ABSTRACT

The goal of our study is to segment the customer based on the demographics.
Where many competitors are trying to be better than others. Nowadays we have
many options of one kind so sometimes customers can get confused about what
to buy or not buy because every person has different choices. But in the time of
technology, we can sort out this problem by using machine learning algorithms.
We can apply many algorithms to the dataset and find the target group.
Without machine learning, it would be time-consuming to find a group with
similar choices. To segment the customers, we are using K-Means unsupervised
learning algorithm. Here K-Means algorithm helps us to make a group of data
with the same attributes that help businesses to grow perfectly. Unsupervised
learning algorithm K-Means Clustering divides the unlabeled dataset intovarious
clusters. Here, K specifies how many pre-defined clusters must be produced as
part ofthe process. It is an iterative approach that separates the unlabeled dataset
into kdistinct clusters, each of which contains just one dataset and shares a set of
characteristics.

iv
 TABLE OF CONTENTS

CERTIFICATE ii

ACKNOWLEDGEMENTS iii

ABSTRACT iv

LIST OF FIGURES v
CHAPTER 1 INTRODUCTION 1-6
1.1 INTRODUCTION 1-2
1.2 SCOPE 2-3
1.3 SOFTWARE DEVELOPMENT METHODOLOGY 3-5
1.4 LITERATURE REVIEW 5-6

CHAPTER 2 EFFORT AND COST ESTIMATION 7

CHAPTER 3 SRS 8-27

3.1 INTRODUCTION 8
3.2 INTENDED AUDIENCE AND READING SUGGESTIONS 9-10
3.3 GENERAL ARCHITECTURE OF SOFTWARE 10-11
3.4 REQUIREMENT SPECIFICATION 11-13

3.4.1 FUNCTIONAL REQUIREMENTS 11-12

3.4.2 NON-FUNCTIONAL REQUIREMENTS 13

3.5 FEASIBILITY STUDY 14-17

3.5.1 OPERATIONAL FEASIBILITY 14

3.5.2 TECHNICAL FEASIBILITY 15-16

3.5.3 ECONOMIC FEASIBILITY 16-17

3.6 SYSTEM REQUIREMENTS STUDY 17-19

 3.6.1 SOFTWARE REQUIREMENTS 17-18

3.6.2 HARDWARE REQUIREMENTS 19

3.7 USER REQUIREMENT DOCUMENT (URD) 20-22

3.7.1 USE-CASE DIAGRAM 20-21

3.7.2 ACTIVITY DIAGRAM 21-22

3.8 SYSTEM DESIGN 23-27

3.8.1 INTRODUCTION 23
3.8.2 DATA FLOW DIAGRAM 24-25
3.8.3 SEQUENCE DIAGRAM 25-26
3.8.4 CLASS DIAGRAM 26-27

CHAPTER 4 IMPLEMENTATION 28-30

CHAPTER 5 SCREENSHOTS 31
CHAPTER 6 TECHNOLOGY USED 32-33
6.1 PYTHON 32
6.2 K-MEANS 32-33
6.3 ELBOW METHOD 33
CHAPTER 7 TESTING AND INTEGRATION 34-39
7.1. TEST CASE DESCRIPTION 34-35
7.2. TYPES OF TESTING 35-36
7.3. TEST CASES 37-39
7.4. FUTURE ENHANCEMENT 39

CHAPTER 8 CONCLUSION 40-41

REFERENCES 42
APPENDIX 43-44
 LIST OF FIGURES

FIG.NO DESCRIPTION PAGE NO.

1.3 Software Development Methodology 12

3.7.1 Use Case Diagram 27

3.7.2 Activity Diagram 29

3.8.2 Data Flow Diagram 31

3.8.3 Sequence Diagram 33

3.8.4 Class Diagram 34

4.1 Number of Clusters 37

5.1 ScreenShots 38

v
 CHAPTER 1 INTRODUCTION

1.1 INTRODUCTION

Work from home (WFH) and study from home are two new phrases that have
emerged as a result of the COVID-19 global pandemic. [1] Which are meant to
individuals should restrict their outdoor activities and remain inside. In order to
preserve revenues throughout the epidemic, hypermarkets have also developed
online shopping platforms. Online shopping platforms have become
increasingly popular among consumers for making purchases of necessities. In
the circumstances at hand, this is helpful. [2] Customer segmentation refers to
the segmentation of customers based on demographics and behaviour.
Demographics do not emphasize a customer's individuality, as people of the
equal age group might have dissimilar interest. So, the behavioural side is a
better perspective to segmenting your customers, and with their help you can do
the right segmentation. The data tuples are seen as objects by the clustering
technique. Group or cluster data objects so that they are like one another inside
each group and different from one other within other groups. This document's
goal is to find consumer subgroups utilising a data mining strategy and the K-
Means clustering technique, a splitting algorithm. The ability of a business to
tailor a marketing strategy for each customer category is a key factor in the
value of customer segmentation. Identification of products associated with
individual components and methods for managing supply and demand
performance. Being able to estimate customer attrition, identify the customers
who are most likely to experience problems, and consider further market
research issues and advice on finding solutions are just a few of the tasks that
need to be completed. Over the years, the increasing competition between
businesses and the availability of large-scale historical data has resulted in the
extensive use of data mining techniques to discover important and strategic
information that is hidden in the information of organizations. Data mining is
the process of extracting logical information from a dataset and presenting it in
a human-accessible way for decision support. Data mining techniques
distinguish areas such as statistics, artificial intelligence, machine learning .

1
 Bio informatics, weather forecasting, fraud detection, financial analysis and
customer segmentation. The key to this paper is to identify customer segments
in the commercial business using a data mining method. Customer division is the
division of the customer base of the business into groups called customer
segments such that each customer segment consists of customers who share
similar market characteristics. These distinctions are based on factors that can
directly or indirectly influence the market or business such as product
preferences or expectations, locations, behavior and so on. The importance of
customer segmentation includes, inter alia, the ability of a business to customize
market plans that will be appropriate for each segment of its customers; support
for business decisions based on a risky environment such as debt relations with
their customers; Identification of products related to individual components and
how to manage demand and supply power; reveals the interdependence and
interaction between consumers, between products, or between customers and
products that the business may not be aware of; the ability to predict customer
decline, and which customers are most likely to have problems and raise other
market research questions and provide clues to finding solutions. Integrated
proved effective for detecting subtle but subtle patterns or relationships buried
in a database of unencrypted data. This mode of learning is classified under
supervised learning. Integration algorithms include the

k-Means algorithm, k-nearest algorithm, Sorting Map (SOM) and more. These
algorithms, without prior knowledge of the data, are able to identify clusters in
them by repeated comparisons of input patterns until stable qualifications in the
training examples are obtained depending on the subject matter or the process.
Each set contains data points that have very close similarities but vary greatly
from the data points of other clusters.

