What is clustering?
Clustering is a task in unsupervised machine learning that tries to group a set of objects into clusters so that similar objects appear in one group. Objects between clusters would differ significantly, while objects inside a cluster would be very similar.
Clustering algorithms do not know in advance the groups or categories; they determine them in the process based on the nature of the objects.
Customer segmentation is an example of clustering, as usually there is no information about the precise number of clusters and what kind of customers they include.
Why is it important?
Clustering is often used by companies that want to get a deeper understanding of their customers. According to the study, more than 90% percent of shoppers would prefer brands that recognize, remember, and provide relevant offers and recommendations. Retail stores, TV and Internet providers, car dealerships, and many others have clustering models that allow them to tune their sales, advertising, and offers according to the customer’s preferences and behavior.