Dynamics in International Market Segmentation of New Product Growth

49 Pages Posted: 17 Aug 2011

See all articles by Aurelie Lemmens

Aurelie Lemmens

Rotterdam School of Management, Erasmus University Rotterdam

Christophe Croux

KU Leuven - Faculty of Business and Economics (FEB)

S. Stremersch

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: July 1, 2011

Abstract

Prior international segmentation studies are static, i.e., they identify segments that are stable over time. This paper shows that country segments in new product growth are intrinsically dynamic. We propose a semiparametric hidden Markov model to dynamically segment countries based on the observed penetration pattern of new product categories. The methodology allows countries to switch between segments over the new product's life cycle, with time-varying transition probabilities. Our approach is based on penalized splines and can thus be flexibly applied to any non-stationary phenomenon, beyond the new product growth context.

For the penetration of six new product categories in 79 countries, we recover each country’s dynamic membership to segments over the life cycle. Our findings reveal substantial dynamics in international market segmentation, in particular at the beginning of the product life. Finally, we exploit the dynamic segments to predict the national penetration patterns of a new product before its launch and show that our forecasts outperform forecasts derived from alternate parametric and/or static methods. Our results encourage multinational corporations to adopt dynamic segmentation methods instead of static ones.

Keywords: country segmentation, dynamic segments, international new product growth, penalized splines, semiparametric modeling

Suggested Citation

Lemmens, Aurélie and Croux, Christophe and Stremersch, Stefan, Dynamics in International Market Segmentation of New Product Growth (July 1, 2011). Available at SSRN: https://ssrn.com/abstract=1911145 or http://dx.doi.org/10.2139/ssrn.1911145

Aurélie Lemmens (Contact Author)

Rotterdam School of Management, Erasmus University Rotterdam ( email )

3000 DR Rotterdam
Netherlands

Christophe Croux

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Stefan Stremersch

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 8719 (Phone)
+31 10 408 9160 (Fax)

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