1.2 SCOPE

In general, the methods used to gather the data for this project can easily be
extended into other relevant contexts/analyses. While there is clear value in
using the same data to investigate purchasing patterns or to build an item based
collaborative filtering recommender system, neither of these is the focus for this
paper. The scope of the paper is limited to the following four intertwined goals:
2
 1. To cluster customers based on common purchasing behaviors for future
operations/marketing projects.
2. To incorporate best mathematical, visual, programming, and business practices
into a thoughtful analysis that is understood across a variety of contexts
and disciplines
3. To investigate how similar data and algorithms could be used in future data
mining projects.
4. To create an understanding and inspiration of how data science can be used
to solve real-world

Before delving into the details of the project and its implications, the next
chapter discusses what customer segmentation analysis is and the reasons for its
importance.

1.3 SOFTWARE DEVELOPMENT METHODOLOGY

The software development lifecycle (SDLC) for clustering customers based on

demographics would typically involve the following stages:

1. Planning: In this stage, the project team defines the goals and objectives of

the project, identifies the data sources and algorithms to be used for clustering,
and establishes the project scope and timeline.

2. Data Collection: In this stage, the project team gathers and cleanses the customer

data to be used for clustering. This data may include demographic information
such as age, gender, income, education level, and location.

3. Data Exploration and Preparation: In this stage, the project team explores the

customer data to identify patterns and trends that may be useful for clustering.
They may also preprocess the data to remove outliers, normalize data, and impute
missing values.

4. Algorithm Selection: In this stage, the project team selects the appropriate

clustering algorithm to be used based on the project goals and data characteristics.

3
 and data characteristics. Popular clustering algorithms include K- means, hierarchical
clustering, and DBSCAN.

5. Implementation: In this stage, the project team implements theselected clustering

algorithm using programming languages such as Python or R. They also validate the
accuracy of the clustering results.

6. Testing: In this stage, the project team tests the clustering results to ensure they are

accurate and reliable. They may use performance metrics such as silhouette score,
clustering stability, or accuracy rate to evaluate the clustering model.

7. Deployment: In this stage, the clustering model is deployed to production environments

for use by stakeholders. The project team may also provide documentation and training
materials to facilitate user adoption.

8. Maintenance: In this stage, the project team provides ongoingsupport and maintenance

for the clustering model. This may include updating the model with new data, fixing bugs
or issues, and providing user support.

Here we use k-means clustering algorithm mainly performs two tasks:

 Determines the best value for K center points or centroids by an iterative process.
 Assigns each data point to its closest k-center. Those data Points which are near
to the particular k-center, create a cluster.

4
 Fig 1.3 SOFTWARE DEVELOPMENT METHODOLOGY

Elbow Method:

The elbow method is based on the observation that increasing the number of
clusters can help to reduce the sum of within-cluster variance of each cluster.
This is because having more clusters allows one to capture finer groups of
data objects that are more similar to each other. To define the optimal clusters,
Firstly, we use the clustering algorithm for various values of k. This is done by
ranging k from 1 to 10 clusters. Then we calculate the total intra-cluster sum of
squares. Then, we proceed to plot intra-cluster sum of square based on the
number of clusters. The plot denotes the approximate number of clusters
required in our model. The optimum clusters can be found from the graph
where there is a bend in the graph.

1.4 LITERATURE REVIEW

In many previous papers, we observed various systems and methods. We

discovered some analysis based on those papers. We discovered some scope,
advantages, and disadvantages. There are various types of systems that exist
today. The majority of them employ various methodologies to forecast mental
illness. Some current systems include an online survey that predicts whether or

5
not the user has mental illness. These surveys are illness-specific, with one for
depression, another for stress, and so on.

The model aims to identify, analyze and characterize the current state of person
by mood tracker, Chatbot, test were provided. Python and machine learning
technology was used for this model. The model develops various systems for
mental health monitoring virtual counselling, precision therapy and diagnostic
systems by reviewing of Chatbot and virtual counselling. The technology used
was AI, Machine Learning and Neural Processing Language for text analysis.

The smartphone will access and monitor sleep, depression and anxiety. Show
early associations between behaviors and sleep parameters and agreement
between clinic based assessments, active smartphone data capture and passively
collected data. The technology used in this model was AI, Machine Learning
and java. User input was taken in the form of MCQ or speak. Then the text were
passed to personality insights API which generates a JSON file. Then a chart
were prepared accordingto the user input and a critical value was set by doctor
and if the critical value falls below the range the doctor were notified via SMS.

The OS used for this model was Linux/Windows. The programming language
used was python 3.6. Framework was Flask 0.12.2, Pygal 2.4.0. The database
used was sqllite 3.8.2 andmangoDB 3.6.0. Situ Man logic uses LTA (Location,
Time, and Activity) logic. The location, time and activity were directly obtained
from the device and a notification were sent by the mood Buster. This
notification typically request patients to rate their levels of mood, anxiety, and
sleep quality. From these situation aware notifications, the mood buster may be
able to correlate the patient’s status with their situations.

The technology used for this model was Machine learning. The application was
created based on interaction between patient and the smart device to connect
with psychologist. Heart rate were calculated by using camera sensor.By
answering some question’s user can measure their anxiety level. The
technology used for this model was machine learning and signal processing
6
 CHAPTER 2 EFFORT AND COST ESTIMATION

Estimating the effort and cost of a project like Clustering of Customers Based
on Demographics would depend on several factors, such as the scope of the
project, the complexity of the algorithms involved, the hardware and software
requirements, and the team size and expertise.

