Welcome to the third project of the Machine Learning Engineer Nanodegree! In this notebook, some template code has already been provided for you, and it will be your job to implement the additional functionality necessary to successfully complete this project. Sections that begin with 'Implementation' in the header indicate that the following block of code will require additional functionality which you must provide. Instructions will be provided for each section and the specifics of the implementation are marked in the code block with a 'TODO' statement. Please be sure to read the instructions carefully!
In addition to implementing code, there will be questions that you must answer which relate to the project and your implementation. Each section where you will answer a question is preceded by a 'Question X' header. Carefully read each question and provide thorough answers in the following text boxes that begin with 'Answer:'. Your project submission will be evaluated based on your answers to each of the questions and the implementation you provide.
Note: Code and Markdown cells can be executed using the Shift + Enter keyboard shortcut. In addition, Markdown cells can be edited by typically double-clicking the cell to enter edit mode.
In this project, you will analyze a dataset containing data on various customers' annual spending amounts (reported in monetary units) of diverse product categories for internal structure. One goal of this project is to best describe the variation in the different types of customers that a wholesale distributor interacts with. Doing so would equip the distributor with insight into how to best structure their delivery service to meet the needs of each customer.
The dataset for this project can be found on the UCI Machine Learning Repository. For the purposes of this project, the features 'Channel' and 'Region' will be excluded in the analysis — with focus instead on the six product categories recorded for customers.
Run the code block below to load the wholesale customers dataset, along with a few of the necessary Python libraries required for this project. You will know the dataset loaded successfully if the size of the dataset is reported.
In [2]:
# Import libraries necessary for this project
import numpy as np
import pandas as pd
from IPython.display import display # Allows the use of display() for DataFrames
# Import supplementary visualizations code visuals.py
import visuals as vs
# Pretty display for notebooks
%matplotlib inline
# Load the wholesale customers dataset
try:
data = pd.read_csv("customers.csv")
data.drop(['Region', 'Channel'], axis = 1, inplace = True)
print "Wholesale customers dataset has {} samples with {} features each.".format(*data.shape)
except:
print "Dataset could not be loaded. Is the dataset missing?"
In this section, you will begin exploring the data through visualizations and code to understand how each feature is related to the others. You will observe a statistical description of the dataset, consider the relevance of each feature, and select a few sample data points from the dataset which you will track through the course of this project.
Run the code block below to observe a statistical description of the dataset. Note that the dataset is composed of six important product categories: 'Fresh', 'Milk', 'Grocery', 'Frozen', 'Detergents_Paper', and 'Delicatessen'. Consider what each category represents in terms of products you could purchase.
In [3]:
# Display a description of the dataset
display(data.describe())
To get a better understanding of the customers and how their data will transform through the analysis, it would be best to select a few sample data points and explore them in more detail. In the code block below, add three indices of your choice to the indices list which will represent the customers to track. It is suggested to try different sets of samples until you obtain customers that vary significantly from one another.
In [4]:
# TODO: Select three indices of your choice you wish to sample from the dataset
indices = [15, 45, 30]
# Create a DataFrame of the chosen samples
samples = pd.DataFrame(data.loc[indices], columns = data.keys()).reset_index(drop = True)
print "Chosen samples of wholesale customers dataset:"
display(samples)
# Displaying the percentiles fo the samples for answering Question 1
print 100.0 * data.rank(axis=0, pct=True).iloc[indices].round(decimals=5)
Consider the total purchase cost of each product category and the statistical description of the dataset above for your sample customers.
What kind of establishment (customer) could each of the three samples you've chosen represent?
Hint: Examples of establishments include places like markets, cafes, and retailers, among many others. Avoid using names for establishments, such as saying "McDonalds" when describing a sample customer as a restaurant.
