Abstract
Prior segmentation research has primarily focused on market behavior, lifestyle and socio-demographics rather than on purchase histories. In this article, the authors propose the use of sequence alignment methods to segment customers based on their purchase histories. The principles underlying the method are discussed, and the method is illustrated using scanner panel data. The findings suggest that, compared to the conventional methods, the proposed method results in a better segment solution that captures both the shopping-frequency and variety-seeking information. These findings have important implications for differentiation and market positioning strategies.
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