Step 5: Extracting Segments

Abstract

This chapter focuses on the task of grouping consumers and, in so doing, revealing naturally existing or creating artificial market segments. The chapter covers algorithms falling into three categories: distance-based methods, model-based methods, and algorithms integrating variable selection with the task of extracting market segments. In addition, data structure analysis is introduced. Data structure analysis provides insight into whether the resulting market segments are naturally occurring in the market; created but stable; or created and unstable across repeated calculations. A series of questions are included in a checklist to assist with the implementation of this step.