Market Segmentation Using Models of Multidimensional Purchasing Behavior

MARKET segmentation has become a widely discussed concept among both managers and researchers. Conceptually, a strategy of market segmentation involves the development and implementation of different marketing programs for different components of the overall market. Products and advertising copy can be specially designed to appeal to the particular preferences of each segment, while promotion (e.g., couponing and sampling) and media selection can be geared to each segment's demographic characteristics and media habits. However, to translate the concept of market segmentation into a profitable managerial strategy, it is necessary to define segments that exhibit differing responses to changes in the firm's marketing mix variables. It is also desirable to be able to identify each segment in terms of customer characteristics. A review of existing market segmentation approaches indicates that no single approach fulfills the above segmentation criteria adequately. Therefore, this article presents a different approach, one that could lead to a more profitable segmentation strategy. After a review of the literature, the new segmentation approach is described in detail. The feasibility of the approach is illustrated by an analysis of a set of panel data on aluminum foil purchases. The final section of the article presents a discussion of how the proposed segmentation approach can help companies develop effective marketing strategies. Literature Review