Here is a high-level breakdown of the effort and cost estimation for a project
of this nature:-
1. Project Scope: The first step is to define the scope of the project, which
involves determining the specific features and functionalities required, such as
the ability to detect and recognize customer’s demand.

2. Algorithm Complexity: The next step is to assess the complexity of the

algorithms involved in the project, such as machine learning algorithms. The
complexity of these algorithms will determine the amount of effort required
for their development, testing, and optimization.

3. Hardware and Software Requirements: The hardware and software

requirements for the project will impact the cost and effort involved. This may
include the cost of processors, and other hardware components, as well as the
cost of software licenses and development tools.

4. Team Size and Expertise: The size and expertise of the development team
will also impact the effort and cost estimation. A larger team with more
experienced developers may be able to complete the project more quickly, but
may also increase the overall cost of the project. Based on these factors, here
is a rough estimate of the effort and cost involved in a clustering of customers
based on demographics.

7
 CHAPTER 3 SOFTWARE REQUIREMENT
SPECIFICATION

3.1 INTRODUCTION

Software Requirement Specification (SRS) is a vital document that serves as a

foundation for the development of a software system. It outlines the functional and
non-functional requirements of the software, providing a clear understanding of what
the system should accomplish and how it should behave. This document acts as a
communication bridge between stakeholders, such as clients, developers, and testers,
ensuring a common understanding of the software's scope and functionality.

The SRS typically starts with an introduction section that provides an overview of the
software project. In this section, the purpose, goals, and objectives of the software
system are described concisely. It also includes information about the intended
audience and stakeholders who will be involved in the project. The introduction sets
the context for the entire document, giving readers a clear understanding of the
software's purpose and the problems it aims to solve.

Furthermore, the introduction section may briefly discuss the background and
motivation behind the development of the software. It can provide insights into the
existing challenges or inefficiencies that the software seeks to address. This helps
stakeholders understand the rationale behind the project and its potential benefits.

Additionally, the introduction section may highlight any specific assumptions or

constraints that impact the software's design and implementation. These can include
limitations in terms of technology, hardware or software dependencies, regulatory
requirements, or budgetary considerations. Acknowledging these constraints upfront
allows the development team to align their efforts and design the software within the
defined boundaries.

8
3.2 INTENDED AUDIENCE AND READING SUGGESTIONS

Intended Audience:

The following audience is targeted by the Software Requirement Specification

(SRS) paper for the Clustering of customers based on demographics project:

1. Development team: The document gives the team a clear grasp of the specs
and requirements for the system. It provides the framework for the system's
design and development.

2. Project stakeholders: The paper gives project stakeholders a thorough

overview of the capabilities, limitations, and specifications of the system.
They can analyse the finished product and offer feedback as a result.

3. Quality assurance team: The document is used as a reference by the

quality assurance team to make sure that the system complies with the
requirements.

4. Reading Suggestion: The system requirements and specifications are fully

described in the SRS paper, a technical document. The document's technical
jargon may be difficult for stakeholders who are not technical to comprehend.
Consequently, the following reading recommendations are provided:-

a. Summary section: The summary section gives a broad knowledge of the

project's and the system's objectives. It is advised that all stakeholders read
this section to comprehend the goals and scope of the project.

b. Use cases: From the viewpoint of the user, the use cases section describes

the functionality of the system. It makes it apparent how the technology

will be applied inpractical situations.

5. Functional requirements: This section describes the specific

features and functionalities of the system. The development team and
stakeholders are advised to read this. The SRS paper, a technical
document, contains a detailed description of the

9
challenging for stakeholders to understand. As a result, the following reading
suggestions are offered: The aims of the project and the system are covered in
detail in the summary section. To understand the objectives and scope of the
project, it is advised that all stakeholders read this section.

a. Use cases: The use cases section describes the system’s functioning from
the perspective of the user. It clearly illustrates how the technology will be
used inreal-world scenarios.
b. Functional requirements: The system's unique features and functionalities
are covered in this section. It is recommended that the development team and
stakeholders read this.

3.3 GENERAL ARCHITECTURE OF SOFTWARE

The general architecture of software for clustering customers based on
demographics may vary depending on the specific tools and technologies
used, but it typically involves the following components:

1. Data Collection: The first step in clustering customers based on

demographics is collecting relevant data about them. This data could include
demographic information such as age, gender, income, education, and
location.

2. Data Preprocessing: Once the data has been collected, it needs to be

cleaned and preprocessed to ensure that it is accurate, consistent, and ready
for analysis. This may involve removing duplicates, handling missing values,
and transforming the data into a suitable format.

3. Feature Selection: After preprocessing, the next step is to select the most
relevant features or variables that will be used to cluster customers. This may
involve using statistical methods to identify the most significant features or
using domain knowledge to select the most important variables.

4. Clustering Algorithm: The clustering algorithm is the core component of

the software, which groups customers based on their similarities and d

10
 the selected features. There are many clustering algorithms available, such as
k-means, hierarchical clustering, and DBSCAN, each with its own strengths
and weaknesses.

5. Visualization: Once the clustering has been completed, the results need to
be visualized and presented in a way that is easy to understand and interpret.
This may involve using graphs, charts, or other visualizations to display the
clusters and their characteristics.

6. Evaluation: Finally, the clustering results need to be evaluated to

determine their usefulness and effectiveness in achieving the desired business
objectives. This may involve measuring the accuracy of the clusters or
assessing their impact on key performance metrics such as customer retention
orsales.

3.4 REQUIREMENT SPECIFICATION

3.4.1 FUNCTIONAL REQUIREMENTS

The functional requirements of clustering customers based on demographics
wouldtypically include the following features:

1. Data Collection: The software should be able to collect customer data in

a suitable format, which includes demographic information such as age,
gender, income, education, and location.

2. Data Preprocessing: The software should be able to clean and preprocess the
customer data to ensure that it is accurate, consistent, and ready for analysis.
This may involve removing duplicates, handling missing values, and
transforming the data into a suitable format.

3. Feature Selection: The software should allow for the selection of relevant
features or variables that will be used to cluster customers. This may involve

11
4. Statistical Method: using statistical methods to identify the most significant
features or using domain knowledge to select the most important variables.

