This section outlines the most common methods for segmentation and targeting. It assumes that you have already obtained the data for segmentation (data on basis variables) and, optionally, the data for targeting. These data should be first assembled into usable matrices. A separate technical note describes methods for behavior-based segmentation using choice models.
Broadly stated, there are two approaches to segmentation (Wedel and Kamakura 2000), namely, a priori methods and post-hoc methods. In a priori methods, an analyst uses domain knowledge to segment customers into different groups (e.g., male and female customers). We will not be focusing on these types of approaches here. In post-hoc methods, the analyst relies on data analysis to identify "groupings" of customers.
In recent years, some studies have highlighted the cost and convenience benefits of using retail electronic payments and, in particular, card payment instruments. However, cash and other paper-based payment instruments are still being largely used by consumers in most developed countries. Card issuers have incurred substantial costs to launch incentive programs to stimulate payments with debit and credit cards, presumably assuming that these rewards would significantly increase the use of these cards based on standard comparisons.
However, card issuers are facing a great uncertainty on how to allocate the resources to make the incentive programs as effective as desired. On a microeconomic basis, little is known on how to encourage consumers to increase the use of debit and credit cards. Thus, understanding how rewards programs affect consumers' preferences for payment instruments has become a key strategic question in the financial industry. This limited knowledge is, at least partially, due to the lack of comprehensive microeconomic data on consumers' preferences towards payment instruments and on the related role of incentive-related mechanisms.
In this paper we seek to move beyond the hyperbole in the popular press by questioning whether “e-business” truly represents a revolution in the way firms operate or whether it is a more normal evolution in the operations of certain firms. It is important to answer this question because if the change is revolutionary then many managers will be required to rethink their firm strategies and managerial responses in a profound way. On the other hand, if the change is simply evolutionary it will apply more to some firms than to others and pre-Internet strategies and managerial responses will still be appropriate in many circumstances.
In order to answer this question we examine where this revolution (or evolution) is concentrated, and why this revolution (evolution) is occurring as it is. In contrast to views in the popular press, we find that e-business is growing most rapidly in business-to-business markets and for the purchasing of routine items. Moreover, in these markets it is occurring as an evolutionary development of previous technologies (telex, fax, EDI, etc.) in established relationships between purchasers and suppliers. We then examine the claims that “e-business” is different to previous forms of business. For each of these claims we find that there are countervailing arguments and, despite the claims of technological “visionaries,” E-business has not suspended the laws of economics. Finally, we evaluate whether e-business meets the criteria of pervasiveness and process orientation that have characterized previous industrial revolutions. We conclude that it is premature to categorize e-business as revolutionary.