Answer:
Daily farmers market, Or may be a food service type establishment like a restaurant
From the percentile table above, we an see that for sample 1, 'Milk', 'Frozen', and 'Delicatessen' are below 26th percentile while other features like 'Fresh', 'Grocery', and 'Detergents_Paper' are above 44th percentile. It shows that the establishment can be of type small restaurant where 'Fresh' and 'Grocery' items are served and by guess 'Detergents_Paper' atre used for cleaning purposes. The question of higher 'Detergents_Paper' can be raised here, but establishments like 'Michelen Star' restaurants aren't usually big but they have greater emphasis on daily cleaning.
https://en.wikipedia.org/wiki/Michelin_Guide
Big Supermarket
From the percentile table above, we can see that 'Milk', 'Grocery', 'Detergents_Paper', and 'Delicatessen' are above 89th percentile. This is very high. Other item like 'Frozen' is above 53rd percentile, which indicates an average sale. While item 'Fresh' is in 34th percentile. This is below average like in a Supermarket where few 'Fresh' items can be bought. Most of the SUpermerkets receive 'Fresh' items from far distance and they try to preserve them. So sales of 'Fresh' items are usually below average.
Big Supermarket with organic food section
From the percentile table above, we can see that 'Fresh', and 'Grocery' are above 77th percentile. This is above average. Item 'Delicatessen' is above 90th opercentile. This is very high. Item 'Milk' is above 49th percentile indicating average sales. 'Detergent_Paper' in 65th percentile indicating above average sales. While 'Frozen' items is in 40th percentile, with below average sales. I can say this type of establishment have more sales in 'Fresh' item than sample no 2. This is common in Supermarkets which have tie ups with organic farms in local areas.
One interesting thought to consider is if one (or more) of the six product categories is actually relevant for understanding customer purchasing. That is to say, is it possible to determine whether customers purchasing some amount of one category of products will necessarily purchase some proportional amount of another category of products? We can make this determination quite easily by training a supervised regression learner on a subset of the data with one feature removed, and then score how well that model can predict the removed feature.
In the code block below, you will need to implement the following:
new_data a copy of the data by removing a feature of your choice using the DataFrame.drop function.sklearn.cross_validation.train_test_split to split the dataset into training and testing sets.test_size of 0.25 and set a random_state.random_state, and fit the learner to the training data.score function.
In [5]:
# TODO: Make a copy of the DataFrame, using the 'drop' function to drop the given feature - DONE
y = data['Grocery']
new_data = data.drop(['Grocery'], axis = 1) # Above selection of records have lower Frozen attributes.
# TODO: Split the data into training and testing sets using the given feature as the target - DONE
from sklearn.cross_validation import train_test_split
X_train, X_test, y_train, y_test = train_test_split(new_data, y, test_size = 0.25, random_state = 42)
# TODO: Create a decision tree regressor and fit it to the training set - DONE
from sklearn.tree import DecisionTreeRegressor
regressor = DecisionTreeRegressor(random_state = 0)
regressor.fit(X_train, y_train)
# TODO: Report the score of the prediction using the testing set
score = regressor.score(X_test, y_test)
score
Out[5]:
Which feature did you attempt to predict? What was the reported prediction score? Is this feature is necessary for identifying customers' spending habits?
Hint: The coefficient of determination, R^2, is scored between 0 and 1, with 1 being a perfect fit. A negative R^2 implies the model fails to fit the data.
Answer:
| Items | Scores |
|---|---|
| Fresh | -0.33307053360466754 |
| Milk | 0.17343800937900888 |
| Grocery | 0.69924819667537985 |
| Frozen | -0.27824914882385121 |
| Detergents_Paper | 0.34877745469093757 |
| Delicatessen | -11.023627900466764 |
To get a better understanding of the dataset, we can construct a scatter matrix of each of the six product features present in the data. If you found that the feature you attempted to predict above is relevant for identifying a specific customer, then the scatter matrix below may not show any correlation between that feature and the others. Conversely, if you believe that feature is not relevant for identifying a specific customer, the scatter matrix might show a correlation between that feature and another feature in the data. Run the code block below to produce a scatter matrix.
In [6]:
# Produce a scatter matrix for each pair of features in the data
pd.scatter_matrix(data, alpha = 0.3, figsize = (14,8), diagonal = 'kde');
Are there any pairs of features which exhibit some degree of correlation? Does this confirm or deny your suspicions about the relevance of the feature you attempted to predict? How is the data for those features distributed?
Hint: Is the data normally distributed? Where do most of the data points lie?
