Customer Segmentation for the Implementation of New Marketing Campaigns

GOAL

Customer segmentation is crucial for various marketing strategies, as it allows for targeted approaches based on specific customer groups, enhancing precision and effectiveness in reaching the intended audience. 

In addition to simply having the data, one must also know how to extract information from it. A company provides its customers' information for segmentation to enhance the implementation of marketing strategies.

PROJECT DESCRIPTION

The project included exploratory data analysis (EDA), preparing the data, grouping data points, and understanding these groups. The clustering utilized the KMeans algorithm, validated through the silhouette score. Visualizing and interpreting these clusters yielded valuable insights for focused marketing efforts and product improvement. This approach is adaptable to other customer datasets, making it a flexible tool within the retail sector.

EXPLORATORY DATA ANALYSIS

An integral exploration of the initial data is vital for comprehending the dataset's arrangement, attributes, and possible anomalies prior to advancing into subsequent analysis or modeling stages.

AGE On average, customers are a mean of 39 years old, with a range of 18 to 70. About a quarter are under 29 (25th percentile), with a median age of 36. Furthermore, most customers, about 75%, are below 49 (75th percentile); indicating a predominantly youthful clientele. The standard deviation of around 14 suggests a reasonably wide range of ages.
ANNUAL INCOME DISTRIBUTION The customers' average annual income is approximately $60.5k, with a standard deviation of around $26.3k, suggesting a significant range in incomes. The lowest recorded income is $15k, while the highest is $137k. The 25th percentile represents an income of $41.5k, the median is $61.5k, and the 75th percentile corresponds to an income of $78k.
SPENDING SCORE DISTRIBUTIONThe average spending score is 50.2, with a standard deviation of about 25.8, indicating a broad range of spending behavior. The lowest score recorded is 1, while the highest is 99. The 25th percentile corresponds to a score of 34.75, the median is 50, and the 75th percentile represents a score of 73.

UNDERSTANDING THE CLUSTERS

The identified clusters offer a distinct view of various customer groups delineated by their income and spending patterns. A simplified summary is presented below:

Low income, Low spending

ECONOMY CUSTOMERS

High income,

Low spending

THRIFTY CUSTOMERS


Medium income, Med. spending

MID-RANGE CUSTOMERS

Low income,

High spending

BIG  CUSTOMERS

High income,

High spending

PREMIUM CUSTOMERS

Another valuable source of information is to classify customers according to their age and spending score, using the clusters previously identified.

ECONOMY CUSTOMERS

OLDER

THRIFTY CUSTOMERS

MIDDLE AGE

MID-RANGE CUSTOMERS

WIDE AGE RANGE

BIG  CUSTOMERS

YOUNG

PREMIUM CUSTOMERS

MIDDLE AGE

DASHBOARD WEB APPLICATION

GitHub