cluster analysis is a multivariate method which aims to classify a sample of

subjects (or objects) on the basis of a set of measured variables into a number of
different groups such that similar subjects are placed in the same group. An
example where this might be used is in the field of psychiatry, where the
characterization of patients on the basis of of clusters of symptoms can be useful
in the identification of an appropropriate form of therapy. In marketing, it may be
useful to identify distinct groups of potential customers so that, for example,
advertising can be appropriately targeted
Hierarchical methods Agglomerative methods, in which subjects start in their
own separate cluster. The two closest (most similar) clusters are then combined
and this is done repeatedly until all subjects are in one cluster. At the end, the
optimum number of clusters is then chosen out of all cluster solutions. Divisive
methods, in which all subjects start in the same cluster and the above strategy is
applied in reverse until every subject is in a separate cluster
Non-hierarchical or k-means clustering methods:In these methods the desired number of clusters is specified in advance and the
best solution is chosen.
Choose initial cluster centers (essentially this is a set of observations that are far
apart each subject forms a cluster of one and its centre is the value of the
variables for that subject).
2. Assign each subject to its nearest cluster, defined in terms of the distance to
the centroid.
3. Find the centroids of the clusters that have been formed
4. Re-calculate the distance from each subject to each centroid and move
observations that are not in the cluster that they are closest to. 5. Continue until
the centroids remain relatively stable
The clusters we can use in Marketing.
cluster analcysis, data-driven market segmentation ... No matter how many
variables are used and no matter how small the sample size, cluster

Agglomerative
Divisive

Two Linkage rules used is single linkage rule & Average linkage rule.
Q2
Multidimensional scaling (MDS) is a classical approach to the problem of finding
underlying attributes or dimensions, which influence how subjects evaluate a
given set of objects or stimuli. This paper provides a brief introduction to MDS. Its
basic applications are outlined by several examples. For the interested reader a
short overview of recommended literature is appended. The purpose of this
paper is to facilitate the first contact with MDS to the non-statistician
We will collect direct & Indirect data for MDS

Q3
( Assumptions has been made)
Attempts to construct consumer typologies are an enduring feature of retailing
research and frequently centre on economic and demographic characteristics.
Attributes Price ,Brand, color

SUMMARY OF CONJOINT ANALYSIS

Technique
Conjoint Analysis

What it does
Allows consumer
preferences for a product
or service to be broken
down into trade-offs
among its individual
attributes, without
separating those
attributes from the
context in which overall
judgments are made.

What it is used for

Optimising product
configurations; studying
price elasticities of
demand; simulating
market response to new
or modified offerings;
diagnosing competitive
strengths and
weaknesses

Determine attribute levels:- The number of levels for each attribute has a direct
bearing on the number of stimuli respondents will be asked to judge. The more
there are, the heavier the burden that is placed on the consumer

Determine attribute combinations This will determine what the full set of stimuli
will look like. One cannot expect a respondent to provide meaningful judgments
if there are five attributes and three levels (3x3x3x3x3=243) each of rank-order
judgments
Select attributes

Determine attribute
levels

Determine attribute
combinations

Determine attribute
combinations

Select form of
presentation of
stimuli and nature of
Decide how
judgments will be
aggregated
Select analysis
technique

Share of Utility:- The share of utility rule allows that consumers do not always

choose the product with the highest utility (they may seek variety, for example).

Each product is given a share proportional to the individuals utility for each
product.
The logit choice rule is similar to the share of utility rule but allows for random
error in translating utilities into choice.

Maximum utility:- The process or goal of obtaining the highest level of utility from
the consumption of goods or services. The goal of maximizing utility is a key
assumption underlying consumer behavior studied in consumer demand theory.
Consumers are assumed to make choices, especially concerning the purchase of
goods, such that they obtain the highest possible level of satisfaction.