New Click here to Enroll in NaBFID Analyst Intro Class on May 6

    Question

    In predictive modeling for customer segmentation, which

    type of model is most suitable for identifying distinct customer groups based on purchasing behaviors?
    A Logistic Regression Correct Answer Incorrect Answer
    B K-Means Clustering Correct Answer Incorrect Answer
    C Random Forest Correct Answer Incorrect Answer
    D Principal Component Analysis (PCA) Correct Answer Incorrect Answer
    E Decision Trees Correct Answer Incorrect Answer

    Solution

    K-Means Clustering is an unsupervised machine learning algorithm that segments data points into distinct clusters based on their similarity. This method is particularly useful in customer segmentation, where businesses need to group customers with similar purchasing behaviors to tailor marketing strategies effectively. K-Means operates by iteratively assigning data points to clusters based on distance, optimizing group homogeneity. This approach enables analysts to uncover hidden patterns in customer data, such as preferences and buying habits, allowing companies to customize their offerings for each segment. The other options are incorrect because: • Option 1 (Logistic Regression) is used for binary classification, not clustering. • Option 3 (Random Forest) is a supervised model for classification or regression, not segmentation. • Option 4 (Principal Component Analysis) reduces dimensionality but does not create clusters. • Option 5 (Decision Trees) are used for classification and regression, not for identifying distinct groups in an unsupervised manner.

    Practice Next