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Rational Decision Making Process

The rational decision making process primarily involves:

  • Problem/need recognition: Consumer recognizes a problem or need.  The need is triggered by internal stimuli when one of the person’s normal needs rises to a level high enough to become a drive.  Hunger-Food.  A need can also be triggered by external stimuli (such as advertisement) i.e., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.
  • Information search: In this stage the consumer is aroused to search for more information; the consumer may simply have heightened attention or may go into active information search.  This is usually done on higher ticket purchases such as cars, pianos, computers, etc.
  • Evaluation of alternatives: The consumer uses information to evaluate alternative brand choices.  Different process for every consumer, involves weighing product attributes and their ability to deliver benefits.
  • Purchase process/decision: Choose buying alternatives, includes product, package, store, method of purchase, etc
  • Post purchase behavior: Outcome; Satisfaction or Dissatisfaction.  Cognitive Dissonance, have you made the right decision.  This is the buyer’s doubts shortly after a purchase about whether it was the right decision.  This can be reduced by warranties, after sales communication, etc.

Consumers evaluate the product on the basis of their usage and this evaluation results either in consumer satisfaction or dissatisfaction.

Market Segmentation

Companies segment a market on the basis of different criteria called segmentation bases. The different segmentation bases used for the consumer market are:

Geographic segmentation: Grouping people on the basis of geographic location is known as geographic segmentation. Geographic segmentation is usually done by region or as rural vs. city markets. This type of segmentation is primarily followed for business markets or for markets where the requirements are location based.

Example of geographic segmentation: Global Information Technology Company Intelligroup has worldwide operations in the Americas, India, Japan, Asia-Pacific, and Europe. Its headquarters is at Princeton, NJ in the United States of America. Its other global offices in each of its key regions are at Al Khobar, Kingdom of Saudi Arabia; at Tokyo, Japan; and at Buckinghamshire, United Kingdom. It primarily offers IT solutions and Support services to companies across the globe with their IT support centers in India.

Demographic segmentation: Grouping the market in terms of different demographic measures like age, gender, income, education, stage of the family life cycle, ethnic background is called demographic segmentation.

  • Example of segmentation by age: advertising of the toothpaste highlighting the taste is done when addressing the children’s segment of the market.
  • Example of segmentation by gender: female cosmetic products like lipsticks, foundation etc are all targeted to the female population.
  • Example of segmentation by income: Aldi (a discount food retailer), Airtours holidays, and discount clothing retailers such as TK Maxx focus segment is the lower income group.

Psychographic segmentation: When the market segmentation is done on the basis of the lifestyle of the people then it is called as psychographic segmentation. The key measures for grouping are the personality type, social status, lifestyle etc. This segmentation is based on the assumption that the individual purchases reflect the individual’s characteristics and lifestyle.

A good example of psychographic segmentation is the different car models available in leading cars. For example Volkswagen has a car to meet all the groups whether through its Polo, Beetle, Passat, Toureg etc. each of these cars suit a specific personality type and lifestyle.

Behavioural segmentation: In this form of segmentation the customers are grouped on the basis of the way they respond to or use a product or service. The parameters used for behavioural segmentation are occasion of purchase or consumption, usage, loyalty and benefits sought.

Example: Kelloggs is perceived by the consumers the world over as a breakfast cereal. The company is planning to make the consumers change this perception and think of Kelloggs as an anytime snack food.

Understanding Occasion Segmentation and Benefit Segmentation

Occasion segmentation is dividing the market  into groups on the basis of the different occasions when the buyers plan to buy the product or actually buy the product or use the product. Some products are perceived to be apt for a particular time or day or event. Thus the motive behind occasion segmentation is to increase the ‘reason to buy’ so as to improve the sales of a particular product or service.

Occasional segmentation is divided primarily into three types:

  • Universal occasions
  • Regular personal occasions
  • Rare personal occasions

For example, orange juice is most commonly perceived as a breakfast juice, products targeted for Mother’s Day or Father’s Day gifts or the turkey bought during Christmas etc.

Benefit segmentation is essentially dividing the market on basis of the characteristics or features of the product or the service as perceived by the customers. In this method the different benefits that the product offers defines the target audience.

Example: Toothpaste is a great product to showcase benefit segmentation. Depending upon the audience segment the benefit that the toothpaste provides would be highlighted. By segmenting the audience according to the benefits through the copy, the advertiser can position the product in three different markets to achieve maximum advertising effectiveness.

  Sensory segment Sociables The workers The independent segment
Principal benefit sought Flavour, product appearance Teeth whiteness Decay prevention Price
Demographic strengths Children Young adults Large families Men
Special behavioral characteristics Flavoured product, special ingredients Smokers Heavy users Heavy users