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STP Cluster Discriminant
STP Cluster Discriminant
Targeting
Cluster Analysis & Discriminant
Analysis
segmentation)
2
Segmentation
Target segments may not be clearly
defined and reachable
In practice, segments may be hard
to define, fuzzy, and overlapping
Buyers can be classified into one or
more segments
Segmentation is not a static
classification but a process to
support business decisions
4
Competency in Segment
The Market
Vs.
Segments
High
Average
G
Low
I
Low
Average
High
Segment Attractiveness
Segments
Bases
Characteristics that tell us why segments differ
(needs, preferences, decision processes)
Descriptors
Characteristics that tell us how to find and reach
Business
Consumer
Industry
Size
Location
Organizational Structure
Age/Income
Education
Profession
Lifestyles
Media habits
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Dimension
2
III
b
II
Dimension 1
2 clusters
3 clusters
5 clusters
Maruti
Swift
Hyundai
Santro
Maruti
SX4
Honda Hyundai
City
Verna
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Step 1
Step 2
Step 3
Step 4
Step 5
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Euclidean Distance
City Block Distance
Correlation
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Clustering Procedures
Hierarchical Clustering: A clustering procedure characterized by the
development of a hierarchy or treelike structure
Agglomerative Clustering -- each object starts out in a separate
cluster; clusters are formed by grouping objects into bigger and
bigger clusters
Divisive Clustering -- all objects start out in one group; clusters
are formed by dividing this cluster into smaller and smaller clusters
Non Hierarchical Clustering: Number of clusters are prespecified;
clusters built around cluster centres
A =
Second Stage:
Third Stage:
B =
AB
AC
AD
AE
BC
CDA = 38.0
AB =
4.5
Fourth Stage:
C =
BD
BE
CD
CE
DE
=
=
=
=
=
D =
=
=
=
=
=
4.5
24.5
32.0
84.5
8.0
CDB =
14.0
CDE = 20.66
AE =
84.5
BE = 50.0
ABCD =
41.0
ABE= 93.17
10
E = 15
12.5
50.0
0.5
18.0
12.5
CDE =
20.66
Fifth Stage:
ABCDE = 98.8
Sony
Sidekick3 Ericsson Segment
M600i
Nokia
9300
I
II
I
II
II
III
I
I
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929.86
Distance
335.86
116.86
61.75
56.04
41.86
40.95
38.02
1
4
8
Cluster ID
15
Overall
Cluster 1
Cluster 2
Cluster 3
6.77
8.42
5.47
5.6
5.5
4.41
4.32
Motorola Q
5.5
7.79
3.06
4.68
Nokia 9300
6.06
6.21
7.19
4.36
Sidekick3
4.12
2.91
3.47
7.04
4.54
5.33
3.62
4.36
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DISCRIMINANT ANALYSIS
18
20
10
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Discriminant Analysis
Analytical tool that considers the variables simultaneously
so as to take into account their inter-relationship and
partially overlapping information
Construct a linear combination of the variables i.e. a
weighted sum
So that the linear combination best discriminates among
the groups
Mathematical Model
D = b0 + b1X1 + b2X2 + + bMXM + e1
D = discriminant score
b = discriminant coefficients or weights
X = predictor or independent variables
The coefficients, b, are estimated so that the groups differ as much as
possible on the value of the discriminant function, D
Occurs when the ratio of between-group sum of squares to withingroup sum of squares for the discriminant scores is at a maximum
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11
Price
Sensitivity
XXOXOOO
XXXOXXOOOO
XXXXOOOXOOO
XXOXXOXOOOO
XXOXOOOOOOO
X-segment
x = high propensity to
buy
o = low propensity to
buy
O-segment
ME Segmentation and
Targeting 2006 - 23
Step 1
Step 2
Step 3
Step 4
Step 5
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26
13
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