ABC, a chain of retail stores, segments its customers based on two criteria: the distance they have to travel to visit the store and the amount of their purchase. (2) XYX, another chain of retail stores, segments its customers based on the basket of products they purchase. Most likely, the businesses are using the following segmentation technique:

Both are defining segments using known characteristics.

Both are discovering naturally existing groups using clustering.

(1) is defining segments using known characteristics, and (2) is discovering naturally existing groups using clustering.

(1) is discovering naturally existing groups using clustering, and (2) is defining segments using known characteristics.