Modeling Hedonic Portfolio Products: A Joint Segmentation Analysis of Music Compact Disc Sales

The authors present a framework that enables researchers to differentiate better among a wide array of hedonic products. Specifically, the authors define and discuss characteristics of hedonic portfolio products and offer a joint segmentation model that is appropriate for understanding the sales dynamics of this class of products. The model offered in this article can accommodate a large degree of product heterogeneity through product clusters and model covariates. The basic premise is that several generic consumer segments exist and remain fixed across all albums, and each album (or each cluster of similar albums) can be viewed as drawing different proportions from each of these underlying segments. The authors also allow explanatory variables to have a differential impact on both components of the model—that is, accelerating purchase rates within a consumer segment and changing the proportions drawn from each consumer segment by each product cluster—thereby expanding or contracting the potential market size. The authors apply this model to music compact disc sales for 20 different albums and discuss the different effects of radio airplay and holiday buying on sales for a sample in the music industry.