Marketing wants to segment customers for targeted campaigns. How would you build the segmentation, and how would you know it is useful?
What the interviewer wants to hear
- Starts from the decision the segments will drive
- Begins with simple rules such as RFM before clustering
- Handles feature scaling and interpretability if clustering
- Checks segments are stable, sizeable and different in behaviour
- Validates usefulness through campaign tests
Model answer
I begin with the decision: are we choosing offers, channels or budget per segment? That decides which features matter. Often a simple RFM model, using recency, frequency and monetary value scored into bands, gives clear and explainable groups like "loyal high spenders" or "lapsing one-time buyers". If we need richer patterns, I try clustering such as k-means on scaled features like order frequency, basket size, categories and discount use, and I pick the number of clusters by both statistics and whether the groups make business sense. A useful segmentation has groups that are large enough to target, clearly different in behaviour, and stable when I rerun it on another month. The real test is impact: I would run campaigns where each segment gets a tailored message versus a generic one, and measure the lift per segment.
Can you answer it under time pressure?
Take a timed hard round and get scored on every answer.
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