Abstract:
This study investigates the process of index construction as a means of
measuring a hypothetical construct that can typically not be measured
by a single question or item and applying it as a method of market
segmentation. The availability of incidental secondary data provided
a relevant quantitative basis to illustrate this process by constructing
a commercial farming sophistication index for South Africa. It was
evident that this approach offers an appropriate and useful means of
segmenting a market. Several factors contribute to the appeal of this
approach. Among others, it addresses important priorities in the area
of future segmentation research. By offering classification rules based
on characteristics that can easily be observed or elicited through
asking a few key questions, new or potential buyers can be grouped
by buying behaviour segment. Furthermore, the multi-step process that was employed provides a systematic and structured multivariate
approach to segmentation. It also facilitates replication of the process
when conducting future studies. Lastly, the outcome of this type of
segmentation method offers researchers and marketing practitioners a
procedure, in the form of an equation, to calculate index scores and
provide rules to segment the market based on predefined intervals.
Hence, the challenge to replicate segment formation across independent
future studies is addressed.
