Using cluster analysis and DEA-discriminant analysis to predict group membership of new customers

Reza Farzipoor Saen

International Journal of Business Excellence, 2013, vol. 6, issue 3, 348-360

Abstract: To understand the value of customers and target the most profitable customers, this paper uses cluster analysis to classify customers into four groups as platinum, gold, iron, and lead. Then, to predict group membership of new customers, data envelopment analysis-discriminant analysis (DEA-DA) model is applied. This paper operationalises the concept proposed by Zeithaml et al. (2001), ('The customer pyramid: creating and serving profitable customers', California Management Review, Vol. 43, No. 4, pp.118-142) on forming the customer pyramid. A case study demonstrates the application of the proposed approach.

Keywords: data envelopment analysis; DEA; discriminant analysis; DEA-DA; cluster analysis; customer pyramid; group membership; new customers; customer value. (search for similar items in EconPapers)
Date: 2013
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