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Introduction
The study reported here assesses the practical and methodological merits of two segmentation methods used in market segmentation schemes. After a review of the key literature, and a discussion of methodological and managerial issues raised by studies in the literature, this paper presents the results of a survey in which the outcomes of segmenting the prestige cosmetics market in Korea by K-means clustering and by mixture regression modelling were tested against four criteria: external validity, model fit measured by R2 , segment profile definability, and practical usefulness.
Its findings have the significant managerial implications that many scholars have pointed out as lacking in most studies of segmentation, and clear relevance to the real world of marketing practice. One of the major issues in segmentation research was summarized by [32] Wind (1978, pp. 317-19) as the "discrepancy between academic developments and real-world practice", with particular reference to the relevance of the segmentation results to the real world. Three decades later, [30] Wedel and Kamakura (2002, p. 182) asserted that "the issues raised by Wind remain valid", while [8] Goller et al. (2002, p. 267), identified the need for "assessment of the gap between theory and practice to bring new impetus to theory development and improved recommendation to practitioners". More recently, a case study of segmentation in the fashion industry has called for "systematic academic research evaluating the managerial value of segmentation" ([22] Quinn et al. , 2007, p. 444).
Validation of the results of such studies is thus an important issue with many practical implications. The empirical study reported here is innovative in building a systematic framework and explicit evaluative criteria into practical segmentation analysis, and in offering marketing practitioners easily applicable procedures for doing so.
Literature review
The concept of market segmentation
The concept of market segmentation was introduced half-a-century ago by Wendell Smith, as an "alternative marketing strategy" in an environment where diversity had become the market norm, and defined as a matter of "viewing a heterogeneous market as a number of smaller homogeneous markets, in response to differing preferences, attributable to desires of consumers for more precise satisfaction of their varying wants" ([25] Smith, 1956, p. 6). He acknowledged its close relationship to product differentiation, but argued that the two procedures...