Using segment level stability to select target segments in data-driven market segmentation studies

• Published in: Marketing letters Vol. 28; no. 3; pp. 423 - 436
• Main Authors: Dolnicar, Sara, Leisch, Friedrich
• Format: Journal Article
• Language: English
• Published: New York Springer 01.09.2017; Springer US; Springer Nature B.V
• Subjects: Business and Management; Cluster analysis; Consumers; Market segmentation; Marketing; Niche marketing; Cluster analysis; Market segmentation; Niche segments; Bootstrap
• ISSN: 0923-0645; 1573-059X
• DOI: 10.1007/s11002-017-9423-8

Market segmentation is widely used by industry to select the most promising target segment. Most organisations are interested in finding one or a small number of target segments to focus on. Yet, traditional criteria used to select a segmentation solution assess the global quality of the segmentation solution. This approach comes at the risk of selecting a segmentation solution with good overall quality criteria which, however, does not contain groups of consumers representing particularly attractive target segments. The approach we propose helps managers to identify segmentation solutions containing attractive individual segments (e.g., more profitable), irrespective of the quality of the global segmentation solution. We demonstrate the functioning of the newly proposed criteria using two empirical data sets. The new criteria prove to be able to identify segmentation solutions containing individual attractive segments which are not detected using traditional quality criteria for the overall segmentation solution.