vinayvirraj/customer-segmentation

An analysis and approach to customer segmentation

customer_segmentation

Segmentation of customers into different categories will help organizations to better understand their customers choices.This is done based on the customer characteristics (eg:Income).

RFM analysis is applied to present data at aggregate level and is used to segment customers into homogenous groups. It has been adopted in business since long ago, especially as part of marketing effort. Three main variables as suggested by the title of analysis, R-recency, F-frequency, and M-monetary, are defined and computed. These three values are important as F and M indicate value of customers, and R indicate customers’ engagement and satisfaction. The values are easy to obtain from the basic set of information.

Silhouette analysis, Elbow method, DBscan and K-Means were adopted to obtain the optimal number of clusters of customers.