Market Segmentation Research: Beyond within and across Group Differences Author(s): Greg Allenby, Geraldine Fennell, Albert

Bemmaor, Vijay Bhargava, Francois Christen, Jackie Dawley, Peter Dickson, Yancy Edwards, Mark Garratt, Jim Ginter, Alan Sawyer, Rick Staelin and Sha Yang Source: Marketing Letters, Vol. 13, No. 3, Choice Modeling (Aug., 2002), pp. 233-243 Published by: Springer Stable URL: http://www.jstor.org/stable/40216637 . Accessed: 10/09/2013 01:42
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Letters 13:3,233-243,2002 Marketing Lg. Pi 2002 Kluwer Academic Publishers. Manufactured in The Netherlands.

Research: and Market BeyondWithin Segmentation AcrossGroupDifferences

GREG ALLENBY* Ohio StateUniversity are listed authors *Co-chairs, alphabetically GERALDINE FENNELL* Consultant authors are listed *Co-chairs, alphabetically ALBERT BEMMAOR ESSEC VUAY BHARGAVA Elan Consulting Group FRANCOIS CHRISTEN Wells FargoBank JACKIEDAWLEY Insight Analysis PETER DICKSON FloridaInternational University YANCY EDWARDS University ofDelaware MARK GARRATT Miller Brewing Company JIMGINTER OhioStateUniversity ALAN SAWYER University ofFlorida RICK STAELIN Duke University SHAYANG New York University 2002 October, 2001; January,

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Abstract
identification as opposed Market research is currently focused toonarrowly on thetaskofsegment segmentation to market to itsstrategic relevance within a firm. In thispaperwe distinguish an ex anteapproach segmentation intheir with that leadpeopletothetasksand interests which themotivating conditions research, begins studying Weargue that an ex postapproach which with an individual's reaction tomarketplace lives,from offerings. begins in themarketing taskof guiding to 'makewhatpeoplewillwantto buy' willbe moresuccessful managements thana detailed life and work, rather of behavior in the context of everyday lightof a deep understanding are discussed. in themarketplace. Directions forfuture research of preferences understanding occasionforaction market motivation, definition, Key words: market segmentation,

1. Introduction and thedatacollection than Market that research is a process goes on longer segmentation that behavioral information The It involves is not obtaining analysis. output justsegments. The outcome of action. inguiding for is useful choicesamong strategic managerial options labels for discrete market research is partof corporate culture, providing segmentation andfacilitate communication which byproviding thinking groupings, organize managerial within a market. wants concrete characterizations of consumer andidentify research In this we examine thecurrent state ofmarket segmentation paper, has a long on the topicof segmentation avenuesfordevelopment. research Although focusedon the task of segment in marketing, recentworkis too narrowly history and obtained content issue of theinformational identification as opposedto thebroader richareaofresearch is a conceptually Market relevance. segmentation segments' strategic theunitof analysis, thattouches on issues suchas market definition, typeof consumer ofall ofthese andtherelation ofbasisvariables, behavior tobe explained, appropriateness tasks. considerations to managerial ofmarket 2 reviews theevolution Section The organization ofthispaperis as follows. and criticaldimensions. alternative research, introducing perspectives segmentation the thathelpsto organize behavior a stylized modelof consumer Section3 introduces - theuniverse of market alternative and keyelements analysis segmentation perspectives 4 task.Section andmanagerial variable, variable, independent beingsegmented, dependent research. a discussion of topicsforfurther provides Research 2. The Evolutionof MarketSegmentation to product orientations twodistinct discussed The original segmentation paperon market and productdifferentiation (Smith 1956). Market policy,i.e., marketsegmentation the and characterizing after decisions referred to making studying product segmentation differentiafor to a market, that individuals ofwants Smith, while, product bring diversity Since this takenrelative decisions tionreferred to product competitors. onlyto a firm's while and market market research/analysis, article, segmentation segmentation original of and books, is oftenreplacedby a discussion in the titleof articles still retained thegeneral from ofconsumers a search for concerns which research, groups segmentation