5. Clustering Algorithms: The software should support various clustering

algorithms, such as k-means, hierarchical clustering, and DBSCAN, each with
its own strengths and weaknesses.

6. Cluster Visualization: The software should allow for the visualization of

clusters and their characteristics in a way that is easy to understand and
interpret. This may involve using graphs, charts, or other visualizations to
display the clusters.

7. Customization: The software should allow for customization of the clustering

process, such as adjusting the number of clusters or selecting specific features
for analysis.

8. Evaluation Metrics: The software should provide evaluation metrics to

determine the usefulness and effectiveness of the clustering results, such as
measuring the accuracy of the clusters or assessing their impact on key
performance metrics such as customer retention or sales.

9. Export: The software should allow for the export of clustering results in a
suitable format, such as a CSV or Excel file.

10. Integration: The software should be able to integrate with other systems, such
as customer relationship management (CRM) or marketing automation tools, to
allow for the application of the clustering results in real-world scenarios.

11. Security: The software should ensure the security of customer data and protect
against unauthorized access or data breaches.

12
3.4.2 NON-FUNCTIONAL REQUIREMENTS

Non-functional requirements for clustering customers based on demographics

would typically include the following aspects:

a. Performance: The software should be able to handle large volumes of

customer data and perform clustering quickly and efficiently, without
significant delays or system crashes.

b. Scalability: The software should be scalable and able to handle

increasing amounts of customer data as the business grows.

c. Usability: The software should be user-friendly and easy to use, with a

clear and intuitive interface that allows non-technical users to
understand and interact with the data.

d. Reliability: The software should be reliable and accurate, with a low

error rate and minimal downtime.

e. Security: The software should ensure the security of customer data and
protect against unauthorized access or data breaches.

f. Compatibility: The software should be compatible with the existing

technology infrastructure of the business, such as hardware, operating
systems, and other software applications.

g. Maintainability: The software should be easy to maintain and update,

with a clear and well-documented codebase that allows for future
modifications and improvements.

h. Accessibility: The software should be accessible to all users, including

those with disabilities, by complying with relevant accessibility
standards.

13
3.5 FEASIBILITY STUDY

3.5.1 OPERATIONAL FEASIBILITY

Operational feasibility of clustering customers based on demographics refers to

the ability of the business to implement and operate the clustering software
effectively. The following factors can be considered to assess the operational
feasibility:-

1. Resources: The business should have sufficient resources, including

hardware, software, and skilled personnel, to support the implementation
and operation of the clustering software.

2. Cost: The cost of implementing and operating the clustering software

should be within the budget of the business and provide a positive return on
investment.

3. Data Availability: The business should have access to accurate and

comprehensive customer data, including demographic information, to
support the clustering process.

4. Integration: The clustering software should be able to integrate with

existing technology infrastructure, such as CRM or marketing automation
tools, to allow of clustering results in real-world scenarios.

5. User Acceptance: The software should be user-friendly and easy to use,

with a clear and intuitive interface that allows non-technical users to
interact with the data.

6. Stakeholder Support: The stakeholders, including business owners,

management, and staff, should support the implementation and be willing
to allocate the necessary resources and time.

7. Regulatory Compliance: The business should comply with relevant

regulatory requirements, such as data protection laws and privacy
regulations, when implementing and operating the clustering software

14
3.5.2 TECHNICAL FEASIBILITY

Technical feasibility of clustering customers based on demographics refers to

the ability of the business to implement the software solution from a technical
standpoint. The following factors can be considered to assess the technical
feasibility:

1. Data Availability: The business should have access to accurate and

comprehensive customer data, including demographic information, in a
suitable format that can be used for clustering.

2. Software Requirements: The clustering software should meet the technical

requirements of the business, such as operating system compatibility,
programming language, and database management system.

3. Algorithm Selection: The business should select suitable clustering

algorithms, such as k-means, hierarchical clustering, or DBSCAN, based on
the size and complexity of the data, and the specific business needs.

4. Data Preprocessing: The software should be able to preprocess the data,

including cleaning and transforming it, to ensure that it is suitable for
clustering.

5. Performance: The software should be able to handle large volumes of

customer data and perform clustering quickly and efficiently, without
significant delays or system crashes.

6. Scalability: The software should be scalable and able to handle increasing

amounts of customer data as the business grows.

7. Integration: The clustering software should be able to integrate with

existing technology infrastructure, such as CRM or marketing automation
tools, to
15
allow for the effective application of clustering results in real-world scenarios.

8. Security: The software should ensure the security of customer data and
protect against unauthorized access or data breaches.

9. Compatibility: The software should be compatible with the existing

technology infrastructure of the business, such as hardware, operating systems,
and other software applications.

10. Maintenance: The software should be easy to maintain and update, with
a clear and well- documented codebase that allows for future modifications
and improvements.

3.5.3 ECONOMIC FEASIBILITY

Economic feasibility of clustering customers based on demographics refers to

the ability of the business to justify the costs associated with the
implementation and operation of the clustering software, and the potential
return on investment. The following factors can be considered to assess the
economic feasibility:

1. Cost of Implementation: The initial cost of implementing the clustering

software, including software license fees, hardware costs, and consulting fees,
should be within the budget of the business.

2. Cost of Operation: The ongoing cost of operating the clustering software,

including maintenance, software upgrades, and personnel costs, should be
reasonable and within the budget of the business.

3. Potential Benefits: The potential benefits of clustering customers based on

demographics should be significant enough to justify the costs of
implementation and operation. These benefits may include improved customer

16
segmentation, more targeted marketing campaigns, increased customer
retention, and higher revenues.

4. Return on Investment: The return on investment for implementing and

operating the clustering software should be positive, meaning that the
potential benefits outweigh the costs.

5. Timeframe: The timeframe for realizing the benefits of clustering

customers based on demographics should be reasonable, and the benefits
should be realized within a reasonable period after implementation.

6. Risk Assessment: The business should assess the potential risks associated
with implementing and operating the clustering software, and take steps to
mitigate these risks.

7. Competitor Analysis: The business should assess whether competitors are

already using clustering techniques to gain a competitive advantage, and
determine whether the business needs to adopt clustering techniques to remain
competitive.

