International Journal of Commerce and Management Research

Authors
Anita Rani, Dr. Balbir Singh

Abstract
Cluster analysis is a statistical technique that sorts observations into similar sets or groups. The use of cluster analysis presents a complex challenge because it requires several methodological choices that determine the quality of a cluster solution. This paper discusses a cluster analysis technique for market segmentation. Single linkage technique is used to conduct market segmentation. The solutions resulting from this approach result in market segments or groups each of which consists of people or organizations with similar demand of products and/or services in terms of price quality and functions. The similarity coefficient metric between any two customers is determined based on product type, price and functionality. The decision on number of clusters/market segments is based on stability of cluster structure. A sample numerical data set is constructed for a set of customer and the single linkage cluster analysis technique is tested on the sample data set. It is shown that the cluster analysis approach yields stable market segments for effective marketing strategies of the firm.