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Network-based analyses have effectively understood customer preferences through interactions between customers and products, particularly for tailored product design. However, research applying this analysis to diverse customers with varied preferences is limited. This paper introduces a market-segmented network modeling approach, guided by customer preference, to explore heterogeneity in customers’ two-stage decision-making process: consideration-then-choice. In heterogeneous markets, customers with similar characteristics or purchasing similar products can exhibit different decision-making processes. Therefore, this method segments customers based on preferences rather than just characteristics, allowing for more accurate choice modeling. Using joint correspondence analysis, we identify associations between customer attributes and preferred products, characterizing market segments through clustering. We then build individual bipartite customer–product networks and apply the exponential random graph model to compare the product features influencing customer considerations and choices in various market segments. Using a US household vacuum cleaner survey, our method detected different customer preferences for the same product attribute at different decision-making stages. The market-segmentation model outperforms the non-segmented benchmark in prediction, highlighting its accuracy in predicting varied customer behaviors. This study underscores the vital role of preference-guided segmentation in product design, illustrating how understanding customer preferences at different decision stages can inform and refine design strategies, ensuring products align with diverse market needs. 

Abstract System design has been facing the challenges of incorporating complex dependencies between individual entities into design formulations. For example, while the decision-based design framework successfully integrated customer preference modeling into optimal design, the problem was formulated from a single entity’s perspective, and the competition between multiple enterprises was not considered in the formulation. Network science has offered several solutions for studying interdependencies in various system contexts. However, efforts have primarily focused on analysis (i.e., the forward problem). The inverse problem still remains: How can we achieve the desired system-level performance by promoting the formation of targeted relations among local entities? In this study, we answer this question by developing a network-based design framework. This framework uses network representations to characterize and capture dependencies and relations between individual entities in complex systems and integrate these representations into design formulations to find optimal decisions for the desired performance of a system. To demonstrate its utility, we applied this framework to the design for market systems with a case study on vacuum cleaners. The objective is to increase the sales of a vacuum cleaner or its market share by optimizing its design attributes, such as suction power and weight, with the consideration of market competition relations, such as inter-brand triadic competition involving three products from different brands. We solve this problem by integrating an exponential random graph model (ERGM) with a genetic algorithm. The results indicate that the new designs, which consider market competition, can effectively increase the purchase frequency of specific vacuum cleaner models and the proposed network-based design method outperforms traditional design optimization.