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with evencustomers, similar anddifferent andsometimes acrosswithin-group population, and Wedel and Kamakura Wind 1972, (see Frank, Massy 2000). Overgroupresponse the such an orientation takes us from the search for variables that simplifying differences, describe behavioral wants conditions resources i.e., amongprospects, allocating people's tasksand interest of everyday how individuals to specific life,to characterizing varyin their reactions to a range ofmarketing variables. of behavioral wants are Examples being thedesireto live up to one's imageas a health consciousadult, to satisfy one's thirsty, and to curiosity, enjoysensory pleasure. This shift in focusovertheyearshas important Whilebothorientations implications. and are concerned with some typeof {market segmentation segmentation) explaining with consumer the focus on was associated conditions behavior, original strategy product in and activities outside themarketplace. Individuals oral for activities, engaged hygiene a of conditions from concern for of example, experience variety ranging particular aspects teeth to teeth care(cavity social about whiteness) gumdisease, prevention, expectations thesort of person wouldbe ifthey didn't brush Suchorientations existin they regularly. thecontext of everyday of whether or not marketers notice. The life,regardless goal of market is to describe such conditions that segmentation analysis within-product category valued and benefits. to attributes point In contrast to market research is an approach research, segmentation segmentation at characterizing differences indomains than aimed acrossgroup other In product strategy. instances whereit is conducted members of the it among general(adult)population, addresses issues of market definition where and how consumers are implicitly (e.g., shop, - premium, tomarketing broad communications, discount). exposed pricelevelpreference In other a firm's current customers arestudied, a typical cases,where only goalis exploring with within howtogenerate additional business that universe. Moreover, existing offerings in theconditions thefocusshifts from wants that to pursue identifying prompt prospects in consumer their tasksand interests, to identifying differences reaction to a rangeof variables ofdistribution. In thediscussion suchas priceand channel belowwe marketing research. We aimed focuson market at underconsider, first, segmentation approaches wants as arise in the conditions of behavioral lives outside the standing they people We then attention to read turn our to wants from reactions marketplace. attempts prospects' to marketplace offerings. 3. A Framework forMarketSegmentation Forclose to a century, authors areon record as appreciating thecomplexity of delivering to human to respond of wants(Shaw wants, production's obligation giventhediversity research has beenindustry's 1912,Smith 1956).Market segmentation practical approach whatis at issue.Regarding to finding forthistask.Consider guidance anyone offering, inresponding has resources to invest to a finite setofhuman Within wants. a management itconsiders thediverse nature ofwants, current state ofwant satisfaction category, product - reflecting - and its likelyability its own and competitive to obtaina satisresponse return from or continuing to support an offering. informafactory supporting Providing tionaboutwants within a market is thetaskof market research. segmentation

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literature models of consumerbehaviorhave appeared in the marketing Comprehensive behavioralprocess (Nicosia formore than 30 years and describe a complex, multi-event 1966; Engel, Kollat, and Blackwell 1968; Howard and Sheth 1969; Dickson 1982; McFadden 1986; Fennell 1988; Ben-Akiva et al. 1999). An abbreviatedmodel of brand on variables choice based on Fennell(1988, 1980; cf. Dickson 1982) thatfocusesattention intersect to form of interest is displayed in Figure 1. Personal and environmental systems of to a domain individual's resources an or action, conditions, wants,allocating motivating withina situationas perceived. For example, an individual eating spicy food at a party becomes concernedabout an upset stomachor bad breath;considersspendinghis or her resources to use some version of a product likely to provide benefitsthat address the conditions;searches fora vendingmachine. motivating a behavioralprocess thatallocates an the model represents Viewed fromleftto right, domain (e.g., stomachcondition),and desiredstate individual'sresourcesto a substantive that (e.g., not feelingupset), and directshow the individualdeploysthose resourceswithin - favoring retailoutlet) domain actions and objects (consumingbrandof stomachremedy,

Personal Systems

i '

SITUATION AS PERCEIVED j ] I I 1 j | Desired Motivating Benefits/ Conditions *j ; Attributes

Brands As Perceived (Brand Beliefs); Brand Consideration Set; Brand Preference Action, Including Brand use

'

]I

Ordering

Environmental Systems

Ex-Ante Analysis

| __;

Analysis
Figure 1. Model of Action and Brand Use.

-**!

