Research on Segmenting E-Commerce Customer through an Improved K-Medoids Clustering Algorithm

In view of the shortcomings of traditional clustering algorithms in feature selection and clustering effect, an improved Recency, Frequency, and Money (RFM) model is introduced, and an improved K-medoids algorithm is proposed. Above model and algorithm are employed to segment customers of e-commerce. First, traditional RFM model is improved by adding two features of customer consumption behavior. Second, in order to overcome the defect of setting K value artificially in traditional K-medoids algorithm, the Calinski-Harabasz (CH) index is introduced to determine the optimal number of clustering. Meanwhile, K-medoids algorithm is optimized by changing the selection of centroids to avoid the influence of noise and isolated points. Finally, empirical research is done using a dataset from an e-commerce platform. The results show that our improved K-medoids algorithm can improve the efficiency and accuracy of e-commerce customer segmentation.