Fuzzy Clustering¶

Identify micro segments in product clusters¶

Treat customers in the same cluster differently based on their probability of belonging to that cluster. For example, you can run two different campaigns for the customers with 0.98 and 0.25 probability.

Build segments that leverage a combination of clusters for granular targeting¶

Target customers that belong to multiple clusters. For example, you can create a menswear-accessory bundle deal that consists of the customers with 0.60 probability in menswear and >=0.25 probability in accessories.

More targeted product or brand campaigns¶

• When customers access your website, show content based on their product affinity.
• When creating a product-focused campaign, identify and target the customers who have previously purchased such products. These types of campaigns can help increase affinity for products that customers already like.
• When launching a new product, identify an existing similar product, locate the customer cluster aligned with the existing product, and target customers in those cluster(s) in the launch campaign. This ensures a high response rate as you target the customers with similar product affinities.

Deepen product affinity and increase promotion spend effectiveness¶

Engage with your customers better without overspending. You can create surgical discounting or pricing tests. For example, you can give a lower discount for product X (or similar products) to the customers that belong to cluster(s) aligned with product X. If a customer already likes product X, you don’t need to give a high discount.

Broaden customers’ purchased product mix¶

Improve retention, loyalty, and lifetime spend by encouraging customers to buy different products. You can create tests by providing higher discounts for product X (or similar products) to customers in clusters that are either negatively indexed towards product X or do not feature product X at all. When you convert such customers to purchase product X, you help improve retention and gain incremental revenue without impacting margin. As such customers would not have purchased these products prior to your tests, the benefits are substantial.

Nudge customers that only buy one category of products to buy into other categories¶

Use Metrics to identify the most common one-time purchased product. Based on that, you can create campaigns to encourage one product purchasers to buy other products, thereby improving their retention and lifetime spend.

A customer may not strongly belong to any specific cluster and instead have all the cluster probabilities almost equal. For example, you may want to treat your customers in the same cluster differently if one belongs in that cluster with .98 probability and the other with .25 probability.

Some marketing mediums are expensive. Therefore, you can use the fuzzy clustering model to further filter a cluster. Fuzzy clustering provides a way to group such customers. For example, you may want to target the customers with >=0.8 probability of belonging in a cluster. Alternatively, you can include more customers or target the customers whose first or second most likely cluster is a certain cluster.