Q.93
Can you explain how you would use clustering analysis to segment customers in a retail organization, and what benefits does customer segmentation provide?
Clustering analysis is a technique used to group similar customers together based on their purchasing behavior or demographic characteristics. To use clustering analysis to segment customers in a retail organization, I would start by collecting data on customer behavior, such as purchase frequency, basket size, and product preferences. I would then use clustering algorithms, such as k-means or hierarchical clustering, to group customers who exhibit similar behavior together. This analysis would allow me to identify different customer segments, such as high-value customers, infrequent shoppers, or customers who prefer certain product categories. Benefits of customer segmentation include the ability to tailor marketing strategies to specific customer groups, to optimize pricing and promotion strategies, and to identify opportunities for cross-selling or up-selling.