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Customer Segmentation

Posts: 57

Customer Segmentation

I was asked the following question during an interview:

What method would you use to segment customers into high, medium and low value groups based on their purchase history of last one year?

I said using RFM(recency, frequency, monetary) method. The interviewer seemed unsatisfied with this answer.

Can I use cluser analysis? If so, how to do it? I can plug the data in and ask the program to produce 3 clusters. But these 3 clusters may not have anything to do with customer values.

Any other method? I think this is an unsupervised learning problem.

Posts: 7,468

Customer Segmentation

If the interviewer didn't respond at all to your answer, I would tend to think that they didn't understand the topic and were expecting a specific answer and figured that the question was sufficiently clear .. which I don't think it was!

However, if you want to learn about the things one might do with SAS to actually do customer segmentation analyses, I would suggest reading some of the available published materials.  E.g., take a look at:

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