VISVESVARAYA TECHNOLOGICAL UNIVERSITY

“JnanaSangama”, Machhe, Belagavi, Karnataka-590018

Mini-Project [21AIMP67]
CUSTOMER SEGMENTATION
Submitted in partial fulfillment towards Mini-Project Work of VI semester of

Bachelor of Engineering

in

CSE (Artificial Intelligence and Machine Learning)

Submitted by
Aparna NR 4GW21CI007
Tanmayi G 4GW21CI051

Under the Guidance of

Mrs. Geetha A L

Assistant Professor, Dept of CSE (AI & ML)

DEPARTMENT OF CSE (ARTIFICIAL INTELLIGENCE AND MACHINE

LEARNING)

GSSS INSTITUTE OF ENGINEERING & TECHNOLOGY FOR WOMEN

(Affiliated to VTU, Belagavi, Approved by AICTE, New Delhi & Govt. of Karnataka)
(Accredited with A Grade by NAAC with 3.13 CGPA)
K.R.S ROAD, METAGALLI, MYSURU-570016, KARNATAKA

2023-2024
 Geetha Shishu Shikshana Sangha (R)
GSSS INSTITUTE OF ENGINEERING & TECHNOLOGY FOR WOMEN
(Affiliated to VTU, Belagavi, Approved by AICTE -New Delhi & Govt. of Karnataka)
(Accredited with A Grade by NAAC with 3.13 CGPA)
K.R.S Road, Mysuru-570016, Karnataka

DEPARTMENT OF CSE (ARTIFICIAL INTELLIGENCE AND

MACHINE LEARNING)

CERTIFICATE

This is certified that the mini project work entitled “Customer Segmentation ” is a Bonafede
work carried out by Aparna NR (4GW21CI007), Tanmayi G(4GW21CI051) in partial
fulfilment for the award of degree of Bachelor of Engineering in CSE (AI & ML) of
Visvesvaraya Technological University, Belagavi during the year 2023-2024. The mini
project has been approved as it satisfies the academic requirements with respect to the mini
project prescribed for Bachelor of Engineering Degree .

Signature of the Guide Signature of the HOD

Mrs. Geetha A L Dr. Manju Prasad B

Assistant Professor Professor & Head

 ACKNOWLEDGEMENT
We sincerely owe our gratitude to all the people who helped and guided us in
completing this mini-project.

We are thankful to Smt. Vanaja B Pandit, Honorary Secretary, GSSSIETW,

Mysuru, for supporting us in our academic endeavors.

We are thankful to Dr. Shivakumar M, Principal, GSSSIETW, Mysuru, for

all the support he has rendered.

We thank our Head of the Department Dr. Manju Prasad B, Professor and
Head, Department of CSE (AI & ML), who has been a driving force, for his
constant support, valuable guidance and encouragement throughout the tenure
of this mini-project work.

We thank our guide Mrs. Geetha A L, Assistant Professor, Department of CSE

(AI & ML), for her guidance and support provided throughout the working of
the project.

We are extremely pleased to thank our parents, family members and friends for
their continuous support, inspiration and encouragement, for their helping hand
and also last but not the least, we thank all the members who supported directly
or indirectly in the academic process.

Aparna NR
Tanmayi G

i
 ABSTRACT

Client division is a vital system in present day business examination, empowering

organizations to tailor their items, administrations, and showcasing endeavors to
particular gatherings of clients. This study plans to recognize significant client portions
inside an organization's dataset, involving segment data, buy history, and online way of
behaving. Utilizing progressed bunching calculations, for example, K-implies, we order
clients into particular portions in view of their qualities and ways of behaving.

Our examination uncovered a few key client fragments, including high-esteem,

continuous purchasers and cost-cognizant, rare customers. These portions display
interesting buying examples and inclinations, offering important experiences for
designated promoting efforts, customized proposals, and client maintenance systems. The
discoveries highlight the potential for information driven decision-production to improve
consumer loyalty and enhance asset assignment.

