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Browsing by Subject "Customer segmentation"

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  • Laaksonen, Jenniina (2021)
    Understanding customer behavior is one of the key elements in any thriving business. Dividing customers into different groups based on their distinct characteristics can help significantly when designing the service. Understanding the unique needs of customer groups is also the basis for modern marketing. The aim of this study is to explore what types of customer groups exist in an entertainment service business. In this study, customer segmentation is conducted with k-prototypes, a variation of k-means clustering. K-prototypes is a machine learning approach partitioning a group of observations into subgroups. These subgroups have little variation within the group and clear differences when compared to other subgroups. The advantage of k-prototypes is that it can process both categorical and numeric data efficiently. The results show that there are significant and meaningful differences between customer groups emerging from k-prototypes clustering. These customer groups can be targeted based on their unique characteristics and their reactions to different types of marketing actions vary. The unique characteristics of the customer groups can be utilized to target marketing actions better. Other possibilities to benefit from customer segmentation include such as personalized views, recommendations and helping strategy level decision making when designing the service. Many of these require further technical development or deeper understanding of the segments. Data selection as well as the quality of the data has an impact on the results and those should be considered carefully when deciding future actions on customer segmentation.
  • Haatanen, Henri (2022)
    In the modern era, using personalization when reaching out to potential or current customers is essential for businesses to compete in their area of business. With large customer bases, this personalization becomes more difficult, thus segmenting entire customer bases into smaller groups helps businesses focus better on personalization and targeted business decisions. These groups can be straightforward, like segmenting solely based on age, or more complex, like taking into account geographic, demographic, behavioral, and psychographic differences among the customers. In the latter case, customer segmentation should be performed with Machine Learning, which can help find more hidden patterns within the data. Often, the number of features in the customer data set is so large that some form of dimensionality reduction is needed. That is also the case with this thesis, which includes 12802 unique article tags that are desired to be included in the segmentation. A form of dimensionality reduction called feature hashing is selected for hashing the tags for its ability to be introduced new tags in the future. Using hashed features in customer segmentation is a balancing act. With more hashed features, the evaluation metrics might give better results and the hashed features resemble more closely the unhashed article tag data, but with less hashed features the clustering process is faster, more memory-efficient and the resulting clusters are more interpretable to the business. Three clustering algorithms, K-means, DBSCAN, and BIRCH, are tested with eight feature hashing bin sizes for each, with promising results for K-means and BIRCH.