3.6 SYSTEM REQUIREMENTS STUDY

3.6.1 SOFTWARE REQUIREMENTS

The software requirements for clustering customers based on demographics

can vary depending on the specific needs of the business. However, some
common software requirements for clustering customers based on
demographics may include:

1. Data Management: The software should be capable of handling and

managing large volumes of customer data, including demographic
information such as age, gender, income, and location.

2. Data Preprocessing: The software should be able to preprocess the data,

17
including cleaning and transforming it, to ensure that it is suitable for
clustering.

3. Clustering Algorithms: The software should offer a range of clustering

algorithms, such as k-means, hierarchical clustering, or DBSCAN, to suit the
specific needs of the business.

4. Visualization Tools: The software should provide data visualization

tools, such as scatterplots or heat maps, to help users understand and
interpret clustering results.

5. Integration with Other Systems: The software should be able to integrate

with other systems used by the business, such as CRM or marketing
automation tools, to enable effective application of clustering results in real-
world scenarios.

6. User Interface: The software should have a user-friendly interface that allows
users to easily interact with the software and perform clustering tasks without
requiring technical expertise

7. Performance: The software should be able to handle large volumes of data

and perform clustering quickly and efficiently, without significant delays or
system crashes.

8. Security: The software should ensure the security of customer data and
protect against unauthorized access or data breaches.

9. Scalability: The software should be scalable and able to handle increasing

amounts of customer data as the business grows.

10. Support and Maintenance: The software vendor should provide ongoing
support and maintenance, including software upgrades and bug fixes, to ensure that
the software continues to meet the business's needs over time.

18
 3.6.2 HARDWARE REQUIREMENTS

The hardware requirements for clustering customers based on demographics can

depend on the size of the data set and the complexity of the clustering algorithm.
Some common hardware requirements for clustering customers based on
demographics may include:

1. Processor: The processor should be able to handle the computational load of the
clustering algorithm. A multi-core processor or a processor with a high clock speed
is recommended for faster processing.

2. Memory (RAM): The amount of RAM required depends on the size of the data
set. The larger the data set, the more RAM is required for efficient processing. At
least 8 GB of RAM is recommended for most clustering applications.

3. Storage: Adequate storage is required to store the data set, intermediate results,
and output files. A solid-state drive (SSD) is recommended for faster read and write
speeds.

4. Graphics Card (GPU): A graphics card can speed up the processing of certain
clustering algorithms, such as those that use distance calculations or matrix
computations. A high-end GPU with a large number of cores and a high memory
bandwidth is recommended.

5. Network: If the clustering software is used in a distributed environment, a fast

and reliable network connection is required for communication between nodes.

6. Backup and Recovery: Adequate backup and recovery mechanisms should be in

place to prevent data loss due to hardware failures or other disasters.

7. Cooling: The hardware should be properly cooled to prevent overheating and

ensure reliable operation.

19
3.7 USER REQUIREMENTS DOCUMENT (URD)

3.7.1 USE-CASE DIAGRAM

Sure! Here is an example of a use-case diagram for clustering

customers Based On demographics.

Fig 3.7.1 USE-CASE DIAGRAM OF CLUSTERING OF CUSTOMERS

1. Customer Clustering: This represents the main system or component

responsible for clustering customers based on demographics. It interacts with
other components to achieve the desired functionality.

2. Segment Customers by Demographics: This use case represents the

primary goal of the system, which is to segment customers based on their
demographics.

3. Customer: This represents the customer entity, which contains information about
each customer . It includes attributes like Customer ID and Demographics.

20
4. Clustering: This represents the clustering process, which takes customer data as
input and applies clustering algorithms to group customers based on their
demographics. It maintains a list of clustered customer.

5. Data Input: This represents the component responsible for providing

input data to the clustering system. It includes the data required for clustering,
such as customer demographics.

6. Data Output: This represents the component responsible for receiving the
clustered data as output from the clustering system. It includes the data that has
been segmented or grouped based on demographics.

3.7.2 ACTIVITY DIAGRAM

Here is an activity diagram:
• Start
• Initialize the Customer Data
• Take the data for pre processing
• Data analysis is the process for obtaining the raw data and subsequently
converting it into useful information
• optimum number of clusters wcss = Σ (xi-yi)^2 where i belongs to n
• K means is the number of clusters you want to group your data
points into, has to be predefined.
• After analysis of the data clusters has been created.
• Repeat the steps for different customer data.
• End
Here is an activity diagram for the project Clustering of Customers Based on the
Demographics.

21
 Fig 3.7.2 ACTIVITY DIAGRAM OF CLUSTERING OF CUSTOMERS

EXPLANATION

The diagram starts with the “Start” node. The first activity is to gather the data.
If the data processing and analysis is done, the diagram moves to the next
activity, which the uses the k-means algorithm.

If the above steps proceed correctly, the diagram moves to the next activity,
which is to display the result of the customer through clustering.

Finally the diagram ends with the “End” node.

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3.8 SYSTEM DESIGN

3.8.1 INTRODUCTION

Clustering customers based on demographics is a common technique used in

marketing to group similar customers together and tailor marketing strategies
to their specific needs and preferences. System design for clustering customers
based on the demographics involves identifying relevant demographic
variables such as age, gender, income, education level, location, etc., and
using these variables to create customer segments.

The following are some steps that can be taken to design a system for clustering
customers based on demographics:

1. Data Collection: The first step is to collect relevant demographic data on

your customers. This can be done through surveys, customer feedback forms,
or by mining customer data from your CRM system.

2. Data Preprocessing: Once the data is collected, it needs to be cleaned and

preprocessed. This involves removing duplicates, filling in missing values,
and normalizing the data.

3. Feature Extraction: The next step is to extract relevant features from the
preprocessed data. This involves selecting the most important demographic
variables that can be used to create customer segments.

4. Clustering Algorithm Selection: Once the features are extracted, the next
step is to select a clustering algorithm that best suits your data and objectives.
Some popular clustering algorithms include k-means, hierarchical clustering,
and DBSCAN.

5. Cluster Evaluation: After clustering the customers, the next step is to

evaluate the quality of the clusters.

23
6. Cluster Visualization: Finally, the clusters can be visualized to help understand the
characteristics of each cluster and how theydiffer from each other.

