Market Segmentation, an Example

Owners of  a new Las Vegas resort needed direction for development of their marketing plans/strategies. The result is a "profile" of the most probable user. Additionally, to help understand how the resort's location can affect visitation.

Several multivariate methodologies are applied to accomplish this effort. The first objective is to "classify" likely versus unlikely visitors based on respondent impressions and opinions from select survey questions. Secondly, the segmentation phase profiles/characterizes the most likely user group.

Discriminant Analysis: The goal of discriminant analysis is to classify cases into one of several mutually exclusive groups based on their values for a set of predictor variables. In the analysis phase, a classification rule is developed using cases for which group membership is known. In the classification phase, the rule is used to classify cases for which group membership is not known. This analysis is applied to identify and explain two visitation segments, those that are somewhat to very likely to visit the resort versus those who are unlikely.

CHAID: CHi-square Automated Interaction Detector is a tree-based classification system that aids in segmentation research and exploratory data analysis. It is used here to identify homogeneous segments that include most likely visitors to the planned resort applying the results from the discriminant classification model.

Factor Analysis:   Factor Analysis is concerned with the study of interrelationships among a set of variables, none of which is given the special status of a criterion variable. The methodology is used to identify viable groupings.  It is a statistical tech­nique that provides for data reduction and subse­quent interpre­ta­tion. The result is to identify a small set of variables that can be used to represent interrelation­ships among many variables.

From the above analyses, several outcomes provide both an analytical [market segments and key drivers of visitation] and pictorial [perceptual maps] resource for informed decision making.