Like products, industries, and markets, individual consumers may be at different stages in their consumption life cycles, and different types of behavioral patterns may coexist within a single product market at the same time. Current segmentation approaches, however, do not address long-term dynamics in customer response and do not adequately capture this phenomenon. The authors develop an approach for modeling the coexistence of multiple dynamic behavioral patterns within a single product market and apply this approach to physician panel data on drug prescriptions and direct-to-physician promotions. The results show markedly different responses across identified physician segments. For firms that track customer-level marketing activity and response over time, market segmentation based on dynamic response can provide a new tool for targeting and efficient resource allocation. The proposed approach is straight-forward to implement and is highly scalable to very large samples and continuous testing. Managers can use this segmentation approach to draw specific implications for when—and to whom—to accelerate, decelerate, or even stop marketing activity.
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