3.8.2 DATA FLOW DIAGRAM

Fig 3.8.2 DATA FLOW DIAGRAM

Here is an explanation of the different steps in the diagram:

1. Customer Demographics Data: This is the source of customer data that will be

24
used to perform clustering based on demographic attributes such as age, gender,
income, education, location, etc.

2. Extract and preprocess data: In this step, the relevant customer data
is extracted from the source and preprocessed to make it suitable for
clustering. This may involve removing missing or irrelevant data,
normalizing the data, and transforming it into a suitable format.

3. Clustering Algorithm: This is the algorithm used to perform the clustering.

There are various clustering algorithms available, such as K-Means,
Hierarchical, and DBSCAN, that can be used for clustering customer data based
on demographics.

4. Apply clustering algorithm: The preprocessed data is fed into the clustering
algorithm, which groups similar customers together based on their demographic
attributes. The resulting clustered data is returned, along with the labels for each
cluster.

5. Cluster Analysis: This is the final step in the process, where the clustered data is
analyzed to gain insights into customer behavior and preferences. This analysis can
help businesses tailor their marketing and sales strategies to specific customer
segments, improving customer engagement and loyalty.

3.8.3 SEQUENCE DIAGRAM

Fig 3.8.3 SEQUENCE DIAGRAM

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 Here is a brief explanation of each step:-

1. The Customer System sends a request to the Clustering System for customer data.

2. The Clustering System retrieves customer data from the Database.

3. The Clustering System preprocesses the data for clustering.

4. The Clustering System clusters customers based on demographics.

5. The Clustering System returns the cluster information to the Customer System.

3.8.4 CLASS DIAGRAM

Fig 3.8.4 CLASS DIAGRAM

In this diagram, we have two classes: Customer and Demographic. Customer

represents a customer of a business or organization, with attributes such as their
id,name, email, address, and cluster _id .

26
The Demographic class represents a set of demographic attributes that can be used to
cluster customers. In this example, we have included attributes such as age, gender,
and income, Depending on the specific use case, other attributes may be included as
well.

To assign customers to clusters based on their demographic information, a clustering

algorithm would be used to group similar customers together.

27
 CHAPTER 4 IMPLEMENTATION

import numpy as np
import pandas as pd
import matplotlib.pyplot as plt
import seaborn as sns
from sklearn.cluster import KMeans

# loading the data from csv file to a Pandas DataFrame

customer_data = pd.read_csv('/content/Mall_Customers.csv')

# first 5 rows in the dataframe

customer_data.head()

# finding the number of rows and columns

customer_data.shape

# getting some informations about the dataset

customer_data.info()

# checking for missing values

customer_data.isnull().sum()
X = customer_data.iloc[:,[3,4]].values

print(X)

# finding wcss value for different number of clusters

wcss = []

for i in range(1,11):
kmeans = KMeans(n_clusters=i, init='k-means++',
random_state=42)

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 kmeans.fit(X)

wcss.append(kmeans.inertia_)

# plot an elbow graph

sns.set()
plt.plot(range(1,11), wcss)
plt.title('The Elbow Point Graph')
plt.xlabel('Number of Clusters')
plt.ylabel('WCSS')
plt.show

Fig 4.1 NUMBER OF CLUSTERS

kmeans = KMeans(n_clusters=5, init='k-means++', random_state=0)

# return a label for each data point based on their cluster

Y = kmeans.fit_predict(X)

print(Y)

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# plotting all the clusters and their Centroids

plt.figure(figsize=(8,8))
plt.scatter(X[Y==0,0], X[Y==0,1], s=50, c='green', label='Cluster
1')
plt.scatter(X[Y==1,0], X[Y==1,1], s=50, c='red', label='Cluster
2')
plt.scatter(X[Y==2,0], X[Y==2,1], s=50, c='yellow', label='Cluster
3')
plt.scatter(X[Y==3,0], X[Y==3,1], s=50, c='violet', label='Cluster
4')
plt.scatter(X[Y==4,0], X[Y==4,1], s=50, c='blue', label='Cluster
5')

# plot the centroids

plt.scatter(kmeans.cluster_centers_[:,0],
kmeans.cluster_centers_[:,1], s=100, c='cyan', label='Centroids')

plt.title('Customer Groups')
plt.xlabel('Annual Income')
plt.ylabel('Spending Score')
plt.show()

NumPy, Pandas, Matplotlib, and Scikit-Learn are some of the most

Pandas is built on top of NumPy and provides a higher-level interface for

data manipulation and analysis.

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CHAPTER 5 SCREENSHOTS

Fig 5.1 CLASS DIAGRAM

31
 CHAPTER 6 TECHNOLOGY USED

6.1 PYTHON
Python is a popular programming language for machine learning due to its
simplicity, ease of use, and the availability of a vast number of libraries and
frameworks specifically designed for machine learning. Python machine
learninginvolves the use of various machine learning algorithms and techniques
to buildmodels that can make predictions or take actions based on data.

It has a number of popular machine learning libraries and frameworks,

including scikit-learn, TensorFlow, PyTorch, and Keras. These libraries provide
a range of tools and techniques for data preprocessing, feature selection, model
training and evaluation, and model deployment. Machine learning models can
betrained using various algorithms, such as linear regression, logistic regression,
decision trees, random forests, support vector machines (SVMs), and neural
networks. These algorithms can be applied to various types of machine learning
tasks, such as regression, classification, clustering, and anomaly detection.

6.2 K-MEANS

K-Means Clustering is an Unsupervised Learning algorithm, which groups the

unlabeled dataset into different clusters. Here K defines the number of pre-
defined clusters that need to be created in the process.

It is a centroid-based algorithm, where each cluster is associated with a centroid.

The main aim of this algorithm is to minimize the sum of distances between the
data point and their corresponding clusters. The algorithm takes the unlabeled
dataset as input, divides the dataset into k-number of clusters, and repeats the
process until it does not find the best clusters. The value of k should be
predetermined in this algorithm.

