Murphy Choy

Understanding Cluster Analysis

In Uncategorized on May 20, 2011 at 2:30 am

Many analysts that I came across who are dealing with customer segmentations have a great deal of experience in dealing with cluster analysis. However, few of the analysts have any clue about the workings of cluster analysis.

Cluster analysis is a very non distinct technique of data exploration. One key issue in cluster analysis is the unknown number of clusters that exist in a dataset. This is compounded by the problem of measurement statistics being fuzzy and relatively hard to interpret. While this problem has been mitigated by CCC (Sarle, 1990), it remains hard to precisely measure the number of clusters needed.

Another major issue that exist is the presence of outliers which severely distorts the cluster analysis. This is particularly obvious for users of CCC which becomes severely negative in some situations.

In the next few posts, I will detail some of the solutions that we can use to solve these problems.

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