SOLVE THIS PUZZLE (1)

– 10,000 Customers - we know their age, city name, income, employment

status, designation
– You have to sell 100 New Gadget nBooks (each costs $1000) to the people
in this group.
– You have maximum of 7 days
– If you start giving demos to each individual, 10,000 demos will take more
than one year.
– How will you sell maximum number of nBooks by giving minimum
number of demos?

INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD

PUZZLE STEPS: SEGMENTATION

–Divide the whole population Customers

1000
into two groups employed /
unemployed Unemployed Employed
3000 7000

–Further divide the employed

population into two groups Low salary
5000
HighSalary
2000
high/low salary
Low High
–Further divide that group Designation Designation
1800 200
into high /low designation
INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD
SOLVE THIS PUZZLE (2)
Weight
Cust1 68 Which two customers aresimilar?
Cust2 72
Cust3 100

Weight Age
Cust1 68 25 Which two customers are similarnow?
Cust2 72 70
Cust3 100 28

Weight Age Income

Cust1 68 25 60,000
Cust2 72 70 9,000 Which two customers are similarin this case?
Cust3 100 28 62,000

INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD

 CLUSTER ANALYSIS: HOW TO SEGMENT?

• Cluster is a group of similar objects (cases,

Inter-cluster
points, observations, examples, members,
Intra-cluster customers, patients, locations, etc.)
distances are distances are
minimized maximized
• Finding the groups of cases / objects
observations / in the population such
that the objects are
• Homogeneous within the group (high intra-
classsimilarity)
• Heterogeneous between the groups (low
inter-class similarity)

INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD