Applications of Clustering

Clustering is useful in a variety of fields. We will look at two of them in detail:

• Market segmentation: Segmentation is the process of splitting a heterogeneous group of consumers or customers into smaller homogeneous groups. These smaller groups can be targeted differently based on their characteristics and behavior. Segmentation is important to businesses because it shapes both marketing efforts and product development. Businesses designing products must decide which product is targeted to which segment of consumers or customers. They must consequently decide what features to include, how to price the product, and how to take it to market. All these actions are heavily influenced by the characteristics of the different segments.

  Most businesses start off not knowing how to group their customers. Clustering is useful in helping these businesses to identify segments in their data.

• Document clustering and information retrieval: In the information and knowledge...