in the notebook.
• visuals.py: This Python script provides supplementary visualizations for the project. Do not modify.