By understanding the assorted necessities and ways of behaving of their client base,
organizations can foster more compelling and productive procedures, prompting
expanded client unwaveringness and income development. The concentrate likewise
features regions for future examination, including the reconciliation of extra information
sources and the investigation of more complex grouping procedures.

ii
 Table of Contents

Acknowledgement i
Abstract ii
Table of contents iii
List of figures iv

1 Introduction
1.1 Objectives of project 1
1.2 Scope 1-2
1.3 Description 3-6
2 Literature survey 7

3 System requirements and 7-9

specifications
3.1 Software requirements 7-8
3.2 Hardware requirements 8
3.3 Functional requirements 8
3.4 Client requirements 8-9

4 Clustering Using Machine Learning 10-11

Methods
4.1 K- means clustering in Machine Learning 11
for customer segmentation
4.2 Mini batch K means clustering 12
4.3 Evaluation Metrics 13
4.4 Customer purchase behavior 14
4.5 Customer frequency of purchase behavior 15
Conclusion 16
Learning outcomes 17

References 17

iii
 LIST OF FIGURES

FIGURE DESCRIPTION PAGE

NUMBER NUMBER

Figure 1 12
Fig 1:Customer segmentation based on the behaviour of
the customer
Figure 2 Fig 2:Customer segmentation using k means clustering 15

Figure 3 Fig 3:Customer segmentation using mini batch K means 16

clustering
Figure 4 Fig 4: Evaluation metrics for Customer segmentation 17
Figure 5 Fig 5: Customer purchase behavior 18

Figure 6 Fig 6:Customer frequency purchase behavior 19

iv
 Customer Segmentation

Chapter -1

INTRODUCTION
The advent of artificial intelligence and machine learning has revolutionized various
industries, brought automation and enhanced efficiency in tasks that were traditionally time-
consuming and prone to human error. In today's competitive business landscape,
understanding customers' needs and preferences is more critical than ever. Customer
segmentation, the process of dividing a customer base into distinct groups with similar
characteristics, allows businesses to tailor their marketing strategies, products, and
services to meet the unique needs of each segment. This targeted approach not only
enhances customer satisfaction but also optimizes resource allocation, thereby
improving overall business performance.

Machine learning has revolutionized the field of customer segmentation by providing

sophisticated tools for analyzing complex and large datasets. Traditional segmentation
methods, often based on simple demographic factors, have evolved into more nuanced
approaches that consider a wide array of variables, including behavioral,
psychographic, and transactional data. By leveraging machine learning algorithms,
companies can uncover hidden patterns and insights, enabling a more granular
understanding of their customer base.

1.1 Objectives of the project

The objective of this project is to apply machine learning techniques to identify and analyze
distinct customer segments within a company's dataset. This dataset includes diverse attributes
such as demographic information, purchase history, and online behavior. The primary goal is
to categorize customers into meaningful segments that can inform strategic decisions, from
targeted marketing campaigns to personalized product offerings.

Identify Distinct Customer Groups:

The primary objective is to analyze customer data using machine learning algorithms to
uncover distinct segments within the customer base. These segments are formed based on
shared characteristics such as demographics, purchase behaviors, or preferences, allowing for
a more granular understanding of the customer population.

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 Customer Segmentation

Enhance Targeted Marketing and Personalization:

By understanding the unique needs and preferences of each customer segment, companies
can develop personalized marketing strategies and offers. This targeted approach increases the
relevance of marketing communications, leading to higher engagement, conversion rates, and
customer satisfaction.

Optimize Business Strategies and Resource Allocation:

Customer segmentation helps businesses prioritize and allocate resources more efficiently by
identifying high-value segments and potential growth areas. This enables companies to focus
on key customer groups for retention and acquisition efforts, product development, and overall
business planning, ultimately driving profitability and growth.

1.2 Scope

The system will be implemented according to the following scope:

Company Perspective

Product Development and Customization:

 Product Innovation: Insights from customer segmentation can inform product development
by highlighting unmet needs or preferences within specific segments. Companies can develop
new products or modify existing ones to better cater to these needs.
 Customization: Segmentation enables companies to offer customized products or services,
enhancing customer satisfaction and loyalty. For example, personalized recommendations in
e-commerce platforms can drive sales and improve user experience.

Strategic Planning and Decision-Making:

 Market Expansion: By understanding the composition of their customer base, companies can
identify potential new markets or underserved segments, guiding strategic expansion
decisions.

