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A Regression Model for Market Segmentation Studies

A model is developed for incorporating the long-standing marketing research effort of explaining variation in observed consumption behavior into the more recent notion that such behavior has an inherent component of randomness. The model recognizes that consumption behavior on any given occasion will fluctuate around some mean consumption level and that this mean consumption level will vary across the population in a systematic manner which is related to the characteristics of the consuming unit. However, it is not assumed that the relationship is exact, but that it contains an element of randomness. The properties of the model are examined and it is compared with ordinary least squares models of the same phenomenon.