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

Research output: Contribution to journalArticlepeer-review

Abstract

Consumers treat and react to promotions diversely in terms of their promotion proneness and variety seeking tendency. This paper investigates 589 consumers with 169678 transaction records in the US salt-snack market ranging from year 4 to year 7 in IRI Market Dataset for exploring how their purchase behaviours evolve in the consumer life cycle. A set of algorithms is presented to process store scanner data for measuring consumers’ promotion proneness and variety seeking tendency, which are then 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 behavioural segments over time, two clear behavioural evolvement patterns can be identified statistically in the consumer life cycle. In the US salt-snack market, some consumers who are initially not sensitive to promotions will gradually evolve to take advantage of promotion to try alternatives for extending their market knowledge. Some explorers’ promotion proneness will gradually increase and outweigh their variety seeking tendency over time, thus, those opportunistic explorers become inclined to buy any brands on promotion. In contrast, consumers who initially prefer to buy their familiar brands will become 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 gradually increase and slightly outweigh their promotion proneness, thus, those consumers will particularly keen to take advantage of promotion to explore the US salt-snack market over time. We discuss the implications of these findings in terms of managerial recommendations regarding promotion activities for retailers to increase the rate of response to promotions and offer suggestions for future research.
Original languageEnglish
Pages (from-to)16-26
Number of pages11
JournalThe Journal of Business and Retail Management Research
Volume10
Issue number1
Publication statusPublished - 1 Oct 2015

Keywords

  • Consumer behavioural evolvement, behavioural segmentation, promotion, exploration and exploitation, retailing, store scanner data

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