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Capturing Customer Heterogeneity using a Finite Mixture PLS Approach

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An approach for capturing unobserved customer heterogeneity in structural equation modeling is proposed based on partial least squares. The method uses a modified finite-mixture distribution approach. An empirical analysis using quality, customer satisfaction and loyalty data for convenience stores illustrates the advantages of the new method vis-à-vis a traditional market segmentation scheme based on well known grouping variables. The results confirm the assumption of heterogeneity in the individuals’ perception of the antecedents and consequences of satisfaction and their relationships. The results also illustrate how the finite-mixture approach complements and provides insights over and above a traditional segmentation scheme.

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Correspondence to Andreas Herrmann.

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The authors thank Sønke Albers, Wagner Kamakura and Michel Wedel for their constructive comments on a previous version of the paper.

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Hahn, C., Johnson, M.D., Herrmann, A. et al. Capturing Customer Heterogeneity using a Finite Mixture PLS Approach. Schmalenbach Bus Rev 54, 243–269 (2002).

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