32
Step-1: Select the number K to decide the number of
clusters.
Step-2: Select random K points or centroids. (It can be other from the input
dataset).
Step-3: Assign each data point to their closest centroid, which will form the
predefined K clusters.
Step-4: Calculate the variance and place a new centroid of each cluster.
Step-5: Repeat the third steps, which means reassign each data point to the new
closest centroid of each cluster.
Step-6: If any reassignment occurs, then go to step-4
else go to FINISH.
Step-7: The model is ready.

6.3 ELBOW METHOD

The elbow method is based on the observation that increasing the number of
clusters can help to reduce the sum of within-cluster variance of each cluster.
This is because having more clusters allows one to capture finer groups of data
objects that are more similar to each other. To define the optimal clusters,
Firstly, we use the clustering algorithm for various values of k. This is done by
ranging k from 1 to 10 clusters. Then we calculate the total intra-cluster sum of
square. Then, we proceed to plot intra-cluster sum of square based on the
number of clusters. The plot denotes the approximate number of clusters
required in our model. The optimum clusters can be found from the graph
where there is a bend in the graph.

33
 CHAPTER 7 TESTING AND INTEGRATION

7.1 TEST CASE DESCRIPTION

Testing and integration are crucial phases in the software development lifecycle that
ensure the quality, reliability, and functionality of a software system. Test case
descriptions play a vital role in guiding the testing and integration processes, outlining
the steps to be taken, expected results, and ensuring comprehensive test coverage.

Test case descriptions provide detailed instructions for executing specific tests on the
software system. Each test case focuses on a particular aspect or functionality of the
system to validate its behavior against expected outcomes. The descriptions typically
include the following components:

1. Test case identifier: A unique identifier that helps in tracking and referencing
the test case.

2. Test case name: A brief but descriptive name that reflects the purpose or
objective of the test.

3. Test case description: A detailed explanation of the test scenario, including

the inputs, actions, and expected results.

4. Test steps: A step-by-step sequence of actions to be performed during the

test execution, including the necessary setup and prerequisites.

5. Test data: The specific input data or conditions required for executing the test case.

6. Expected results: The anticipated outcome or behavior of the software when the
test case is executed successfully.

7. Actual results: The observed results during test execution, which are
compared against the expected results.

34
8. Pass/fail criteria: The criteria that determine whether the test case has passed
or failed based on the comparison of actual and expected results.

9. Dependencies: Any dependencies or preconditions required for executing the

test case, such as specific configurations or prior tests.

10. Test environment: The specific hardware, software, and network

configurations needed for executing the test case.

11. Test priority: The priority level assigned to the test case, indicating its
relative importance in the testing process.

By documenting test cases in detail, testers can ensure that all aspects of the
software system are thoroughly tested. Test case descriptions serve as a reference for
testers to execute tests consistently and aid in identifying and resolving any issues or
defects found during testing. Moreover, integration test case descriptions facilitate
the seamless integration of individual components or modules into a cohesive
software system, ensuring their compatibility and proper functioning as a whole.

In summary, test case descriptions provide a structured approach to testing and

integration activities, enabling comprehensive test coverage, improved software
quality, and efficient defect identification and resolution.

7.2 TYPES OF TESTING

The testing types for clustering of customers based on demographics can include:

1. Unit Testing: This type of testing verifies the accuracy of individual

functions or methods in the clustering algorithm. The input and output
parameters can be tested to ensure that the algorithm performs the intended
computations.

35
2. Integration Testing: Integration testing for clustering of customers based on
demographics involves verifying how different modules or components of the
clustering algorithm work together to ensure they integrate correctly. This type
of testing may include testing how different distance metrics or clustering
algorithms work together to generate accurate customer segments.

3. System Testing: System testing involves evaluating the entire clustering

system as a whole to ensure that it meets the specified requirements. The
testing can include evaluating the system's response to different datasets with
varying sizes and demographics to ensure the accuracy and scalability of the
clustering algorithm.

4. Acceptance Testing: Acceptance testing for clustering of customers based

on demographics evaluates whether the clustering algorithm meets the
customer's requirements and specifications. This testing involves verifying that
the clustering algorithm generates clusters that accurately represent the
demographic characteristics of customers.

5. Regression Testing: Regression testing ensures that changes or

modifications made to the clustering algorithm do not adversely affect its
existing functionality. This testing can be performed after each change or
modification to the algorithm to ensure its accuracy and stability.

6. Performance Testing: Performance testing for clustering of customers based

on demographics evaluates the speed and efficiency of the clustering algorithm.
This type of testing involves testing how the algorithm performs under different
dataset sizes and varying computational loads to ensure it meets the
performance requirements.

7. Usability Testing: Usability testing for clustering of customers based on

demographics evaluates the ease of use and effectiveness of the clustering
algorithm. This testing can involve testing how user-friendly the algorithm's
user interface is and how well it communicates the clustering results to users.

36
7.3 TEST CASES

Here are some test cases for clustering of customers based on demographics:

Test Case id - 1 Input Validation

Verify that the algorithm correctly hands invalid
Description or missing input data, such as null values or non-
numeric data.

Inputs A dataset containing invalid or missing data.

Expected Output The algorithm should return an error message or

handle the invalid data appropriately.

Developed by Devansh Bhardwaj

Executed by Chirag Bisht

Test Case id - 2 Clustering Accuracy

Description Verify that the clustering algorithm accurately

groups customers based on their
demographic characteristics.

Inputs A dataset containing demographic data for a set of

customers.

Expected Output The algorithm should generate clusters that

accurately represent the demographic patterns
andcharacteristics of the customers.

Developed By Riddhi kaushik

Executed By Devansh Bhardwaj

37
Test Case id - 3 Cluster Purity

Description Verify that the clusters generated by the algorithm

are homogeneous and have high cluster purity.

Inputs A dataset containing customers with clearly

defined demographic profiles.

Expected Output The algorithm should generate clusters.

Developed By Devansh Bhardwaj

Executed By Chirag Bisht

Test Case id - 4 Sensitivity Analysis

Description Verify that the clustering algorithm is not sensitive

to small changes in the input data.

Inputs A dataset containing small variations in customer

demographic data.
The algorithm should generate similar clustering
Expected Output results slighty varied input data, indicating that the
algorithm is stable changes in the input.
Riddhi kaushik
Developed By

Chirag Bisht
Executed By

38
Test Case id - 5 Scalability

Verify that the clustering algorithm can handle large

Description
datasets containing millions of customer records.