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 Customer Segmentation
 Competitive Advantage: In a competitive landscape, the ability to segment customers
effectively provides a significant advantage, enabling companies to differentiate themselves
through tailored offerings and superior customer experiences.

Customer Perspective:

Relevant Product and Service Offerings:

 Customized Solutions: Customers can enjoy products and services specifically designed to
meet their unique requirements, leading to greater satisfaction and loyalty.
 Innovative Products: Insights gained from segmentation can drive the development of
innovative products that address the specific needs of different customer segments, offering
customers more choices and better solutions.

Improved Customer Support:

 Targeted Assistance: Segmentation can help companies provide targeted customer support,
with specialized teams or resources dedicated to specific customer groups. This leads to more
efficient and effective problem resolution.

Greater Value and Satisfaction:

 Value for Money: By targeting promotions and offers to relevant segments, customers are
more likely to find value in the products and services offered, enhancing their overall
satisfaction and perceived value.

1.3 Description

Data Collection and Integration:

 Collect comprehensive data from various sources, such as transactional records, web activity
logs, social media interactions, and customer surveys. This data includes demographic,
behavioural, and transactional attributes.
 Combine data from multiple sources into a unified dataset. This may involve merging
databases, aligning different formats, and ensuring consistency across the dataset.

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 Customer Segmentation

Data Pre-processing:

 Clean the data to remove inaccuracies, handle missing values, and normalize or standardize
features. This step ensures that the data is in a suitable format for analysis.

Feature Selection:

 Choose relevant features that capture important aspects of customer behaviour and
characteristics. Feature selection may involve techniques such as correlation analysis, domain
expertise, and dimensionality reduction.

Choosing a Clustering Algorithm:

 Select an appropriate clustering algorithm based on the data characteristics and business
objectives. Common algorithms include K-means, hierarchical clustering, DBSCAN

Model Training:

 Apply the chosen clustering algorithm to the dataset. For example, in K-means, the algorithm
iteratively assigns customers to clusters based on their feature similarity and updates cluster
centroids until convergence.

Cluster Evaluation:

 Assess the quality of the clusters using evaluation metrics such as silhouette score, Davies-
Bouldin index, or within-cluster sum of squares. These metrics measure the cohesion and
separation of the clusters.

Cluster Interpretation:

 Analyse the characteristics of each cluster to understand what defines them. This involves
examining the average values of features within each cluster and identifying distinguishing
traits.

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 Customer Segmentation

Segmentation Output:

 Generate the final segmentation results, which include the customer groups and their profiles.
Each segment represents a cluster of customers with similar attributes and behaviours.

Visualization:

 Create visualizations to represent the clusters and their features, such as scatter plots, radar
charts, and heat maps. This helps in communicating the segmentation results to stakeholders.

Application of Segmentation:

 Use the segmented customer groups to tailor marketing strategies, product recommendations,
and customer service efforts. Personalized campaigns and offers can be developed based on
segment characteristics.

Monitoring and Updating:

 Continuously monitor the performance of the segmentation model and update it as needed.
This may involve re-training the model with new data or adjusting parameters to reflect
changing customer behaviours.

Integration with Business Strategy:

 Integrate the insights from customer segmentation into the broader business strategy. This
includes aligning marketing efforts, product development, and customer retention strategies
with the identified customer segments.

Machine learning for customer segmentation, businesses can gain a deeper understanding of their
customer base, leading to more effective and targeted strategies that enhance customer
engagement and drive growth.

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 Customer Segmentation

Applications and Use Cases

Targeted Marketing Campaigns:

 Personalized Offers: Create tailored marketing messages and promotions based on the
specific needs and preferences of different customer segments. For example, offering
discounts on products that a segment frequently purchases.
 Email Marketing: Send customized email campaigns to different segments, enhancing
relevance and engagement. For instance, sending product recommendations based on past
purchases.

Product Development:

 Feature Customization: Develop or modify products to meet the needs of specific customer
segments. For example, creating different product versions for tech-savvy and budget-conscious
customers.
 New Product Launches: Identify which segments are likely to be most interested in new
products and focus launch efforts on these groups.

Pricing Strategies:

 Dynamic Pricing: Implement different pricing strategies for different segments based on their
willingness to pay. For instance, offering premium pricing for high-value segments and discounts
for price-sensitive segments.
 Customized Discounts: Provide segment-specific discounts or special offers to incentivize
purchases and increase sales.

