User value identification based on an improved consumer value segmentation algorithm

Abstract

PurposeThe purpose of this study is to propose a new consumer value segmentation method for low-dimensional dense market datasets to quickly detect and cluster the most profitable customers for the enterprises.Design/methodology/approachIn this study, the comprehensive segmentation bases (CSB) with richer meanings were obtained by introducing the weighted recency-frequency-monetary (RFM) model into the common segmentation bases (SB). Further, a new market segmentation method, the CSB-MBK algorithm was proposed by integrating the CSB model and the mini-batch k-means (MBK) clustering algorithm.FindingsThe results show that our proposed CSB model can reflect consumers' contributions to a market, as well as improve the clustering performance. Moreover, the proposed CSB-MBK algorithm is demonstrably superior to the SB-MBK, CSB-KMA and CSB-Chameleon algorithms with respect to the Silhouette Coefficient (SC), the Calinski-Harabasz (CH) Index , the average running time and superior to the SB-MBK, RFM-MBK and WRFM-MBK algorithms in terms of the inter-market value and characteristic differentiation.Practical implicationsThis paper provides a tool for decision-makers and marketers to segment a market quickly, which can help them grasp consumers' activity, loyalty, purchasing power and other characteristics in a target market timely and achieve the precision marketing.Originality/valueThis study is the first to introduce the CSB-MBK algorithm for identifying valuable customers through the comprehensive consideration of the clustering quality, consumer value and segmentation speed. Moreover, the CSB-MBK algorithm can be considered for applications in other markets.