Answer:
Check the heat map below, it shows the relevance in my prediction.
In [7]:
import seaborn as sns
sns.heatmap(data.corr(), annot=True);
In this section, you will preprocess the data to create a better representation of customers by performing a scaling on the data and detecting (and optionally removing) outliers. Preprocessing data is often times a critical step in assuring that results you obtain from your analysis are significant and meaningful.
If data is not normally distributed, especially if the mean and median vary significantly (indicating a large skew), it is most often appropriate to apply a non-linear scaling — particularly for financial data. One way to achieve this scaling is by using a Box-Cox test, which calculates the best power transformation of the data that reduces skewness. A simpler approach which can work in most cases would be applying the natural logarithm.
In the code block below, you will need to implement the following:
log_data after applying logarithmic scaling. Use the np.log function for this.log_samples after applying logarithmic scaling. Again, use np.log.
In [8]:
# TODO: Scale the data using the natural logarithm - DONE
log_data = np.log(data.copy())
# TODO: Scale the sample data using the natural logarithm - DONE
log_samples = np.log(samples.copy())
# Produce a scatter matrix for each pair of newly-transformed features
pd.scatter_matrix(log_data, alpha = 0.3, figsize = (14,8), diagonal = 'kde');
After applying a natural logarithm scaling to the data, the distribution of each feature should appear much more normal. For any pairs of features you may have identified earlier as being correlated, observe here whether that correlation is still present (and whether it is now stronger or weaker than before).
Run the code below to see how the sample data has changed after having the natural logarithm applied to it.
In [9]:
# Display the log-transformed sample data
display(log_samples)
Detecting outliers in the data is extremely important in the data preprocessing step of any analysis. The presence of outliers can often skew results which take into consideration these data points. There are many "rules of thumb" for what constitutes an outlier in a dataset. Here, we will use Tukey's Method for identfying outliers: An outlier step is calculated as 1.5 times the interquartile range (IQR). A data point with a feature that is beyond an outlier step outside of the IQR for that feature is considered abnormal.
In the code block below, you will need to implement the following:
Q1. Use np.percentile for this.Q3. Again, use np.percentile.step.outliers list.NOTE: If you choose to remove any outliers, ensure that the sample data does not contain any of these points!
Once you have performed this implementation, the dataset will be stored in the variable good_data.
In [10]:
# For each feature find the data points with extreme high or low values
for feature in log_data.keys():
# TODO: Calculate Q1 (25th percentile of the data) for the given feature
Q1 = np.percentile(log_data[feature], 25)
# TODO: Calculate Q3 (75th percentile of the data) for the given feature
Q3 = np.percentile(log_data[feature], 75)
# TODO: Use the interquartile range to calculate an outlier step (1.5 times the interquartile range)
step = (Q3 - Q1) * 1.5
# Display the outliers
print "Data points considered outliers for the feature '{}':".format(feature)
display(log_data[~((log_data[feature] >= Q1 - step) & (log_data[feature] <= Q3 + step))])
# OPTIONAL: Select the indices for data points you wish to remove
outliers = [65, 66, 75, 128, 154]
# Remove the outliers, if any were specified
good_data = log_data.drop(log_data.index[outliers]).reset_index(drop = True)
Answer:
In this section you will use principal component analysis (PCA) to draw conclusions about the underlying structure of the wholesale customer data. Since using PCA on a dataset calculates the dimensions which best maximize variance, we will find which compound combinations of features best describe customers.
Now that the data has been scaled to a more normal distribution and has had any necessary outliers removed, we can now apply PCA to the good_data to discover which dimensions about the data best maximize the variance of features involved. In addition to finding these dimensions, PCA will also report the explained variance ratio of each dimension — how much variance within the data is explained by that dimension alone. Note that a component (dimension) from PCA can be considered a new "feature" of the space, however it is a composition of the original features present in the data.
In the code block below, you will need to implement the following:
sklearn.decomposition.PCA and assign the results of fitting PCA in six dimensions with good_data to pca.log_samples using pca.transform, and assign the results to pca_samples.