A large dataset containing millions of customer

Inputs
demographic records.
The algorithm should be able to process the large
dataset within a reasonable time frame and generate
Expected Output
clusters that accurately represent the underlying
customer demographics.

Riddhi Kaushik
Developed By

Chirag Bisht
Executed By

7.4 FUTURE ENHANCEMENT

Here are some potential future enhancements for clustering ofcustomers based on
demographics:

1. Incorporating Additional Data Sources: In addition to demographic

data, incorporating additional data sources such as purchasing history,
browsing behavior, or social media activity can provide a more
comprehensive view of customers and enhance the accuracy of the
clusteringresults.

2. Real-Time Clustering: Implementing real-time clustering capabilities

that can handle dynamic changes in customer demographics and behavior
can provide businesses with more up-to-date and accurate customer insights.

3. Machine Learning Integration: Incorporating machine learning

techniques, such as feature engineering or model selection, can improve
the accuracy and scalability of the clustering algorithm.

39
 CONCLUSION

As our dataset was unlabeled, in this paper we have opted for internal clustering
validation rather than external clustering validation, which depends on some
external data like labels. Internal cluster validation can be used for choosing
clustering algorithm which best suits the dataset and can correctly cluster data
into its opposite cluster.

Customer segmentation can have a positive impact on a business if done properly.

Hence we can give special discounts or gift vouchers to the people of orange
clusters to retain them for long and for people in blue and red cluster we can
give discounts and do advertisement of highly selling objects to attract them,
and for the low value people which are in green clusters, we can arrange
feedback column to know what we can change to attract them as well.

Based on the above information, we now know that the Jumbo Bag Red Retro
spot is the best- selling item by our most expensive team. With that information
available, we can make recommendations for other potential customers in this
section.

Clustering customers based on demographics can provide valuable insights into

customer behavior and preferences, which can be used to tailor marketing
strategies and improve customer experience. By grouping customers with
similar demographic characteristics together, businesses can identify patterns
and trends that may not be apparent otherwise. For example, clustering
customers based on age, income, and education level may reveal that certain
groups are more likely to purchase certain types of products or services, or that
they prefer certain marketing channels over others. This information can then
be used to target marketing efforts more effectively and to create more
personalized experiences for customers.

However, it is important to note that clustering based on demographics alone

40
may not always provide a complete picture of customer behavior and
preferences. Other factors such as psychographics, buying behavior, and
individual preferences may also need to be taken into account. Additionally, it
is important to ensure that any clustering analysis is done ethically and with
respect for customers' privacy and data protection rights.

Overall, clustering based on demographics can be a useful tool for businesses to gain
insights into customer behavior and preferences, but it should be used in
combination with other data analysis techniques and with consideration for ethical
and privacy concerns.

41
 REFERENCES

[1]. Sayyida, S.; Hartini, S.; Gunawan, S.; Husin, S.N. The Impact ofthe Covid-19
Pandemic on Retail Consumer Behaviour. Aptisi Trans. Manag. (ATM) 2021,
5, 79–88.

[2]. Prof. Nikhil Patankar, Soham Dixit, Akshay Bhamare, Ashutosh Darpel and
Ritik Raina. Customer segmentation refers to the segmentation of customers
based on demographics “Dept. Of Information Technology Sanjivani College
of Engineering, Kopargaon”423601 (MH), India.

[3]. Aman Banduni, Prof Ilavendhan A. Identifying and meeting the needs and
requirements.School of Computing Science & Engineering, Galgotias University,
Greater Noida, U.P.

[4]. A.K. Jain, M.N. Murty and P.J. Flynn.ǁ Data Integration: A Reviewǁ. ACM
Computer Research. 1999. Vol. 31, No. 3.

[5]. H. Mehta, V.S. Dixit and P. Bedi, “ Refinement of recommendationsbased

on user preferences”.

[6]. Omar Kettani, Faycal Ramdani, Benaissa Tadili, “An Agglomerative Clustering
Method for Large Data Sets”, IJCA, Year: 2014.

[7]. Sukru Ozan, “A Case Study on Customer Segementation by using Machine

Learning Methods”, IEEE, Year: 2018.

42
 APPENDIX

Customer segmentation is a process of dividing customers into groups based on their

shared characteristics, such as demographics, behavior, or preferences. One common
approach to customer segmentation is clustering, which groups customers based on
their similarities in one or more attributes. In this appendix, we will discuss clustering
of customers based on demographics.

Demographic segmentation is one of the most commonly used methods for customer
segmentation. It divides customers into groups based on demographic characteristics
such as age, gender, income, education, marital status, and occupation. Clustering is a
useful technique for grouping customers based on their demographic attributes, as it
allows marketers to identify patterns and similarities in customer behavior and
preferences.

Clustering algorithms can be divided into two main types: hierarchical clustering and
partitioning clustering. Hierarchical clustering is a bottom-up approach that starts with
each customer as a separate cluster and gradually merges clusters based on their
similarity. Partitioning clustering, on the other hand, is a top-down approach that starts
with a set of clusters and assigns customers to the nearest cluster based on their
similarity.

There are several clustering algorithms that can be used for customer segmentation,
including k-means, hierarchical agglomerative clustering, and DBSCAN. K-means
clustering is a partitioning algorithm that separates customers into k clusters based on
their distance from the center of each cluster. Hierarchical agglomerative clustering,
on the other hand, is a hierarchical algorithm that creates a dendrogram to visualize
the clustering process. DBSCAN is a density-based clustering algorithm that groups
customers based on their density in the data space.

Once customers are clustered based on their demographics, marketers can use these
clusters to develop targeted marketing campaigns and personalized communication
strategies. For example, customers in the same cluster may have similar preferences

43
and behaviors, making it easier to tailor products and services to their needs.

In conclusion, clustering customers based on their demographics is a useful technique

for customer segmentation. It allows marketers to identify patterns and similarities in
customer behavior and preferences, which can be used to develop targeted marketing
campaigns and personalized communication strategies. Clustering algorithms such as
k-means, hierarchical agglomerative clustering, and DBSCAN can be used to group
customers based on their demographic attributes.

44