Category role aided market segmentation approach to convenience store chain category management

a r t i c l e i n f o Category management (CM) plays an increasingly important role in retailing management, as it aids retailers to increase their core competitiveness, maximise profits and ensure a good long-term customer relationship. This technique has been successfully applied to diverse large manufacturers and wholesale retailers. However, it remains a challenging task to directly employ the CM technique in convenience store (CVS) chain(s). This is because CVS chains are often distributed in a variety of areas, each store has impulsive consumers, and the traditional market segmentation attributes (e.g. consumer age, salary, and background) are difficult to collect under such circumstances. This makes it impractical to apply one general CM solution to all CVS chains. Hence, it is crucial to segment a market region and then apply customised CM solutions to the corresponding segments. This paper presents an innovative market segmentation model which is driven by category-role (CR), for the first time, to support CM in CVS chains. A new similarity measure (named HCsim()) and an improved weighted fuzzy K-means clustering algorithm (WFKM) are developed in an effort to cluster the CVSs. The usefulness and applicability of this study is illustrated by means of an empirical study to provide marketing strategy decision support. The derived results are also discussed and compared with existing methods. Convenience store (CVS) refers to a small store that stocks everyday items such as groceries, beverages and snacks. Convenience is its distinguished strength that attracts consumers. Modern CVSs normally utilise store chain management methods and represent one of the fastest growing segments in the retail market. Such rapid growth brings increasing competition amongst CVS retailers. In recent years, category management (CM) [3,21,38] has gradually gained popularity in these companies to increase their core competitiveness, maximise profits and ensure long-term healthy customer relationship. CM is a business fundamental that uncovers untapped potential to be explored. It aims to analyse consumer purchasing behaviour and stock the products that consumers are most likely to buy. The basic idea of CM is managing product categories as business unit and customising them to satisfy customers' needs [18]. More specifically, the defined categories can be used to target the consumer groups and to gain a better understanding of their needs. From early 1990s, CM can be divided into two types: product-centric CM [6,51] and consumer-centric CM [1,14,31]. Product-centric CM uses historical transaction data to gain insights …