Cluster Analysis

Cluster analysis is an exploratory tool designed to reveal natural groupings within a large group of observations. Cluster analysis segments the survey sample, i.e. respondents or companies, into a small number of groups.

Respondents whose answers are very similar should fall into the same clusters while respondents with very different answers should be in a different cluster. Ideally, the cases in each group should have a very similar profile towards specific characteristics (e.g. attitudinal or behavioural questions), while the profiles of respondents belonging to different clusters should very dissimilar.

Its main advantage is that it can suggest, based on complex input, groupings that would not otherwise be apparent ie the needs of specific groupings or segments in the market.

Cluster analysis is widely used in market research to describe and quantify customer segments. This enables marketers to target customers tailored to their needs instead of having one general marketing approach - see market segmentation.