Customer Segmentation With K-Means and UMAP

A report for the non-technical marketing team.

R
k-means
UMAP
Author

Sandra Jurela

Published

December 15, 2022

Problem Statement

Marketing team would like to increase email campaign engagement by segmenting the customer-base using their buying habits.

Solution Summary

The 4 customer segments were identified and given descriptions based on the customer’s top product purchases.

  1. Segment 1 Preferences: Road Bikes, Below $3200 (Economical Models) - 27%

  2. Segment 2 Preferences: Mountain Bikes, Above $3200 (Premium Models) - 10%

  3. Segment 3 Preferences: Road Bikes, Above $3200 (Premium Models) - 20%

  4. Segment 4 Preferences: Both Road and Mountain, Below $3200 (Economical Models) - 43%

Customer Preferences

Heat Map

Our customer-base consists of 30 bike shops. Several customers have purchasing preferences for Road or Mountain Bikes based on the proportion of bikes purchased by category (mountain or road) and sub-category (Over Mountain, Trail, Elite Road, etc).

3.1%4.5%12.2%13.3%5.3%0.7%3.2%7.6%7.1%8.5%0.8%2.0%11.8%6.5%0.3%7.2%0.8%6.1%0.8%8.1%1.5%7.6%1.3%4.7%9.4%2.7%9.2%1.0%8.7%9.5%11.5%10.3%1.3%1.3%11.6%4.1%2.0%8.6%2.9%8.9%1.0%10.4%0.5%4.0%14.5%2.2%7.2%14.2%12.6%14.7%1.5%9.1%0.3%6.8%7.6%1.3%2.7%10.5%7.0%2.1%3.7%9.7%14.2%9.8%0.9%2.0%9.0%9.2%6.8%0.7%3.4%9.1%7.8%1.0%6.4%10.1%12.3%8.4%1.0%2.6%7.5%9.3%1.2%7.3%10.6%11.8%2.0%6.0%12.5%14.4%3.2%13.8%8.8%1.9%5.7%13.0%12.9%1.1%7.4%10.0%13.5%2.2%6.5%12.9%13.4%10.4%1.1%8.8%1.3%6.4%6.2%0.8%2.3%3.1%11.7%2.9%12.6%2.4%8.9%2.0%4.7%16.8%15.3%18.0%17.5%18.8%23.9%16.9%17.9%17.3%30.0%16.6%18.2%25.8%16.1%17.9%17.0%17.7%19.0%16.7%16.0%29.4%15.6%17.9%18.5%15.1%30.1%19.4%15.0%16.6%Cross Country RaceFat BikeOver MountainSportTrailWichita SpeedTampa 29ersSeattle Race EquipmentSan Francisco CruisersSan Antonio Bike ShopProvidence Bi-pedsPortland Bi-pedsPittsburgh Mountain MachinesPhoenix Bi-pedsPhiladelphia Bike ShopOklahoma City Race EquipmentNew York CyclesNew Orleans VelocipedesNashville CruisersMinneapolis Bike ShopMiami Race EquipmentLouisville Race EquipmentLos Angeles CyclesLas Vegas CyclesKansas City 29ersIthaca Mountain ClimbersIndianapolis VelocipedesDetroit CyclesDenver Bike ShopDallas CyclesColumbus Race EquipmentCincinnati SpeedAustin CruisersAnn Arbor SpeedAlbuquerque Cycles2.4%4.5%6.6%8.8%3.7%9.3%6.1%9.5%4.6%7.9%4.7%4.3%3.7%14.0%8.8%3.1%6.3%5.6%3.8%6.0%1.9%11.3%8.1%3.3%3.1%12.6%9.4%3.3%4.2%9.1%3.5%7.2%3.5%6.6%7.9%7.6%6.4%5.5%6.6%7.5%6.4%9.2%4.0%6.2%7.1%6.8%3.7%9.8%5.3%4.8%2.1%12.5%9.3%5.3%5.4%14.4%5.9%2.6%5.4%2.2%8.1%5.3%12.6%4.7%10.9%2.4%9.7%5.8%1.9%5.5%7.5%24.1%18.9%37.0%23.6%37.4%19.9%30.9%23.8%27.7%23.9%20.9%18.4%22.4%17.7%37.6%24.1%28.7%25.2%21.4%17.3%36.2%21.3%32.0%23.5%23.7%17.0%32.7%22.3%31.0%25.5%22.7%18.3%33.1%24.2%23.3%15.5%21.8%17.2%22.8%20.1%21.6%23.1%16.7%32.1%21.9%24.2%35.9%30.8%21.7%CyclocrossElite RoadEndurance RoadTriathalon
Heatmap of Purchasing Habits MountainRoad

Customer Segmentation

This is a 2D Projection based on customer similarity that exposes 4 clusters, which are key segments in the customer base.

-2-1012-101
cluster1234 Customer Segmentation: 2D Projection xy

Customer Preferences By Segment

The 4 customer segments were given descriptions based on the customer’s top product purchases.

Segment
Preferences
Price Range
Description
1
Road Bikes
Below $3200
Economical Models
2
Mountain Bikes
Above $3200
Premium Models
3
Road Bikes
Above $3200
Premium Models
4
Road and Mountain Bikes
Below $3200
Economical Models


$300$1,000$3,000$10,000MountainRoad$300$1,000$3,000$10,000MountainRoad
cluster1234 Top 5 Bike Models by Customer and Cluster Bike TypeProduct Price (log scale)1234


Note: The table below is sortable. You can sort a column by clicking on its header.

Segment
Customer
City
State
1
Ann Arbor Speed
Ann Arbor
MI
1
Austin Cruisers
Austin
TX
1
Indianapolis Velocipedes
Indianapolis
IN
1
Miami Race Equipment
Miami
FL
1
Nashville Cruisers
Nashville
TN
1
New Orleans Velocipedes
New Orleans
LA
1
Oklahoma City Race Equipment
Oklahoma City
OK
1
Seattle Race Equipment
Seattle
WA
2
Ithaca Mountain Climbers
Ithaca
NY
2
Pittsburgh Mountain Machines
Pittsburgh
PA
1–10 of 30 rows
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