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likelyto bringabout an improvedstateof being. Management'sadvertising promisesthat certainattributes and benefits, which management has arrangedto deliver its brandoffers For benefits to exist,theremustbe via thebrand'sphysicaland psychologicalformulation. can deliver,find and users who value the outcome thatthe brand's attributes brandtriers The presence of motivating and select the brand,and use it with satisfaction. conditions can be as unmet without demand. marketplace offerings regarded corresponding Similarly, withoutcorresponding the presence of offerings motivatingconditions likely leads to return insufficient sales forsatisfactory on management'sinvestment. - ex ante and ex post. An ex research There are two approachesto market segmentation the motivating conditionsthatlead people to the tasks ante approach begins by studying in theirlives. Such an analysis provides guidance for productstrategy and interests as in and brand formulation and marketimplemented positioning physical psychological It is through a deep understanding of the conditionsthatgive rise to ing communications. learnstheattributes actionwithin itsproductdomainthatmanagement thatpeople value in brandofferings, and the conditionsto portray to gain targets'attention via advertising. In all if manufacturers had accurate information on conditions within motivating principle, the focal behavioral domain, and the ability to produce and deliver unique product at low cost, then even individualcustomizationof offerings would be a viable offerings are collected As more data from multiple "touch-points"such as the productstrategy. direct and were cost of customizationto and Internet, marketing, point-of-purchase market research become obsolete? We return to thistopic later. does decline, segmentation An ex post approach to market segmentation research begins with an individual's reaction to marketplace offerings.This may take the form of ratings of product of conjoint attributes/benefits (e.g., benefit segmentation,Haley 1968; part-worths what must choose rather than what the on conditions among, analysis).By focusing people call ex market research a task of from for, theyexperience post segmentation changes conditions to to to read wants from identifying motivating guide productstrategy, trying and benefits as foundin existingofferings. reactionsto productattributes way to measurewants is a centralissue in marketsegmentation Findingan appropriate available to guide research and affectsthe likely amount of achieved understanding nature in action. the of the variables used theanalysisis but However, strategic explanatory and development.Among such one of a numberof key aspects in need of clarification issues are the other elements present in an analysis, including the universe being segmentedand the behaviorto be explained. These issues are discussed next. Research 3.1. Ex AnteMarketSegmentation Marketsegmentation researchstarts forthemarket by specifying membership qualification in whichthe diversenatureof demand is to be described.Since thisdemand exists in the form of motivatingconditions,it is necessary to map from the product class under consideration (e.g., shampoo) to a corresponding range of behavior(e.g., hair care). In an ex ante analysis,the behaviorof interest exists outside of the marketplace. If the product is shampoo,forexample,market consistsof individualswho qualify category membership

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as likely to spend on buying shampoo, e.g., people who wash theirhair at least once a week. Qualitative research among market members to investigatemotivatingconditions (relevantto hair care) startswith the broader domain of personal grooming,and within to hairwashing.The unitof thatdomain,narrowsdown through personalhygieneroutines, is the context for engaging in individual for human behavior analysis, then, describing in person-activity occasions instancesof activity, and the relevantuniverseis enumerated number of the a their hair at least once individuals who week,multiplied by (e.g., shampoo occasions per person in an appropriatetime period such as a calendar year). For some occur in the occasions may typically such as doing the familylaundry, however, activities, could be the unit of and a relatively personanalysis unchangingobjective environment, activity(e.g., people who do familylaundry).For other activities,such as snacking or In these kinds of objective environment. beer, the activitycan occur in distinct drinking in universe is enumerated in mind that the it is essential to bear instances, person-activity times occasions per person for drinking occasions (e.g., beer drinkers beer) ratherthan across all occasions, since what consumerswant may vary only in qualifiedrespondents Dickson 1982, Miller and Ginter 1979). For example, 1975, intraindividually (Belk a beer to sip in an up-scale, pricey bar afterwork vs. consider someone contemplating a nightcapin the neighborhoodtavernvs. afterSunday morningmixed doubles tennis. As shown in Figure 1, Motivations are heterogeneouswithin objective environment. and can and environmental arise from conditions systems, intersecting personal motivating conditions environmental and as within and across individuals, change. personal change also be can conditions and Fennell As illustrated (2002), motivating by Yang, Allenby of attribute-levels. the and related to brand importance strongly preference or basis, variablesin market The motivating conditionsare the independent, segmentationresearch.In an ex ante analysis,theycan be operationalizedas concernsand interests relevant to an activity (e.g., Fennell 1997). We note thatour use of theword "motivation" variablethatselects a domain (oiliness of hairon head) and direction refers to a qualitative to of adjustment (e.g. more/less)believed likelyto improveone's stateof being. In contrast variable intendedto apply across activity the term,"motive," which refersto a trait-like to a variablewhose scope refers and over time(e.g. high need forcleanliness),motivation to a single occasion of an activity is appropriate (e.g., my hair looks dull and oily). We because the scope of a trait-like reject "motive" forthe purpose of marketsegmentation term is unnecessarily broad in the context of marketingwhere goods/services are and competitive one at a time,each withinits own substantive developed and supported, conditions for darkeningthe to reflectmotivating universe. Examples of items written edges of one's eyelids as found throughqualitativeresearchinclude "my appearance is weak and nondescript,""I look too pale around my eyes," and "it makes me look sophisticated"(see Fennell, Saegert and Hoover 1997). and generalpsychographic of demographic variables, Comparedwiththegeneralcontent the contentof motivationalvariables reflectsdiverse contextswithinproductcategory. of individuals variablesare trait-like descriptors Demographicand generalpsychographic environmentwithin and context thatarepresumedto hold across activity Similarly, activity. free. are context to locationvariablesthat (e.g., geographicregion)variablesrefer descriptive

