Segmentation strategies in urban retail : an application to nanostores in Bogota

Abstract

This research analyzes how to apply segmentation strategies in the nanostore retail market, focusing on a pilot company located in Bogota, Colombia. This study introduces two segmentation strategies: 1) a sketch segmentation strategy based on a basic ordering pattern analysis combined with an extended value matrix, sourced from a customer value matrix created by Marcus (1998); and 2) a precision segmentation strategy based on a diffusion mapping analysis in conjunction with a factor value matrix, derived from the principal component analysis. The work further illustrates how to apply the precision segmentation strategy in assortment planning, with the goal of identifying more valuable products for the pilot company. Considering that product market diffusion is the key to increase purchase intention in the nanostore market, using this strategy can allow the pilot company to utilize resources more efficiently to further improve the diffusion of those valuable products.