Title: Cluster Analysis Author: Kriko Published: May 26, 2023 Last modified: Jul 7, 2026 --- 1. [Home](https://kriko.io/) / 2. [Glossary](https://kriko.io/glossary) / 3. C Letter # Cluster Analysis **Cluster analysis** is a statistical method used to group [data](https://kriko.io/services/data-analysis-insight) points with similar characteristics. Also known as clustering, the method aims to create groups in which observations within the same cluster are similar, while observations in different clusters are as distinct as possible. It can therefore reveal natural groupings, relationships and patterns within a dataset. Cluster analysis is commonly applied when predefined class labels are not available. The method is used in customer segmentation, image analysis, bioinformatics, [data](https://kriko.io/services/data-analysis-insight) mining, pattern discovery and anomaly detection. Businesses may group customers according to purchasing behaviour, demographic characteristics or engagement levels. Researchers can identify similar observations within large datasets and determine areas that require further investigation. Clustering may support the development of new hypotheses, but it does not confirm an existing hypothesis on its own. Cluster analysis is generally considered an **unsupervised learning** method. The model attempts to identify similarities within the [data](https://kriko.io/services/data-analysis-insight) without relying on predefined correct answers or class labels. However, some algorithms require the number of clusters to be selected in advance. For example, K-Means requires a predefined number of clusters, while hierarchical or density-based methods may reveal clusters according to the structure of the data. Clustering is different from classification. In classification, a model uses labelled examples to assign new observations to known categories. In cluster analysis, categories are not defined in advance and similar observations are grouped by the algorithm. The resulting clusters therefore often require interpretation by subject-matter experts. A successful clustering result should show high similarity among observations within the same cluster and low similarity between separate clusters. Results may vary according to the distance measure, selected variables, [data](https://kriko.io/services/data-analysis-insight) scaling and algorithm parameters. Incomplete, inaccurate or poorly scaled [data](https://kriko.io/services/data-analysis-insight) may produce misleading groups. [Data](https://kriko.io/services/data-analysis-insight) preparation and variable selection should therefore be managed carefully before the analysis begins. Cluster analysis may use partitioning, hierarchical, density-based, grid-based, model-based and constraint-based methods. K-Means is an example of a partitioning method, while DBSCAN is a density-based algorithm. Hierarchical clustering presents relationships between observations through a tree-like structure. The appropriate method should be selected according to the volume and structure of the [data](https://kriko.io/services/data-analysis-insight), expected cluster shapes and analytical objective. Cluster analysis can also support the identification of outliers and unusual behaviour. [Data](https://kriko.io/services/data-analysis-insight) points that remain distant from other observations or do not belong strongly to any cluster may be treated as anomalies. However, an outlier does not automatically indicate an error or fraudulent activity and should be evaluated within its context. 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