ANALYTICS
Cluster analysis is often referred to as market segmentation. It is a technique that is used to help establish market composition by sub-dividing in into discrete groups (known as ‘clusters’).
While conventional ‘demographic’ analysis is based on tangible characteristics such as sex, age and social class, cluster analysis primarily relies on either subjective elements such as attitude, motivation, aspiration etc or on behavioural traits such as awareness, trial, weight of usership etc.
The rationale for cluster analysis is to sub-divide the sample into homogeneous groupings (i.e. clusters), each of whom share as many characteristics as possible with each other, while being as ‘different’ to everybody else as possible. This it does by looking at the response patterns and relationships between responses (for example from a large attitude battery such as TGI or series of factual responses based on awareness, trial and usership). In the interpretation of cluster analysis we should be aware that while everyone in the same cluster group shares the same broad traits and characteristics, they are not necessarily identical.
Cluster analysis allows us to identify the number and nature of different customer groupings within the market. By establishing the needs, requirements, opportunities and threats presented by each one we can ascertain their current and future [potential] worth to our business.
