Capturing Customer Heterogeneity Using a Finite Mixture Pls Approach

Schmalenbach Business Review (sbr), Vol. 54, July 2002

27 Pages Posted: 22 Aug 2002

See all articles by Andreas Herrmann

Andreas Herrmann

University of St. Gallen - MCM Institute

Carsten H. Hahn

SAP AG - Walldorf

Michael D. Johnson

Stephen M. Ross School of Business at the University of Michigan

Frank Huber

University of St. Gallen

Abstract

An approach for capturing unobserved customer heterogeneity in structural equation modeling is proposed based on partial least squares. The method uses a modified finite-mixture distribution approach. An empirical analysis using quality, customer satisfaction and loyalty data for convenience stores illustrates the advantages of the new method vis-a-vis a traditional market segmentation scheme based on well known grouping variables. The results confirm the assumption of heterogeneity in the individuals' perception of the antecedents and consequences of satisfaction and their relationships. The results also illustrate how the finite-mixture approach complements and provides insights over and above a traditional segmentation scheme.

JEL Classification: M31, C11

Suggested Citation

Herrmann, Andreas and Hahn, Carsten H. and Johnson, Michael David and Huber, Frank, Capturing Customer Heterogeneity Using a Finite Mixture Pls Approach. Schmalenbach Business Review (sbr), Vol. 54, July 2002, Available at SSRN: https://ssrn.com/abstract=321004 or http://dx.doi.org/10.2139/ssrn.321004

Andreas Herrmann (Contact Author)

University of St. Gallen - MCM Institute ( email )

Blumenbergplatz 9
CH-9000 St. Gallen
Switzerland
+41-71-224-3026 (Phone)

Carsten H. Hahn

SAP AG - Walldorf ( email )

Neurottstrasse 16
69190 Walldorf
Germany
+49 6227 747474 (Phone)
+49 6227 7837009 (Fax)

Michael David Johnson

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States

Frank Huber

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

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