Sales Strategies:

 Sales Targeting: Focus sales efforts on high-potential segments with customized approaches,
such as personalized sales pitches or special offers.
 Cross-Selling and Up-Selling: Use segmentation insights to recommend additional products or
services that align with the interests of each segment.

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 Customer Segmentation

Market Research and Strategy:

 Market Segmentation Analysis: Understand the composition of different market segments and
their behaviours to guide strategic decisions and identify new opportunities.
 Competitive Analysis: Assess how different segments interact with competitors and tailor
strategies to differentiate the company’s offerings.

Advertising and Media Planning:

 Targeted Advertising: Design and place ads that appeal to specific customer segments,
optimizing ad spend and improving return on investment.
 Media Channel Selection: Choose the most effective media channels for each segment based on
their media consumption habits.

Customer Experience Optimization:

 Personalized Interactions: Enhance the overall customer experience by tailoring interactions

and touch points based on segment-specific preferences and behaviours.
 Experience Design: Design customer journeys and experiences that cater to the unique needs of
different segments.

Fig 1: Customer segmentation based on the behaviour of the customer

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 Customer Segmentation

Chapter – 2
LITERATURE SURVEY
In today’s fast moving world of marketing from product-orientation to customer-orientation, the
management of customer treatment can be seen as a key to achieve revenue growth and profitability.
Knowledge of customer behavior can help marketing managers re-evaluate their strategies with the
customers and plan to improve and expand their application of the most effective strategies. B2B or
business customers are more complex, their buying process is more complicated and their sales value
is greater. The business marketers usually prefer to cooperate with fewer but larger buyers than the
final consumer marketer.
As a business transaction requires more decision makings and more professional buying effort
than the consumer market does, the efficient relationship with business customers is of paramount
importance. Most customer segmentation approaches based on customer value fail to account for the
factor of time and the trend of value changes in their analysis. In this article, we classify customers
based on their value using the RFM model and K-means clustering method. Then, an assessment of
changes over several periods of time is carried out.
Nowadays Customer segmentation became very popular method for dividing company’s
customers for retaining customers and making profit out of them, in the following study customers of
different of organizations are classified on the basis of their behavioral characteristics such as
spending and income, by taking behavioral aspects into consideration makes these methods an
efficient one as compares to others.
For this classification a machine algorithm named as k-means clustering algorithm is used and
based on the behavioral characteristic’s customers are classified. Formed clusters help the company
to target individual customer and advertise the content to them through marketing campaign and social
media sites which they are really interested in.

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 Customer Segmentation

Chapter - 3

SYSTEM REQUIREMENTS AND SPECIFICATION

3.1 Hardware Requirements

1. Client Side:

RAM: 512 MB

Hard Disk: 1 GB

Processor: 1.0 GHz

2. Server Side:

RAM: 512 MB

Hard Disk: 1 GB

Processor: 1.0 GHz

3.2 Software Requirements:

1. Client Side:

Web browser - Google Chrome (default) or any other browser

Operating system - Windows or any equivalent operating system

2. Server Side:

Web Server - APACHE

Web browser - Google Chrome or any Compatible browser

Operating system - Windows or any equivalent OS

Server-side languages – Python

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 Customer Segmentation

Functional Requirements

The functional requirements for a customer segmentation system encompass the core capabilities and
features needed to effectively analyse and categorize customers. The system should be capable of
ingesting and processing large volumes of diverse data, including demographic information,
transactional records, and behavioural data from multiple sources. It must support robust data pre-
processing functions, such as data cleaning, normalization, and feature extraction, to ensure that the
data is accurate and ready for analysis.

The core functionality of the system includes the application of machine learning algorithms for
clustering, such as K-means, hierarchical clustering, or DBSCAN, to identify distinct customer
segments. The system should offer flexibility in selecting and tuning these algorithms based on the
specific needs and characteristics of the data. Additionally, it must provide tools for evaluating the
quality of the segmentation using metrics like silhouette score and Davies-Bouldin index.

