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Customer segmentation model based on value generation for marketing strategies formulation

Author

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  • Álvaro Julio Cuadros
  • Victoria Eugenia Domínguez

Abstract

When deciding in which segment to invest or how to distribute the marketing budget, managers generally take risks in making decisions without considering the real impact every client or segment has over orga- nizational profits. In this paper, a segmentation framework is proposed that considers, firstly, the calcu- lation of customer lifetime value, the current value, and client loyalty, and then the building of client seg- ments by self-organized maps. The effectiveness of the proposed method is demonstrated with an empir- ical study in a cane sugar mill where a total of 9 segments of interest were identified for decision making.

Suggested Citation

  • Álvaro Julio Cuadros & Victoria Eugenia Domínguez, 2014. "Customer segmentation model based on value generation for marketing strategies formulation," Estudios Gerenciales, Universidad Icesi, March.
    • Handle: RePEc:col:000129:011444
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    File URL: http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/1761
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    References listed on IDEAS

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    1. Seret, Alex & Verbraken, Thomas & Versailles, Sébastien & Baesens, Bart, 2012. "A new SOM-based method for profile generation: Theory and an application in direct marketing," European Journal of Operational Research, Elsevier, vol. 220(1), pages 199-209.
    2. Verbeke, Wouter & Dejaeger, Karel & Martens, David & Hur, Joon & Baesens, Bart, 2012. "New insights into churn prediction in the telecommunication sector: A profit driven data mining approach," European Journal of Operational Research, Elsevier, vol. 218(1), pages 211-229.
    3. Bayón, Tomás & Gutsche, Jens & Bauer, Hans, 2002. "Customer Equity Marketing:: Touching the Intangible," European Management Journal, Elsevier, vol. 20(3), pages 213-222, June.
    4. Verhoef, P.C. & Donkers, A.C.D., 2001. "Predicting Customer Potential Value: an application in the insurance industry," ERIM Report Series Research in Management ERS-2001-01-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    Cited by:

    1. Tu Van Binh & Ngo Giang Thy & Ho Thi Nam Phuong, 2021. "Measure of CLV Toward Market Segmentation Approach in the Telecommunication Sector (Vietnam)," SAGE Open, , vol. 11(2), pages 21582440211, June.
    2. Chen, Yanhong & Liu, Luning & Zheng, Dequan & Li, Bin, 2023. "Estimating travellers’ value when purchasing auxiliary services in the airline industry based on the RFM model," Journal of Retailing and Consumer Services, Elsevier, vol. 74(C).
    3. Schubert, Sebastian, 2018. "Analysis and development of customer segmentation criteria and tools for SMEs," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 300253, January.

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    More about this item

    Keywords

    Segmentation; Customer value; Artificial neural network; Self-organized maps;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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