How can algorithms help in segmenting users and customers? A systematic review and research agenda for algorithmic customer segmentation

Joni Salminen, Mekhail Mustak, Muhammad Sufyan, Bernard J. Jansen

Research output: Contribution to journalReview Articlepeer-review

1 Citation (Scopus)

Abstract

What algorithm to choose for customer segmentation? Should you use one algorithm or many? How many customer segments should you create? How to evaluate the results? In this research, we carry out a systematic literature review to address such central questions in customer segmentation research and practice. The results from extracting information from 172 relevant articles show that algorithmic customer segmentation is the predominant approach for customer segmentation. We found researchers employing 46 different algorithms and 14 different evaluation metrics. For the algorithms, K-means clustering is the most employed. For the metrics, separation-focused metrics are slightly more prevalent than statistics-focused metrics. However, extant studies rarely use domain experts in evaluating the outcomes. Out of the 169 studies that provided details about hyperparameters, more than four out of five used segment size as their only hyperparameter. Typically, studies generate four segments, although the maximum number rarely exceeds twenty, and in most cases, is less than ten. Based on these findings, we propose seven key goals and three practical implications to enhance customer segmentation research and application.
Original languageEnglish
Peer-reviewed scientific journalJournal of Marketing Analytics
Volume11
Issue number4
Pages (from-to)677-692
Number of pages16
ISSN2050-3318
DOIs
Publication statusPublished - 06.07.2023
MoE publication typeA2 Review article in a scientific journal

Keywords

  • 512 Business and Management
  • customer segmentation
  • machine learning
  • AI
  • algorithms

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Leading for growth and well-being

Fingerprint

Dive into the research topics of 'How can algorithms help in segmenting users and customers? A systematic review and research agenda for algorithmic customer segmentation'. Together they form a unique fingerprint.

Cite this