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and theactivities aboutlikelyusersofproducts While thesevariablesdo provideinformation in morebeerthanold people and participate in whichtheyengage (e.g., youngpeople drink with are more wear dentures to old morestrenuous exercise; likely compared youngpeople relevant to the specificpersonal and environand use relatedproducts),theylack content in thecontextforactionand relevant to the attributes and benefits mentalelementspresent in brands and cf. find valuable that market members (Fennell Allenby2002; Kennedy likely conditions arisefrom and Ehrenberg 2001). This is because motivating intersecting personal in isolation. and not fromeither and environmental elements, individualsto pursue Ex ante analysis providesinsightsinto the conditionsprompting Such an analysis guides managementregardingthe nature of theirtasks and interests. forwhich individualsmay consider spendingresources. Strategicconsiderations benefits such as positioning writing sellingpropositions, (physicaland psychologicalformulation), are better crafted in lightof and choosingexecutionalelementsto engage targets'attention from an ex ante as understood conditions perspective. motivating Research 3.2. Ex Post MarketSegmentation about wants In ex post market segmentationresearch, researchersseek information attributes and benefits of reaction to (e.g., ratings attributes/ product through respondents' of thisapproachis thatit failsto shed lighton the benefits; conjointanalysis).A limitation the kinds of benefitsand attributes determine that conditionsthatultimately motivating who a to canine will value. For owners give high rating "good example, dog prospects a nutrition," dog is experiencing poor health,theywantto nurture may do so because their that a is nourished. not or ensure workingwatchdog properly Accordingly, pamperedpet, but advertisingexecution is indeterminate from only guidance on brand formulation obtained in the formof reactionsto productattributes/benefits, information e.g., high ratings of "good canine nutrition."Moreover, if motivatingconditions are not fully and benefits, thenwants will be less than in the current set of productattributes reflected ex will and an served again provide an incompleteview of the post analysis optimally the unitof analysis (i.e., sources of humanaction. Finally,the real worldfactsconcerning an occasion for engaging in the focal activity),as well as how the marketis properly enumerated (i.e., qualifiedindividualstimesoccasion per personforengagingin the focal are not accessible in an ex post view,which as noted lacks variablesto represent activity), conditionsupstreamfromthe marketplace. in which brands of marketplace data in not revealingthe environments The limitations and potentialcustomers within conditionsof the current are consumed,nor themotivating and analyzing data from these environments, is not resolved by obtaining,integrating All marketplacedata suffer fromthese same limitations, which multiple"touch-points." across different transactions are not resolved by pooling information and/or consumers. As McFadden notes (1986, p. 275) "revealed marketdata" are inadequate in describing the underlying mechanismsthat govern behavior. Manufacturers therefore do not have to execute mass-customization withaccess to sufficiently accurateinformation strategies out substantial participation,or co-production,by consumers. While co-production

