Market Segmentation in the 21st Century: Discrete Solutions to Continuous Problems

Greg Allenby, The Ohio State University
Neeli Bendapudi, University of Louisville
Bob Burnkrant, The Ohio State University
Leslie Fine, The Ohio State University
Jim Ginter, The Ohio State University
Bob Leone, The Ohio State University
Mark Stiving, The Ohio State University
Rao Unnava, The Ohio State University

Originally published in the Seoul Journal of Business, volume 4, number 2, in December 1998.


Market segments exist because of information and cost constraints If manufacturers had accurate individual-level demand information and the ability to produce and deliver unique products at low cost, then individual customization of products would be a viable market strategy But as uncertainty about consumer demand increases and/or the cost of customization increases, firms find it more profitable to reduce the variety of the products they offer This paper reports on a critical examination of trends in the analysis of customer data and in reductions in the cost of customization brought about by innovations such as the Internet and flexible manufacturing systems We conclude that recent trends are not sufficient to support individual customization in most product categories However, despite the inability of these trends to support individual customization, we predict several changes In the dimensions surrounding successful segmentation strategies that will be used by firms in the future.