Behavioural segmentation using store scanner data in retailing: Exploration and exploitation in frequently purchased consumer goods markets

Consumers treat and react to promotions diversely in terms of their promotion proneness and varietyseeking tendency. This paper investigates 589 consumers with 169678 transaction records in the USsalt-snack market ranging from year 4 to year 7 in IRI Market Dataset for exploring how theirpurchase behaviours evolve in the consumer life cycle. A set of algorithms is presented to process storescanner data for measuring consumers’ promotion proneness and variety seeking tendency, which arethen used for conducting clustering analysis. Four types of purchase behaviours including“Promotion averse”, “Bargain hunters”, “Opportunistic explorers”, and “Opportunistic exploiters”are identified and assigned accordingly for each consumer in each year. Even though consumers’purchase behaviours will dynamically and freely shift within or among those four behaviouralsegments over time, two clear behavioural evolvement patterns can be identified statistically in theconsumer life cycle. In the US salt-snack market, some consumers who are initially not sensitive topromotions will gradually evolve to take advantage of promotion to try alternatives for extendingtheir market knowledge. Some explorers’ promotion proneness will gradually increase and outweightheir variety seeking tendency over time, thus, those opportunistic explorers become inclined to buyany brands on promotion. In contrast, consumers who initially prefer to buy their familiar brands willbecome motivated to buy any brands, particularly the brands they are familiar with, on promotion.After a certain period of exploitation with promotions, their variety seeking tendency will graduallyincrease and slightly outweigh their promotion proneness, thus, those consumers will particularlykeen to take advantage of promotion to explore the US salt-snack market over time. We discuss theimplications of these findings in terms of managerial recommendations regarding promotion activitiesfor retailers to increase the rate of response to promotions and offer suggestions for future research.