Archetypal analysis: a new way to segment markets based on extreme individuals

Abstract

Segmenting consumers into groups has long been used to gain marketing insights (e.g., Frank, Massey & Wind 1972). Many ways to identify segments have been proposed (e.g., Kaufman & Rousseeuw 1990), although most share some common features, such as choosing representative local centered "objects" according to some criterion. The rationale for focusing on extreme individuals in segmenting markets was noted by Allenby and Glinter (1995), who argued such consumers can be important in new product introduction and switching contexts. We discuss and illustrate a new approach called "archetypal analysis" (AA) based on distance from "important extreme objects." AA has considerable potential for use in marketing, which we illustrate with two examples: 1) identifying segments from responses to attitudinal statements and 2) identifying segments from responses to discrete choice experiments.