Segmentation and clustering

Segmentation is the process by which data is bundled together in segments or clusters. If there are a million customer records, and let's say we want to know what is common among those customers, to do this, we will start aggregating a few customer records or bunching some customers together based on similarities in their profiles. What we are essentially doing is forming close-knit clusters of customers. If all these customers were similar, then it would make the whole process easy. We would end up with one cluster and we could describe it easily. But this seldom happens. There are always some demographic or transactional properties by which we want to segregate customers. This is important as we want to customize our offerings to various clusters of customers. Remember the general rule of marketing: no two customers are the same in their intrinsic...