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

Authors: Reza Farzipoor Saen

Addresses: Department of Industrial Management, Faculty of Management and Accounting, Islamic Azad University, Karaj Branch, P.O. Box 31485-313, Karaj, Iran

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.

DOI: 10.1504/IJBEX.2013.053618

International Journal of Business Excellence, 2013 Vol.6 No.3, pp.348 - 360

Published online: 09 Apr 2013 *

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