What are the best ways to identify customer segments with cluster analysis?

You should use data that is relevant to the business problem the customer segmentation is trying to solve. Is the goal to: to find new customers for current products or to introduce new products to current customer? to retain current customers through experience improvements and incentives? identify attitudinal segments for brand position purpose? Etc. Qualitative research is often needed to explore the variables that will differentiate the segments. Qualitative research helps create hypotheses about the impact of any variable in separating the segments. Cluster analysis helps validate whether they really do as distinct segments emerge (or not).

1 - put a distinctive line between customer inherent demographics/general behavior and customer interaction/induced behavior with organizations’ products,services or communication efforts. 2 - identify a proxy parameter of customer satisfaction/performance at your best interest upon which customers inherit behavior will be classified. 3 - deploy your clustering techniques : - K- Means - K- Medoids - HDBSCAN - agglomerative clustering - Gaussian Mixture Clustering 4 - Evaluate clusters statistically : - Silhouette score - calinski- harabasz score - davis bouldin score 5- Evaluate clusters from a business perspective: - Segment accessibility - Immediate segment profits - Sustainability - Future potential - Spending power - others

Choose a segmentation method. The most common include: Demographic Segmentation: Based on age, gender, income, education, etc. Geographic Segmentation: Based on location such as country, state, or city. Psychographic Segmentation: Based on lifestyle, social class, and personality characteristics. Behavioral Segmentation: Based on purchasing behavior, benefits sought, user status, and usage rate. Use cluster analysis or other advanced statistical techniques to identify distinct segments within your customer data.

Measure the results of your segmentation and targeted strategies. Evaluate their effectiveness in terms of increased sales, improved customer satisfaction, and higher customer retention rates. Make adjustments based on performance data and feedback. Effective customer segment analysis provides a business with a deep understanding of its customer's needs and preferences, which can lead to more effective marketing strategies, improved product development, and better customer service. It's a dynamic process that requires regular updates as the market and customer behaviors change.