In e-commerce, where the search costs are low and the competition is just a mouse click away, it is crucial to accurately predict customer purchasing behavior in order to offer more targeted and personalized products and services. Recent research has demonstrated that including the context in which a transaction occurs in customer behavior models improves their predictive performance, especially when studying individual customer behavior. However, several practical and managerial issues can arise, thus driving companies to focus on segments rather than on individuals. The main contribution of this work lies in presenting a conceptual framework to incorporating context when building predictive models of market segments, and in comparing different approaches, across a wide range of experimental conditions. Our experiments show that the most accurate approach is not the most efficient from a managerial perspective. Our findings provide insights of how companies can exploit context at best to support marketing decisionmaking.
Recent research showed that including context in customer behavior models improves predictive performance, especially when the unit of analysis is the single customer. Also segmentation has proved to improve the performance of predictive modeling. The research contribution of this work lies in studying interaction effects between segmentation and contextual information. Several experiments were done on a data set coming from an e-commerce application.
The growing complexity and variability characterizing markets have induced scholars and marketers to propose new segmentation approaches. Recent research has shown that including the context in which a transaction occurs in customer behavior models, improves the ability of predicting their behavior. However, no systematic research has studied whether contextual information really matters in market segmentation. To this aim we conducted an empirical study in an e-commerce application across a wide range of experimental conditions. The results show that context strongly affects the composition of segments. Moreover, including context in the segmentation approach can improve both the homogeneity of segments and the ability of predicting customer behavior. Finally in some experimental conditions, the finer contextual information is, the better segmentation results are. Some managerial implications related to the benefits and complexity of a contextual segmentation are discussed.
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