The Spatial Representation of Market Information

Desarbo, Wayne S.; Degeratu, Alexandru M.; Wedel, Michel; Saxton, M. Kim
September 2001
Marketing Science;Fall2001, Vol. 20 Issue 4, p426
Academic Journal
To be used effectively, market knowledge and information must be structured and represented in ways that are parsimonious and conducive to efficient managerial decision making. This manuscript proposes a new latent structure spatial model for the representation of market information that meets this requirement. When applied to a priori defined (e.g., socioeconomic) segments, our proposed methodology provides a new way to display marketing data parsimoniously via dimension reduction through a factor-analytic specification. In post hoc studies, we simultaneously derive market segments from the data and represent the structure of market information within each of the unobserved, derived groups/segments. We summarize all relevant information concerning derived market segments via a series of maps that prove conducive to the quick and accurate dissemination of customer and competitor market information. The associations between the variables are captured in a reduced space, where each variable is represented by a vector that emanates from the origin and terminates on a hypersphere of unit (the vector length is arbitrary) radius (e.g., a unit circle in a two-dimensional space). The angles between the variable vectors capture the correlation structure in the reduced space. The method is very general and can be utilized to identify latent structures in a wide range of marketing applications. We present an actual commercial marketing application involving the (normalized) prescription shares (of specialists) of ethical drugs to demonstrate the effectiveness of representing market information in this manner and to reveal the advantage of the proposed methodology over a more general finite mixture-based method. The proposed methodology derives three segments that tend to group specialists with respect to the stage of adoption of innovation in this therapeutic category. The specialists in the first group appear to be laggards because they prescribe more of the older class...


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