Segmentation based on habit with respect to customer responses to sale promotions

Market segmentation is a core concept in modern marketing since consumers behaviours and preferences have become more and more diverse. The practice of segmentation assists companies in better discriminating and more efficiently allocating of resources to the most valuable groups of customers. This research concerns whether a number of various measures of habitual behaviours would elicit evidence of its implications to enhance the performance of consumer segmentation. Besides, extracted rule perfection is expected to be achieved via effective model factors and variations. More specifically, this paper examines if consumers can be segmented with respect to their reactions to promotional campaigns by providing analysis and discussion on market segmentation in a UK retailer context. A vast amount of literature is reviewed in detail on several aspects of consumers habits, impact of sales promotions on consumers’ behaviours as well as market segmentation concepts and different bases to segment the markets. A number of different segmentation variables, techniques and their variation are also outlined. Based on that, a theoretical framework for the research is then proposed. The aim of the dissertation is to address the following research questions: Whether customer responses to promotional offers are different across various characteristics of individuals as well as various types of promotion; and whether or not consumers can be segmented with respect to their responsiveness to sales promotions? The goal of segmenting the consumers in this way is to create an approach to identify the most potential customers to whom focus the marketing or promotion efforts on. The key idea was to use quantitative data set to extract different features or variables related to the basis of consumers attitudes or shopping habits toward three sales promotion techniques: coupon, in-store product displays and weekly mailers. The analysis confirms that consumers’ responsiveness to marketing mix elements varies across different segments as well as different marketing or promotional strategies. A total of four distinct segments are built with the consumers that share a particular purchasing habits and what distinguishes them from other segments with different behaviours. The discussions thereafter further elaborate on the analysis and connects theory to the empirical data. Practical implications are also discussed with a business recommendation of several sizable share of customers that can be positively impacted through promotions. Finally, as with any study, there are always a number of limitations that could be improved via future research. The paper then outlines the constraints in conducting this research and also suggests further directions that can be undertaken in the future