Market Segmentation Analysis by Sara Dolnicar & Bettina Grün & Friedrich Leisch

Author:Sara Dolnicar & Bettina Grün & Friedrich Leisch
Language: eng
Format: epub
ISBN: 9789811088186
Publisher: Springer Singapore

7.5 Data Structure Analysis

Extracting market segments is inherently exploratory, irrespective of the extraction algorithm used. Validation in the traditional sense, where a clear optimality criterion is targeted, is therefore not possible. Ideally, validation would mean calculating different segmentation solutions, choosing different segments, targeting them, and then comparing which leads to the most profit, or most success in mission achievement. This is clearly not possible in reality because one organisation cannot run multiple segmentation strategies simultaneously just for the sake of determining which performs best.

As a consequence, the term validation in the context of market segmentation is typically used in the sense of assessing reliability or stability of solutions across repeated calculations (Choffrey and Lilien 1980; Doyle and Saunders 1985) after slightly modifying the data (Funkhouser 1983; Jurowski and Reich 2000; Calantone and Sawyer 1978; Hoek et al. 1996), or the algorithm (Esslemont and Ward 1989; Hoek et al. 1996). This approach is fundamentally different from validation using an external validation criterion. Throughout this book, we refer to this approach as stability-based data structure analysis.

Data structure analysis provides valuable insights into the properties of the data. These insights guide subsequent methodological decisions. Most importantly, stability-based data structure analysis provides an indication of whether natural, distinct, and well-separated market segments exist in the data or not. If they do, they can be revealed easily. If they do not, users and data analysts need to explore a large number of alternative solutions to identify the most useful segment(s) for the organisation.

If there is structure in the data, be it cluster structure or structure of a different kind, data structure analysis can also help to choose a suitable number of segments to extract.

We discuss four different approaches to data structure analysis: cluster indices, gorge plots, global stability analysis, and segment level stability analysis.

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