Segmentation Algorithms and Rater Bias: How our proprietary algorithm for market segmentation outperforms standard approaches
Segmentation is a method that partitions a market to market segments. These are essentially subgroups of consumers who have similar characteristics, be it their attitude towards shopping, their life philosophy, their preference to a product, etc. The idea behind segmentation is that it helps firms develop more efficient marketing strategies, such as to better target their products to their consumers based on the different needs of segments.There are generally two types of segmentation: a-priori and post hoc. With the a-priori segmentation, segments are defined prior to analysis and the goal of the analysis is simply to profile these segments. With the post hoc segmentation, segments are identified by using either hierarchical or partitioning methods (Dillon, 1994).