In [11]:
# TODO: Apply PCA by fitting the good data with the same number of dimensions as features - DONE
from sklearn.decomposition import PCA
pca = PCA(n_components=6) # since we have six features ie n_components <= max_features
pca.fit(good_data)
# TODO: Transform log_samples using the PCA fit above
pca_samples = pca.transform(log_samples)
# Generate PCA results plot
pca_results = vs.pca_results(good_data, pca)
np.cumsum(pca.explained_variance_ratio_)
Out[11]:
How much variance in the data is explained in total by the first and second principal component? What about the first four principal components? Using the visualization provided above, discuss what the first four dimensions best represent in terms of customer spending.
Hint: A positive increase in a specific dimension corresponds with an increase of the positive-weighted features and a decrease of the negative-weighted features. The rate of increase or decrease is based on the indivdual feature weights.
Answer:
Run the code below to see how the log-transformed sample data has changed after having a PCA transformation applied to it in six dimensions. Observe the numerical value for the first four dimensions of the sample points. Consider if this is consistent with your initial interpretation of the sample points.
In [12]:
# Display sample log-data after having a PCA transformation applied
display(pd.DataFrame(np.round(pca_samples, 4), columns = pca_results.index.values))
When using principal component analysis, one of the main goals is to reduce the dimensionality of the data — in effect, reducing the complexity of the problem. Dimensionality reduction comes at a cost: Fewer dimensions used implies less of the total variance in the data is being explained. Because of this, the cumulative explained variance ratio is extremely important for knowing how many dimensions are necessary for the problem. Additionally, if a signifiant amount of variance is explained by only two or three dimensions, the reduced data can be visualized afterwards.
In the code block below, you will need to implement the following:
good_data to pca.good_data using pca.transform, and assign the results to reduced_data.log_samples using pca.transform, and assign the results to pca_samples.
In [13]:
# TODO: Apply PCA by fitting the good data with only two dimensions - DONE
pca = PCA(n_components=2)
pca.fit(good_data)
# TODO: Transform the good data using the PCA fit above -DONE
reduced_data = pca.transform(good_data)
# TODO: Transform log_samples using the PCA fit above - DONE
pca_samples = pca.transform(log_samples)
# Create a DataFrame for the reduced data
reduced_data = pd.DataFrame(reduced_data, columns = ['Dimension 1', 'Dimension 2'])
In [14]:
# Display sample log-data after applying PCA transformation in two dimensions
display(pd.DataFrame(np.round(pca_samples, 4), columns = ['Dimension 1', 'Dimension 2']))
A biplot is a scatterplot where each data point is represented by its scores along the principal components. The axes are the principal components (in this case Dimension 1 and Dimension 2). In addition, the biplot shows the projection of the original features along the components. A biplot can help us interpret the reduced dimensions of the data, and discover relationships between the principal components and original features.
Run the code cell below to produce a biplot of the reduced-dimension data.
In [15]:
# Create a biplot
vs.biplot(good_data, reduced_data, pca)
Out[15]:
Once we have the original feature projections (in red), it is easier to interpret the relative position of each data point in the scatterplot. For instance, a point the lower right corner of the figure will likely correspond to a customer that spends a lot on 'Milk', 'Grocery' and 'Detergents_Paper', but not so much on the other product categories.
From the biplot, which of the original features are most strongly correlated with the first component? What about those that are associated with the second component? Do these observations agree with the pca_results plot you obtained earlier?
Answer: Observation results
In this section, you will choose to use either a K-Means clustering algorithm or a Gaussian Mixture Model clustering algorithm to identify the various customer segments hidden in the data. You will then recover specific data points from the clusters to understand their significance by transforming them back into their original dimension and scale.
Answer:
Advantages of K-Means clustering algorithm
It's less expensive, easy to implement, clusters are cleary defined, and choosing appropriate number of clusters increases efficiency.Advantages of Gaussian Mixture Models clustering algorithm
It's relaxed, as it allows points to be in multiple groups. Can be efficient if it can identify the hidden layer of dependencies.
Which algorithm to use from above two and why
Here we need clearly defined clusters for efficient results. So I chose K-Means since it's fast.
