Frederick Squab Brokerage (FSB) offers online securities trading and other services, such as financial planning and portfolio management. It is considering following the lead of competitors that segment their customers and focus marketing efforts. FSB believes that its customers can be segmented by the equally important attributes of account balance, trading frequency, and purchase of other services. These represent major uses of resources to serve customers and drivers of revenue. Following are the data from a random sample of 30 FSB customers.”

Random Sample of Customers Customer Account Balance Trades/Year Other Services 1 $29,396 isis) 0 2 85,679 30 i 3 11,027 Aq 6 4 50,512 3 0)

5) 20,960 164 13 6 17,674 16 11 if 18,026 10 3 8 32,546 49 11

© ie wes 172 4 10 4,370 20 2 Wl 42,881 135 1 12 23,988 38 8 13 35,950 24 6 14 26,398 12 0 Random Sample of Customers Customer Account Balance Trades/Year Other Services 1.8 28,470 ill 19 16 42,749 92 O We 604 14 |
18 54,789 120 2 19 86,367 171 We 20 22,192 3 1 21 Wo) li 40 8 22 (2,023 Al 3 28 23,609 52 5 24 25,076 8 1 25) 65,984 59 16 26 50,003 107 4 a7 897 6 O 28 3,455 47 10 29 61,743 138 9 30 Sil 5/91 30 3 Complete the following in small groups.
Required

a. Use this information to develop numerical scores for each customer attribute by classifying customers into no more than four categories within each attribute (e.g., scoring 5 1, 2, 3, or 4). (Hint:
Enter the data into a spreadsheet, such as Excel, and then plot each customer attribute and look for “natural” cutoffs for categories. Note: This is somewhat subjective but critically important to this type of analysis.)

b. Add individual attribute scores to obtain overall scores. Use overall scores to segment customers into no more than three categories (A 5 best, B 5 middle, and C 5 worst). You must judge where to make cutoffs here, too.

c. Express any concerns you have about this classification. How can you improve it or validate it