Visualization capabilities are essential for interpreting and presenting the results. The system should
be able to generate various visualizations, including scatter plots, heat maps, and radar charts, to help
users understand the distribution and characteristics of each segment. It should also offer reporting
features that summarize the key insights and cluster profiles in an accessible format. Integration with
other business tools, such as CRM systems or marketing platforms, is necessary for applying
segmentation insights directly to marketing campaigns and customer interactions.

Client Requirements
From the client’s perspective, the primary requirement for a customer segmentation solution is to
deliver actionable insights that enhance marketing effectiveness and improve customer understanding.
The client needs a system that not only segments the customer base into meaningful groups but also
provides detailed profiles and actionable recommendations for each segment. The solution should be
user-friendly, allowing non-technical stakeholders to easily interpret the results and apply them to
strategic decisions.

Clients also require the system to be scalable and adaptable, accommodating growing datasets and
evolving business needs. It should be able to integrate seamlessly with existing data sources and tools,
ensuring that segmentation insights can be utilized across various business functions. Additionally,

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 Customer Segmentation

the system should offer customizable features to align with the specific objectives and criteria defined
by the client, whether for targeted marketing, product development, or customer retention.

Security and data privacy are critical concerns for clients. The solution must comply with relevant
regulations and standards to protect sensitive customer information and ensure secure data handling
practices. Finally, clients expect ongoing support and updates to keep the system aligned with
technological advancements and changing business requirements.

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 Customer Segmentation

Chapter - 4
Clustering Using Machine Learning Methods
While many applications of machine learning, such as regression and classification, focus on
predicting the outcome or value of an instance, these applications do not attempt to understand
similarities between instances, just the relationship between instances and their respective outputs.
Thus, when it comes to searching for algorithms or methods that look for similarities between features
of instances, the focus must turn from supervised machine learning to unsupervised machine learning.
Determining whether an algorithm is a part of supervised and unsupervised machine learning is
contingent upon whether the instances used to train the model in the training data contain their target
value. In all cases of supervised machine learning training, instances are paired with a target value,
which could be a scalar or a vector depending on the context. In contrast, unsupervised machine
learning deals with data that is not paired with a target value. To clearly spell out these differences —
and also certain similarities — it may be best to examine them through an example. For instance,
consider a retail store owner who has a store that has been open for over a year and they are interested
in examining their data to help boost understanding of their customers while also predicting how much
they will spend next visit.

To predict their next ticket, the owner takes their previous purchases and comes up with a way to
guess, based on the previous tickets, the value of the next purchase. Since this example involves
prediction and the outcomes of previous data and its outcomes (the tickets themselves), this is an
example of supervised machine learning. To be more specific, since the owner is likely trying to
predict a dollar amount the customer will spend, this type of algorithm is called regression. On the
other hand, to boost the understandings of their customers, the owner decides to look at some collected
customer data and see if there are broader patterns or similarities between the customers. Since there
is no clear outcome or target value associated with the data or the process, this is a type of unsupervised
machine learning. More precisely, this exemplifies clustering. In technical terms, clustering is an
unsupervised machine learning technique that groups instances into clusters based on the similarities
between instances. This just states that clustering is one way of viewing or evaluating data by looking
at the natural groupings or segments that separate instances in the data. However, it is difficult to
appreciate clustering without first fully understanding what it means for instances to be considered
similar.

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 Customer Segmentation
4.1 K- means clustering in Machine Learning for customer segmentation

K-means clustering is a widely used machine learning algorithm for customer segmentation, valued
for its simplicity and effectiveness in partitioning a dataset into distinct, non-overlapping clusters. The
algorithm works by partitioning customers into a predefined number of clusters, denoted as K, where
each customer belongs to the cluster with the nearest mean value. Initially, K-means assigns random
centroids to K clusters and iteratively refines these centroids by minimizing the within-cluster
variance. Customers are reassigned to clusters based on their proximity to the updated centroids, and
this process continues until convergence, where the centroids no longer change significantly or the
assignments stabilize.

In customer segmentation, K-means helps to identify distinct groups within a customer base based on
features such as purchasing behaviour, demographics, or engagement metrics. By clustering
customers into segments with similar characteristics, businesses can gain actionable insights for
targeted marketing, personalized recommendations, and strategic decision-making. However,
selecting the optimal number of clusters (K) is crucial and often involves techniques like the Elbow
Method or Silhouette Score to balance between over fitting and under fitting. Despite its strengths, K-
means assumes clusters are spherical and equally sized, which may not always align with the true
structure of the data, necessitating careful consideration and possible combination with other methods
for improved results.