In [25]:
from sklearn.mixture import GMM
from sklearn.cluster import KMeans
import matplotlib.pyplot as plt
## Following CODE SOURCE is an Unknown Udacity Reviewer- Thanks!
import time
n = 1000
k = 6
kmeans_train_times = []
for k in xrange(1, 7):
cum_time = 0.
for i in xrange(n):
start = time.time()
KMeans(n_clusters=k).fit(reduced_data)
cum_time += (time.time() - start)
train_time = cum_time / n
kmeans_train_times.append([k, train_time])
km_df = pd.DataFrame(kmeans_train_times, columns=['KM_Clusters', 'KM_Time'])
gmm_train_times = []
for k in xrange(1, 7):
cum_time = 0.
for i in xrange(n):
start = time.time()
GMM(n_components=k).fit(reduced_data)
cum_time += (time.time() - start)
train_time = cum_time / n
gmm_train_times.append([k, train_time])
gmm_df = pd.DataFrame(gmm_train_times, columns=['GMM_Components', 'GMM_Time'])
times_df = km_df.join(gmm_df)
plt.plot(times_df.GMM_Components, times_df.GMM_Time * 1000., label='GMM Train Time')
plt.plot(times_df.GMM_Components, times_df.KM_Time * 1000., label='Kmeans Train Time')
plt.legend(loc='best')
plt.ylabel('Train time (in millisec.)')
plt.xlabel('Cluster/Components Used in Training')
plt.title('Training Time for Different Cluster/Component Sizes \n Averaged Over {} Runs Per Size'.format(n))
plt.show()
Depending on the problem, the number of clusters that you expect to be in the data may already be known. When the number of clusters is not known a priori, there is no guarantee that a given number of clusters best segments the data, since it is unclear what structure exists in the data — if any. However, we can quantify the "goodness" of a clustering by calculating each data point's silhouette coefficient. The silhouette coefficient for a data point measures how similar it is to its assigned cluster from -1 (dissimilar) to 1 (similar). Calculating the mean silhouette coefficient provides for a simple scoring method of a given clustering.
In the code block below, you will need to implement the following:
reduced_data and assign it to clusterer.reduced_data using clusterer.predict and assign them to preds.centers.pca_samples and assign them sample_preds.sklearn.metrics.silhouette_score and calculate the silhouette score of reduced_data against preds.score and print the result.
In [16]:
from sklearn.metrics import silhouette_score
from sklearn.cluster import KMeans
# TODO: Apply your clustering algorithm of choice to the reduced data - DONE
for i in range(2, 10):
clusterer = KMeans(i).fit(reduced_data)
# TODO: Predict the cluster for each data point - DONE
preds = clusterer.predict(reduced_data)
# TODO: Find the cluster centers - DONE
centers = clusterer.cluster_centers_
# TODO: Predict the cluster for each transformed sample data point - DONE
sample_preds = clusterer.predict(pca_samples)
# TODO: Calculate the mean silhouette coefficient for the number of clusters chosen - DONE
score = silhouette_score(reduced_data, preds)
print "Silhouette score for ", i ," clusters is: ", score
Answer:
Report
Silhouette score for 2 clusters is: 0.426281015469
Silhouette score for 3 clusters is: 0.390834597182
Silhouette score for 4 clusters is: 0.332930419681
Silhouette score for 5 clusters is: 0.349997797526
Silhouette score for 6 clusters is: 0.36082051323
Silhouette score for 7 clusters is: 0.358946330801
Silhouette score for 8 clusters is: 0.349106116932
Silhouette score for 9 clusters is: 0.359870845719
In [17]:
# So choosing k-Means 2
clusterer = KMeans(2).fit(reduced_data)
preds = clusterer.predict(reduced_data)
centers = clusterer.cluster_centers_
sample_preds = clusterer.predict(pca_samples)
score = silhouette_score(reduced_data, preds)
Once you've chosen the optimal number of clusters for your clustering algorithm using the scoring metric above, you can now visualize the results by executing the code block below. Note that, for experimentation purposes, you are welcome to adjust the number of clusters for your clustering algorithm to see various visualizations. The final visualization provided should, however, correspond with the optimal number of clusters.
