RETAIL BLOG

Subscribe To Our Weekly Newsletter

Subscribe Here!

Featured Post

Recent Posts

How Cluster Mapping Can Help Your Business Succeed

Blog banner-01-01

You can use cluster mapping to help your business understand the geographic spread of your clusters in relation to your cluster input variables and the external environment. This practice gives you in-depth insights and a visual representation of your store groupings to help you make informed strategic decisions. But what exactly is cluster mapping? Is this something your business should be using? And how can you get started?

Icons-01 (6)
 
What is cluster mapping? [And how does it work?]

Cluster mapping is the process of plotting your clusters visually onto a map after you have completed a cluster analysis. To do this, you could manually place each cluster on its geographic location or use computer software for a more accurate, responsive and interactive analysis.

Cluster Mapping map

You can also use cluster mapping to measure the presence, size and performance of your category-based clusters over a specific region. You would typically map your clusters after completing a geographic cluster analysis. This would help you to see which stores fall into each cluster and where they are located in relation to one another.

Cluster mapping not only provides you with insights into the geography of the stores within your clusters, but you can also use it to compare the other cluster analysis inputs you select. You can see in the image below that if you selected sales as an input variable, you could compare the sales per geographic area to each cluster. Cluster A is shown in red, Cluster B, in blue and so on.

Africa Cluster Mapping

When we break down the term ‘cluster mapping’, it is basically a way to quantitatively measure the input variables you select across the geographic reach of your business. This technique helps you to determine the size of your clusters and understand what defines them.

This data-driven process will help you to understand the impact or significance of relationships between local environments and clusters. However, it is important to note that cluster mapping does not describe the dynamics and patterns within each cluster; that would fall under the cluster profiling process.

Icons-02 (7)
 
Who should do a cluster mapping exercise? [And why should they do it?]

If you’re a retailer who wants to assess and understand the distribution of your stores across their geographical reach, you would benefit from cluster mapping. This may assist you to make decisions about product assortments, new store ventures and market opportunities.

If you’re a supplier, you may benefit from cluster mapping as this would visually display the different retailers that you provide with products. This practice will also give you information about which stores fall within the same cluster.

For example, a liquor supplier may provide products to various food retailers across the country. In this case, different retailers’ store branches may fall within the same cluster because these stores have similar locations, performance data or shopper purchasing patterns.

In both retailers and suppliers, clustering can be used across business functions. This means that many role players will need to understand how this process works and what the results of each cluster analysis mean. By visually plotting each cluster onto a map, this will facilitate stakeholder understanding of what a cluster is, why certain stores are grouped together, and what makes them different from one another. Once you understand the basics of cluster analysis, you can use cluster mapping for more in-depth analysis which can assist each role player in their function.

Icons-03 (5)
 
How to create a cluster map

You can break the cluster mapping process into three steps.

1. Create your clusters and define them

First, you should select a suitable clustering algorithm tailored to your market environment and assess your access to different data sources. After this point, you can select a clustering method/s that will help you to achieve your business goals. When you work with cluster mapping, it is advisable that you use your geographic location as one of the input variables for the cluster analysis. You can still conduct a multivariate cluster analysis using other inputs such as performance data or demographic variables.

Once you have created your category-based clusters, you can begin to create your cluster map. This process should be represented on a map of the area you would like to work with to facilitate improved understanding and clear analysis between clusters. It is important that you aim to create clear definitions of each cluster that can be used to compare them against each other as well as the market/economic climate in which they were formed.

Something to watch out for at this step is map overloading. When you use a computer-based system to map your clusters, there may be too many clusters in an area for you to understand the difference between them. At this point, you should be using a map that can scroll inwards to a smaller geographic area such as a town or suburb.

2. Apply your cluster definitions to the geographic area

When you compare your clusters, the definition of each must be considered alongside the market environment and economic conditions of the area. You can place this information in a table to make it easier to understand and compare. You can display each cluster at the top of a column with each input variable on a row. This will allow you to understand the composition of each cluster and how your clusters differ from each other.

3. Analyse your mapped cluster data

You can then use the cluster mapping data to generate insights into the role of each cluster in the region’s economy, competitive environment and overall input criteria such as demographics.

Conclusion

Cluster mapping is an innovative way to view, understand and analyse your geographic clusters. This information can help you to identify opportunities and make strategic decisions based on the insights generated from this process.

Looking for assistance to create a cluster map and understand how to compare your clusters? Let DotActiv help. Find out more about our clustering services here or book a meeting here.

Erin Hodgson

Cluster Development Manager at DotActiv

CTA-04-1

 

Activ8 Sign Up page

 

 

From Facebook