Fig 2: Customer segmentation using k means clustering

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 Customer Segmentation

4.2 Mini batch K means clustering:

Mini-Batch K-means is an efficient variant of the K-means clustering algorithm designed to handle
large-scale datasets by using a smaller, randomly selected subset of data in each iteration. This
approach improves computational efficiency and reduces memory usage compared to the traditional
K-means algorithm. In Mini-Batch K-means, instead of processing the entire dataset at once, the
algorithm updates cluster centroids using mini-batches of data, which are subsets randomly sampled
from the full dataset. These mini-batches are used to compute incremental updates to the centroids,
allowing the algorithm to converge more quickly while maintaining reasonable accuracy.

For customer segmentation, Mini-Batch K-means is particularly useful when dealing with large
volumes of customer data, such as extensive transactional records or behavioural data from multiple
sources. The algorithm's ability to process data in smaller chunks makes it suitable for real-time or
near-real-time applications where quick updates are beneficial. Although Mini-Batch K-means may
offer slightly less precision compared to standard K-means due to its use of smaller data subsets, its
efficiency gains often outweigh this trade-off, especially in scenarios requiring rapid clustering of
large datasets. By leveraging Mini-Batch K-means, businesses can achieve scalable and timely
customer segmentation, facilitating targeted marketing strategies and enhancing data-driven decision-
making.

Fig 3: Customer segmentation using mini batch K means clustering

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 Customer Segmentation

4.3 Evaluation Metrics

Evaluation metrics are crucial for assessing the effectiveness and quality of customer segmentation
in machine learning. These metrics help determine how well the clustering algorithm has grouped
customers into meaningful segments. Commonly used metrics include the Silhouette Score, which
measures how similar each customer is to its own cluster compared to other clusters, providing a
score between -1 and 1 where higher values indicate better-defined clusters. The Davies-Bouldin
Index evaluates the average similarity ratio of each cluster with its most similar cluster, where lower
values suggest better clustering with well-separated groups. These metrics collectively provide
insights into the structure and quality of the segmentation, helping ensure that the resulting customer
segments are both distinct and actionable for strategic business applications.

Inertia: Measures how tight the clusters are. Lower values are better.

Silhouette Score: Measures how similar an object is to its own cluster compared to other clusters.
Higher values are better.

Calinski-Harabasz Score: Measures the ratio of the sum of between-cluster dispersion to within-
cluster dispersion. Higher values are better.

Davies-Bouldin Score: Measures the average similarity ratio of each cluster with the cluster most
similar to it. Lower values are better.

Fig 4: Evaluation metrics for Customer segmentation

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 Customer Segmentation

4.4 Customer purchase behavior:

Customer purchase behavior is a critical aspect of customer segmentation that involves analyzing how
and why customers make purchasing decisions. By examining patterns such as purchase frequency,
average transaction value, product preferences, and seasonal buying trends, businesses can gain
valuable insights into different customer groups. This analysis helps identify distinct segments based
on their purchasing habits, such as frequent buyers, occasional shoppers, or high-value customers.
For example, one segment may consist of loyal customers who make regular, high-value purchases,
while another might include bargain hunters who buy primarily during sales events. Understanding
these behaviors allows businesses to tailor marketing strategies, personalize offers, and optimize
product assortments to meet the specific needs and preferences of each segment. By leveraging
insights into purchase behavior, companies can enhance customer engagement, drive sales growth,
and improve overall customer satisfaction.

Fig 5: Customer purchase behavior

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 Customer Segmentation

4.5 Customer frequency of purchase behavior:

Customer frequency of purchase behavior is a key factor in customer segmentation that focuses on
how often customers make purchases within a given timeframe. Analyzing purchase frequency helps
identify distinct customer segments based on their buying patterns, such as frequent buyers, occasional
purchasers, and infrequent customers. Frequent buyers are those who make regular purchases,
indicating high engagement and loyalty, while occasional purchasers may buy sporadically,
suggesting a need for targeted incentives to increase their purchasing frequency. Infrequent buyers,
on the other hand, might require different strategies, such as personalized promotions or re-
engagement campaigns, to encourage more frequent transactions. Understanding these patterns allows
businesses to tailor marketing efforts, optimize inventory management, and design loyalty programs
that cater to the specific needs of each segment. By leveraging frequency of purchase behavior,
companies can enhance their marketing strategies, improve customer retention, and drive more
consistent revenue growth.

