Extending Dynamic Segmentation with Lead Generation: A Latent Class Markov Analysis of Financial Product Portfolios

Abstract:     
A recent development in marketing research concerns the incorporation of dynamics in consumer segmentation. This paper extends the latent class Markov model, a suitable technique for conducting dynamic segmentation, in order to facilitate lead generation. We demonstrate the application of the latent Markov model for these purposes using a database containing information on the ownership of twelve financial products and demographics for explaining (changes in) consumer product portfolios. Data were collected in four bi-yearly measurement waves in which a total of 7676 households participated. The proposed latent class Markov model defines dynamic segments on the basis of consumer product portfolios and shows the relationship between the dynamic segments and demographics. The paper demonstrates that the dynamic segmentation resulting from the latent class Markov model is applicable for lead generation.

Number of Pages in PDF File: 46

Keywords: Market segmentation, Markov chains, marketing, demography, measurement

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