In [18]:
# Display the results of the clustering from implementation
vs.cluster_results(reduced_data, preds, centers, pca_samples)
Each cluster present in the visualization above has a central point. These centers (or means) are not specifically data points from the data, but rather the averages of all the data points predicted in the respective clusters. For the problem of creating customer segments, a cluster's center point corresponds to the average customer of that segment. Since the data is currently reduced in dimension and scaled by a logarithm, we can recover the representative customer spending from these data points by applying the inverse transformations.
In the code block below, you will need to implement the following:
centers using pca.inverse_transform and assign the new centers to log_centers.np.log to log_centers using np.exp and assign the true centers to true_centers.
In [26]:
# TODO: Inverse transform the centers - DONE
log_centers = pca.inverse_transform(centers)
# TODO: Exponentiate the centers
true_centers = np.exp(log_centers)
# Display the true centers
segments = ['Segment {}'.format(i) for i in range(0,len(centers))]
true_centers = pd.DataFrame(np.round(true_centers), columns = data.keys())
true_centers.index = segments
display(true_centers)
display(data.describe())
true_centers = true_centers.append(data.describe().ix['50%'])
true_centers = true_centers.append(data.describe().ix['mean'])
true_centers.plot(kind = 'bar', figsize = (16, 4))
Out[26]:
Consider the total purchase cost of each product category for the representative data points above, and reference the statistical description of the dataset at the beginning of this project. What set of establishments could each of the customer segments represent?
Hint: A customer who is assigned to 'Cluster X' should best identify with the establishments represented by the feature set of 'Segment X'.
Answer:
The two clusters show the spending trend of the customers.
Cluster 0 represents customer spending below the median in 'Milk', 'Grocery', and 'Detergents_Paper' categories. Customers in this segment spend more on 'Fresh' items. So this type of establishment can be a farmers market or a food service unit like a restaurant. I would justify it to be a restaurant based upon the use of 'Frozen' items, since its sales is higher than the median. Farmers markets rarely sell 'Frozen' items.
Cluster 1 represents customer spending above the median in 'Milk', 'Grocery', and 'Detergents_Paper' categories. This is entirely opposite of spending pattern of a customers who belongs to Cluster 0. Customers in this segment spend more on 'Grocery' items. So this type of establishment could be a Supermarket. I would justify this choice since it has above the median sales in 'Delicatessen' items but below the median sales in 'Fresh' items. Because most Supermarkets stores items for longer time than an extablishment like a restaurant.
In [20]:
# Display the predictions
for i, pred in enumerate(sample_preds):
print "Sample point", i, "predicted to be in Cluster", pred
# Following code source is an Unknown Udacity Reviewer. Thanks!
for i, pred in enumerate(sample_preds):
print "Sample point", i, "predicted to be in Cluster", pred
print 'The distance between sample point {} and center of cluster {}:'.format(i, pred)
print (samples.iloc[i] - true_centers.iloc[pred])
Answer: Check the 'Cluster Visualization' picture shown above. It shows the pca_samples(ie sample points 0, 1, and 2) as 'x' in the plot.
Sample Point 0 is shown in cluster 0 marked as 'x' among the red points. It's in the cluster 0 boundary where most of the red points are located. So it verifies concretely that my prediction of a small farmers market or any food service establishments like a restaurant is correct. In cluster 0(or Segment 0), 'Milk', 'Grocery', and 'Detergents_Paper' are usually sold in higher rate(shown in 'Visualizing a Biplot' graph). Sample 0 have the following values 1114(true center at 1897.0), 3821(true center at 2477.0), 964(true center at 294.0) for 'Milk', 'Grocery', and 'Detergents_Paper' respectively.
Sample Point 1 is shown in cluster 1 marked as one of the 'x' among the pink points. It's in the cluster 1 boundary where most of the pink points are located. So it verifies concretely that my prediction of sample point 1 of being a Supermarket is correct. In sample 1, every feature excpet 'Fresh' are sold higher than average. For example, values of 'Fresh', 'Milk', 'Grocery', 'Frozen', 'Detergents_Paper', and 'Delicatessen, are 5181(true center at 4005.0), 22044(true center at 7900.0), 21531(true center at 12104.0), 1740(true center at 952.0), 7353(true center at 4561.0), 4985(true center at 1036.0).
