Description
The purpose of this assignment is to perform cluster analysis and analyze clusters in a data set to determine whether or not the information generated can be used to address a specific business problem.
For this assignment, you will use the "Wholesale Customers" data set from the Topic Materials. Most data categories are self-explanatory. Clarifying notes are as follows.
- Fresh: Annual spending (in $1000s) on fresh products
- Milk: Annual spending (in $1000s) on milk products
- Grocery: Annual spending (in $1000s) on grocery products
- Frozen: Annual spending (in $1000s) on frozen products
- Detergents_Paper: Annual spending (in $1000s) on detergents and paper products
- Delicatessen: Annual spending (in $1000s) on delicatessen products
- Client_Type: Type of client – either HoReCa (Hotel/Restaurant/Café) or Retail
- Region: Region of client – either Lisbon, Oporto, or Other
A wholesale distributor wants to understand the purchasing profiles of its clients. If a finite set of distinct profiles were defined, then a marketing strategy could be designed specifically for each set of similar clients. The company has compiled a data set that includes annual client spending on diverse product categories. You have been tasked with analyzing the data to determine what patterns emerge and how these patterns can be used to create specific client marketing profiles.
Use k-means clustering to explore and analyze the data set by using only the quantitative variables to cluster the clients.
Question 1: Explain the process you used to define the clusters such as the number of clusters formed, the specific variables used, etc. Include the "Cluster Sizes" and "Predictor Importance" outputs when submitting the answer.
Question 2: Interpret the clusters with respect to the quantitative variables that were used in forming the clusters. Include the "Clusters" output when submitting the answer.
Question 3: Discuss whether there is a pattern in the clusters with respect to the qualitative variables (i.e., Client_Type or Region). Include the charts illustrating these patterns when submitting the answer.
Question 4: Provide an appropriate name for each cluster using any or all of the variables in the data set.
Question 5: Based upon your analysis, what patterns emerged and how can these patterns be used to create specific client marketing profiles? Include discussion of the characteristics for each profile. Present your finding in the form of a 250-word executive summary that includes relevant data, charts, and tables.
General Requirements:
Submit the answers to Questions 1-4 and the executive summary as Word documents.
APA format is not required, but solid academic writing is expected.
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Explanation & Answer
Attached.
EXECUTIVE SUMMARY
The clients were divided into three main groups. The first group included mainly
smaller-sized customers, based on their spending. These customers were also more balanced in
their purchasing preferences, though their purchases clearly focused on fresh products, groceries,
and milk. These clients included medium and small restaurants and cafes, and are mainly based
in non-urban areas. Thus, marketing for these clients should focus on fresh foods and
accompanying products. The marketing strategy should take into consideration the moderate
size of their clients, such as moderate-sized product packaging and shipping, as well as shipping
to rural locations. The second cluster of clients was also fairly large, as far as the number of
clients, and also spent larger amounts of money on purchases. The focus of these clients’
purchases was clearly fresh food products. These were mainly hotels, cafes, and restaurants.
Virtually no retail clients belonged to this cluster. These clients were located in both urban and
rural areas. Marketing for these clients should focus on needs of restaurants, who wish to
provide their clients with daily fresh meal...