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ina proliferation is canresult ofofferings whencomponent-based manufacturing strategies will manufacturers still music CD's), employed (e.g., personal personalized computers, Such made available for assembly. need to strategically determine the components self-selection with considerations the issues, including along obviously troubling sampling rolein willcontinue to playitsessential meanthat market research/analysis segmentation investment decisions. guiding product of supplyand Another withex post segmentation is thatthe co-evolution problem extended the successful demandcreates in the around space evolving peaks preference Arthur Dickson channel or the 1992; (see product service, including distribution/service in the cumulative and This evolution Farris Verbeke 1994; Dickson, designof 2000). can actions on and the mix that builds develop incrementally past products marketing ex ante to other that blindthefirm assetand learning technological, pathdependencies the and barriers to create severe (i.e., through redeploymobility segment opportunities that theconditions Ex ante that from ment ofresources). research starts give understanding to is riseto a person's rather than how a satisfies, likely category product activity, specific the freed from not it new market as is somewhat (but totally) growth spot opportunities influence of current and feasible technological approaches. market for there exists a recent literature on statistical segmentation techniques Finally, and attribute about brandpreference thatuses sales scannerdata to make inferences A Hardie Fader and and Russell 1989; 1996). advantage potential (Kamakura importance linkedto actual in groupings thatare moredirectly of thisapproach is thatit results are viewedin whentheseapproaches and behaviors. However, marketplace preferences such as includes variables that of an extended model of behavior motivating light and brand consideration beliefs, set, conditions, benefit/attribute importances, product thesame limitations suffer from These approaches theyare seen to be under-specified. human for with all ex postapproaches discussed abovethat areassociated understanding it uses suchdataforstrategic In addition, that wants. to theextent guidance, management the thedatado notreflect ofcustomers, from a universe should bearinmind obtained that, whoarenot from do information as they full ofmarket prospects omitting range response, customers. 4. Discussion from management's success, just as businesssuccess,dependson thereturn Marketing that is Theoffering an offering. andselling indesigning, investment promoting, producing, Brandpurchase/use, theobjectof marketplace is a brand. repeat purchase/use exchange to are central and businesssuccess. Such measures are primemeasures of marketing the domain. Correspondingly, function and disciplinary as a managerial marketing is theintra in marketing research andconceptual essential focusfor product development tobrand that arerelevant which includes all thevariables levelofanalysis, use,as outlined, in Figure1. forexample essential has had theclear,strategically research market Fromthestart, segmentation and stateof wantnature of demand of thediverse a description of providing objective

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variable and managerial the universebeing segmented, dependentvariable, independent task. As noted,market starts forthe by specifying segmentation membership qualification in whichthe diversenatureof demand is to be described.As thisdemandexists in market the formof motivating conditions,it is necessary to map fromthe productclass under considerationto a correspondingrange of behavior. Since the universe is properly in person-activity enumerated occasions, the sampling plan should consider such occasions over time and geographic space. When values of personal and environmental across occasions, it is likelypossible to cut corners variablesare stable,intraindividually, to by asking respondents replyby summarizingover occasions. Research is needed to the extentto which such an approach leads to misleadingresults. investigate Numerous variables exist in market segmentationresearch, including the personal conditions and the frequencywith which qualitativelydistinct relevance of motivating worthsof attribute-levels, brandbeliefs,consideration conditionsoccur,the partsets and actual brand use. Methods are needed for studyingmarketplacevariables (e.g., partworths) for strategically interesting groups based on the motivatingconditions. Such at the core of market is analysis segmentationresearch, as managementsattemptto understandhow prospects with a particularkind of behavioral demand view existing offerings. researchand the managerialtask is the The relationship betweenmarketsegmentation for research.Once managementlearns of the finalarea where we discuss opportunities market italso considersthecurrent diversenatureof wantsthrough research, segmentation its own and state of want satisfaction, reflecting competitiveresponses, and its own abilities,in deciding whetheror not to continueto supportin same or altered form,to or design a new entry. Methods of takingaccount of the various withdraw its offering, with the use of statistical decision theory, are needed. considerations, possibly and scholars our lack of emphasis here on "segmenting" To some practitioners consumers by their shopping behavior or responsiveness to marketingmix elements may seem out of touch with the potentialfor miningtoday's data-bases. Understanding whereand how prospectsshop is one facetof thetask of market but notmarket definition, available alternativesis important for segmentation. Studyingchoice among currently about the cross-sellingand tactical price management,but these data lack information of consumer preferencefor a upstreamconditions that lead to a deep understanding specific brand. The search for useful ways to describe human "wants" and "prospect requirements"is ongoing. We hope that the spotlight we have shone on market

withinmanagement's satisfaction productmarket.Huge consumerdata-bases (that must deliver more "confidence"?) and highly sophisticatedtools (that must deliver more "insight" and "rigor"?) when used to analyze the ex post behavior of consumers, crucial analyticdistinctions and relevantdata pertaining to the conditions cannotretrieve whichare accessible onlyvia an ex ante thatprospectsexperienceoutsidethemarketplace, researchon heterogeneity (Allenby and Rossi 1999; Wedel approach.Much of the current focus needed to guide strategic et al. 1999), forexample, lacks the substantive decisions, by respondingto includinghow best to deploy its resourcesin a particular productmarket some subset of behavioralwants as found. Additionalresearchis needed on the key elementsof marketsegmentation analysis

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will helpto bring it back to center research segmentation stageto receivetheresearch resources itsstrategic relevance warrants.

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