Customer Segmentation Using the RFMD Model and Fuzzy C-Means Algorithm

Many businesses face challenges in optimizing customer data processing, which often limits the ability to understand customer behavior and improve marketing strategies. This research addresses these challenges by applying the RFMD (Recency, Frequency, Monetary, Diversity) model combined with the Fuzzy C-Means (FCM) clustering algorithm to segment customers based on transaction data. The results identified five distinct customer segments based on Customer portfolio Analysis (CPA), which were validated using the Davies-Bouldin Index (DBI), with each segment showing diverse levels of engagement and behavioral patterns. The results show that the best clusters of Superstar and Golden customers are clusters 4 and 2, while Typical and Occasional customers are clusters 1 and 3. The lowest cluster of Everyday customers is found in cluster 5. The findings provide applicable insights to improve customer retention and optimize data-driven marketing strategies.