Sample Point 2 is shown in cluster 1 marked as one of the 'x' among the pink points. It's in the cluster 1 boundary where most of the pink points are located. So it verifies concretely that my prediction of sample point 2 of being a Supermarket with organic food section is correct. In sample 2, all features are sold higher than average. For example, values of 'Fresh', 'Milk', 'Grocery', 'Frozen', 'Detergents_Paper', and 'Delicatessen, are 18815(true center at 4005.0), 3610(true center at 7900.0), 11107(true center at 12104.0), 1148(true center at 952.0), 2134(true center at 4561.0), 2963(true center at 1036.0).
In this final section, you will investigate ways that you can make use of the clustered data. First, you will consider how the different groups of customers, the customer segments, may be affected differently by a specific delivery scheme. Next, you will consider how giving a label to each customer (which segment that customer belongs to) can provide for additional features about the customer data. Finally, you will compare the customer segments to a hidden variable present in the data, to see whether the clustering identified certain relationships.
Companies will often run A/B tests when making small changes to their products or services to determine whether making that change will affect its customers positively or negatively. The wholesale distributor is considering changing its delivery service from currently 5 days a week to 3 days a week. However, the distributor will only make this change in delivery service for customers that react positively. How can the wholesale distributor use the customer segments to determine which customers, if any, would react positively to the change in delivery service?
Hint: Can we assume the change affects all customers equally? How can we determine which group of customers it affects the most?
Answer:
https://en.wikipedia.org/wiki/Welch%27s_t-test https://en.wikipedia.org/wiki/P-value
No, the changes won't affect a;; customers equally. For example, working people can go to a market accordingly, even if the store does not have an item for purchase. But establishments in Food Service, depend upon constant supplies, without proper delivery schedule, there will be negative effects in customer service.
Yes, we can determine which customer is affacted the most, using the p-values. If any one of the p-value of segmenst A and B changes significantly, then it indicates that segments is affected by the delivery service.
Additional structure is derived from originally unlabeled data when using clustering techniques. Since each customer has a customer segment it best identifies with (depending on the clustering algorithm applied), we can consider 'customer segment' as an engineered feature for the data. Assume the wholesale distributor recently acquired ten new customers and each provided estimates for anticipated annual spending of each product category. Knowing these estimates, the wholesale distributor wants to classify each new customer to a customer segment to determine the most appropriate delivery service.
How can the wholesale distributor label the new customers using only their estimated product spending and the customer segment data?
Hint: A supervised learner could be used to train on the original customers. What would be the target variable?
Answer: We can use K-Means to classify the customers to their appropriate clusters. Then we can run any supervised algorithm to identify their delivery methods. Here the target variable(or label) can be the segments 0 and 1. We can then use the ten new customers as test set for classification. Since we have already chosen a delivery method for segments 0 and 1 using the A/B test results, classfying the ten new customer is the only task left behind.
At the beginning of this project, it was discussed that the 'Channel' and 'Region' features would be excluded from the dataset so that the customer product categories were emphasized in the analysis. By reintroducing the 'Channel' feature to the dataset, an interesting structure emerges when considering the same PCA dimensionality reduction applied earlier to the original dataset.
Run the code block below to see how each data point is labeled either 'HoReCa' (Hotel/Restaurant/Cafe) or 'Retail' the reduced space. In addition, you will find the sample points are circled in the plot, which will identify their labeling.
In [21]:
# Display the clustering results based on 'Channel' data
vs.channel_results(reduced_data, outliers, pca_samples)
How well does the clustering algorithm and number of clusters you've chosen compare to this underlying distribution of Hotel/Restaurant/Cafe customers to Retailer customers? Are there customer segments that would be classified as purely 'Retailers' or 'Hotels/Restaurants/Cafes' by this distribution? Would you consider these classifications as consistent with your previous definition of the customer segments?
Answer:
Note: Once you have completed all of the code implementations and successfully answered each question above, you may finalize your work by exporting the iPython Notebook as an HTML document. You can do this by using the menu above and navigating to
File -> Download as -> HTML (.html). Include the finished document along with this notebook as your submission.