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Cluster Analysis in Business Research

Cluster analysis is used to group similar objects together into clusters. It involves partitioning a set of data into clusters based on similarity, and then assigning labels to the clusters. It has various applications in business research, including market segmentation, customer profiling, and fraud detection. Effective cluster analysis requires algorithms that can handle different data types, discover clusters of arbitrary shapes, scale to large datasets, and identify outliers. Common clustering methods include partitioning, hierarchical, density-based, grid-based, model-based, and constraint-based.

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183 views2 pages

Cluster Analysis in Business Research

Cluster analysis is used to group similar objects together into clusters. It involves partitioning a set of data into clusters based on similarity, and then assigning labels to the clusters. It has various applications in business research, including market segmentation, customer profiling, and fraud detection. Effective cluster analysis requires algorithms that can handle different data types, discover clusters of arbitrary shapes, scale to large datasets, and identify outliers. Common clustering methods include partitioning, hierarchical, density-based, grid-based, model-based, and constraint-based.

Uploaded by

archana_sree13
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© © All Rights Reserved
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UNIT V

I. WRITE SHORT NOTES ON CLUSTER ANALYSIS AND ITS


UTILITY IN BUSINESS RESEARCH.

Cluster is a group of objects that belongs to the same class. In


other words, similar objects are grouped in one cluster and
dissimilar objects are grouped in another cluster.

Clustering is the process of making a group of abstract objects


into classes of similar objects.
Points to Remember
 A cluster of data objects can be treated as one group.
 While doing cluster analysis, we first partition the set of
data into groups based on data similarity and then assign
the labels to the groups.
 The main advantage of clustering over classification is that,
it is adaptable to changes and helps single out useful
features that distinguish different groups.

Applications of Cluster Analysis


 Clustering analysis is broadly used in many applications
such as market research, pattern recognition, data
analysis, and image processing.
 Clustering can also help marketers discover distinct
groups in their customer base. And they can characterize
their customer groups based on the purchasing patterns.
 Clustering also helps in classifying documents on the web
for information discovery.
 Clustering is also used in outlier detection applications
such as detection of credit card fraud.
Requirements of Clustering in Data Mining
The following points throw light on why clustering is required in
data mining −
 Scalability − We need highly scalable clustering
algorithms to deal with large databases.
 Ability to deal with different kinds of attributes −
Algorithms should be capable to be applied on any kind of
data such as interval-based (numerical) data, categorical,
and binary data.
 Discovery of clusters with attribute shape − The
clustering algorithm should be capable of detecting clusters
of arbitrary shape. They should not be bounded to only
distance measures that tend to find spherical cluster of
small sizes.
 High dimensionality − The clustering algorithm should
not only be able to handle low-dimensional data but also
the high dimensional space.
 Ability to deal with noisy data − Databases contain
noisy, missing or erroneous data. Some algorithms are
sensitive to such data and may lead to poor quality
clusters.
 Interpretability − The clustering results should
be interpretable, comprehensible, and usable.

Clustering Methods
Clustering methods can be classified into the following
categories −

 Partitioning Method
 Hierarchical Method
 Density-based Method
 Grid-Based Method
 Model-Based Method
 Constraint-based Method

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