An Approach to Customer Community Discovery

In the paper, a new multi-level hybrid method of community detection combining a density-based clustering with a label propagation method is proposed. Many algorithms have been applied to preprocess, visualize, cluster, and interpret the data describing customer behavior, among others DBSCAN, RFM, k-NN, UMAP, LPA. In the paper, two key algorithms have been detailed: DBSCAN and LPA. DBSCAN is a density-based clustering algorithm. However, managers usually find the clustering results too difficult to interpret and apply. To enhance the business value of clustering and create customer communities, the label propagation algorithm (LPA) has been proposed due to its quality and low computational complexity. The approach is validated on real life marketing database using advanced analytics platform Upsaily.