Fig 6: Customer frequency of purchase behavior

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 Customer Segmentation

CONCLUSION

Customer segmentation is a powerful tool that enables businesses to better understand and
cater to the diverse needs of their customer base. By dividing customers into distinct groups
based on characteristics such as demographics, purchase behavior, and preferences,
companies can create more targeted and effective marketing strategies, improve product
offerings, and enhance customer experiences.

The insights gained from segmentation help in personalizing interactions, optimizing

resource allocation, and driving higher engagement and loyalty. As businesses increasingly
rely on data-driven approaches, customer segmentation stands out as a critical component
of strategic decision-making, leading to more precise and impactful customer engagement.

Ultimately, by leveraging segmentation, businesses can foster stronger relationships with

their customers, enhance satisfaction, and achieve sustained growth and competitive
advantage.

This targeted approach enhances the effectiveness of marketing campaigns, drives more
personalized customer experiences, and fosters stronger relationships with customers.
Moreover, segmentation allows companies to optimize resource allocation, improve product
offerings, and implement data-driven strategies that align with the specific characteristics
of each segment.

As machine learning and data analytics continue to advance, the ability to perform more
nuanced and dynamic segmentation will further enhance businesses' ability to understand
and respond to their customers. The strategic use of segmentation not only improves
customer satisfaction and loyalty but also drives overall business growth and competitive
advantage.

By continually refining segmentation strategies and integrating new data insights,

companies can adapt to evolving market trends and maintain a strong connection with their
customer base, ultimately achieving long-term success.

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 Customer Segmentation

LEARNING OUTCOMES

The learning outcomes from customer segmentation are multifaceted and significantly
impact various aspects of business operations and strategy. Firstly, businesses gain a
profound understanding of their customer base by identifying distinct segments with
unique characteristics and behaviors. This enhanced customer insight enables more
effective targeting and personalization of marketing efforts, leading to increased
engagement, higher conversion rates, and improved customer satisfaction.
Additionally, organizations learn to leverage data-driven strategies to tailor product
offerings and optimize pricing, thereby enhancing their value propositions and
competitive positioning in the market.

From a strategic standpoint, customer segmentation equips businesses with the

knowledge to allocate resources more efficiently, focusing efforts on high-value
segments and minimizing waste in less profitable areas. It also fosters the development
of targeted retention strategies, as businesses can identify and address the needs of
customers at risk of churn. By integrating segmentation insights into broader business
practices, companies can refine their overall marketing strategy, enhance customer
experience, and drive growth through more precise and actionable decision-making.

Furthermore, businesses learn to use advanced analytical tools and techniques, such as
machine learning algorithms, to process and interpret complex datasets. This
proficiency not only improves segmentation accuracy but also supports continuous
adaptation to changing customer behaviors and market dynamics. Overall, the learning
outcomes from customer segmentation empower businesses to develop more effective
strategies, enhance operational efficiency, and ultimately achieve sustained success
and growth in a competitive landscape.

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REFERENCES

[1]Researchgate: Customer Segmentation Using Machine Learning

[2]Researchgate: New approach to customer segmentation based on changes in customer value

[3] Google scholar: A.Banduni A. Ilavendhan Customer segmentation using machine learning

International journal of innovative research in technologyVolume 7 Issue 2 ISSN: 2349-6002,

[4] Freecodecamp: https://www.freecodecamp.org/news/customer-segmentation-python-

machine- learning/

[5] Kaggle : https://www.kaggle.com/code/des137/customer-segmentation-credit-cards.

[6]Github: https://datauab.github.io/mall_segmentation/

[7]You tube:

https://www.youtube.com/watch?v=rW-erbDPHBs

https://www.youtube.com/watch?v=QSFs-J8JPac

https://www.youtube.com/watch?v=D-B3WFW3ofw

Dept. of CSE (AI&ML), GSSSIETW, Page 26

Mysuru.