Estimating the Segment-Oriented Discrete-Choice Model of Customer Differentiation

Subject Areas : Futurology

M. A.  Abdolvand ¹ (ندارد)
J.  Nazemi ² (ندارد)
H. A.  Momeni ³ (نویسنده مسئول یا طرف مکاتبه)

Received: 2008-10-27 Accepted : 2009-01-04 Published : 2010-11-22

Keywords: Discrete Choice, segmentation, principal component analysis, Multinomial logit,

Abstract :

In product choice models, incorporating socio-demographic characteristics is conceptually appealingand has numerous managerial benefits. The main question is how socio-demographic characteristicsdifferentiate customers or products in order to define relevant marketing strategies. Traditionally,discrete choice models, also called the consolidated approach, have been used to understand, describe,and predict consumer choices for a particular product . In this study, a segment-oriented approach isintroduced and compared with the consolidated approach. The proposed methodology uses principalcomponent analysis to segment the population into different groups. The results indicate that principalcomponent analysis is a robust method and outperforms the consolidated approach in terms of choicepredictability and R-square index. These findings bring new insight to manufacturers as well asmarketers regarding customer policies targeting .