Cluster Analysis - Basic

8 important questions on Cluster Analysis - Basic

What is the thing that cluster analysis do?

Cluster analysis groups objects (respondents, products, firms, variables, etc.) so that each object is similar to the other objects in the cluster and different from objects in all the other clusters.

What are typical applications of cluster analysis?

  • Understanding buyer behavior by identifying homogenous groups of buyers.
  • Market segmentation
  • analysis of strategies

When should an outlier be retained in Cluster analysis?

They should be retained if they represent an under-sampling/poor representation of relevant groups in the population.
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Where are distance measures most often used for?

They are most often used as a measure of similarity. High values representing greater dissimilarty (Distance between cases)

What is the most common measure of distance?

Euclidean (straight line) distance is the most common measure of distance.

Why do we use standardized variables with cluster analysis?

If possible, use standardize variables to avoid problems that come from the use of different scale values.

How are variables most of the times standardized?

Z-scores

Which approaches are part of the agglomerative approaches?

  • Single linkage (nearest neighbor)
  • Complete linkage (farthest neighbor)
  • Average linkage
  • centroid method
  • ward's method

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