Lecture # 2

CB Market Segmentation

&
Problem Recognition & Information
Search

AVINASH BBA-4 081107 10-1

Copyright Atomic Dog Publishing, 2002
Outline
 Market’s Segmentation Defined & its Variables
 Consumer Decision Process: Action Options
– Problem Recognition: Actual State Versus Desired
State And Motivation Arousal
 Information Search
– Pre-purchase, Post-purchase, and Ongoing information
search
– Internal and External Information Search
 Consideration Sets
 Sources of Marketplace Information

AVINASH BBA-4 081107 10-2

Copyright Atomic Dog Publishing, 2002
Market Segmentation
 Market segmentation is the process of
classifying a market into distinct subsets
(segments) that behave in similar ways or
have similar needs. The segmentation
process in itself consists of segment
identification, segment characterization,
segment evaluation and target segment
selection.

AVINASH BBA-4 081107 10-3

Copyright Atomic Dog Publishing, 2002
Market Segmentation
 The purpose for segmenting a market is to allow
your marketing/sales program to focus on the
subset of prospects that are "most likely" to
purchase your offering.
 If done properly this will help to insure the
highest return for your marketing/sales
expenditures. Depending on whether you are
selling your offering to individual consumers
or a business, there are definite differences in
what you will consider when defining market
segments.

AVINASH BBA-4 081107 10-4

Copyright Atomic Dog Publishing, 2002
Variables Used for Segmentation
 Geographic Variables

– Region of the world or country, East, West, South,

North, Central, hilly, etc.
– Country size/country size : Metropolitan Cities,
small cities, towns.
– Urban, Semi-urban, Rural.
– Climate Hot, Cold, Humid, Rainy.
AVINASH BBA-4 081107 10-5
Copyright Atomic Dog Publishing, 2002
Variables Used for Segmentation
 Demographic Variables
– Age
– Gender male and female
– Family size
– Education primary, high school, secondary, college,
universities.
– Income
– Occupation
– Socioeconomic status
– Religion
– Nationality/ Race
– Language

AVINASH BBA-4 081107 10-6

Copyright Atomic Dog Publishing, 2002
Variables used for
segmentation…
 Psychographic Variables
– Personality
– Life style
– Value
– Attitude
 Behavioral Variables
– Benefit sought
– Brand loyalty
– Stage
– Decision making unit
– Profitability

AVINASH BBA-4 081107 10-7

Copyright Atomic Dog Publishing, 2002
Successful Segmentation
Successful segmentation requires the following:
 Homogeneity within the segment
 Heterogeneity between segments
 Segments are measurable and identifiable
 Segments are stable over time
 Segments are accessible and actionable
 Target segment is large enough to be profitable

AVINASH BBA-4 081107 10-8

Copyright Atomic Dog Publishing, 2002
Consumer Decision Process
Action Options
 Start through steps and complete them in order
 Start, stop, start, stop, etc. and complete steps in
order
 Start steps and “loop back” as needed based on
what happens and complete process
 Start into the process then stop somewhere along
the way and never finish
 Do not start the process

AVINASH BBA-4 081107 10-9

Copyright Atomic Dog Publishing, 2002
Problem Recognition
 When consumers realize that they need
something!
 It is the first step in the decision-making process:
– Problem recognition
– Information search
– Alternative evaluation
– Choice/ Implementation
– Outcomes/ Evaluation

AVINASH BBA-4 081107 10-10

Copyright Atomic Dog Publishing, 2002
Motivational Arousal
 Different people have different benefit
motivations for purchasing different products or
services.
 Types of benefit motives:
– To optimize satisfaction
– To prevent possible future problems
– To escape from a problem
– To resolve a conflict
– To maintain the status quo or satisfaction

AVINASH BBA-4 081107 10-11

Copyright Atomic Dog Publishing, 2002
Problem Recognition: Actual
State versus Desired State
 It is the psychological process used to
determine the difference between the
consumer’s actual benefits state (where you
are) and the desired benefits state (where
you want to be).
– Opportunity (vs. problem) recognition

AVINASH BBA-4 081107

10-12
Copyright Atomic Dog Publishing, 2002
Problem Recognition Influences
 Situational influences
 Consumer influences
 Marketing influences

AVINASH BBA-4 081107 10-13

Copyright Atomic Dog Publishing, 2002
Situational Influences
– Product consumption (e.g., running out of gas)
– Product acquisition (e.g., purchasing a new
home may stimulate other purchases)
– Changed circumstances (e.g., moving away
from home to college)

AVINASH BBA-4 081107 10-14

Copyright Atomic Dog Publishing, 2002
Consumer Influences
 Actual state consumers: those who look to
existing products to solve their problems.
 Desired state consumers: those who shop
for new products to address their problems.
– They enjoy the shopping experience

AVINASH BBA-4 081107 10-15

Copyright Atomic Dog Publishing, 2002
Marketing Influences
 Marketing mix
changes and/or
promotion actions may
help stimulate problem
recognition:
– Advertising
– Coupons
– Free offers

AVINASH BBA-4 081107 10-16

Copyright Atomic Dog Publishing, 2002
Information Search
 Information collected by
consumers is the basis for
evaluation and choice
behavior.
 It is important for marketers
to know:
– Why consumers are
searching for information
– Where will they look
– What information consumers
seek
– How extensively they are
willing to search

AVINASH BBA-4 081107 10-17

Copyright Atomic Dog Publishing, 2002
Types of Information Search
 Pre-purchase Search:
– Directed searches: consumer searches for information that will
help solve a specific problem.
– Browsing: consumer is “just looking” with no immediate intent to
buy.
– Accidental search: consumer is not actively looking for
information, but takes note of information that is formally
presented or inadvertently encountered.
 Post-purchase search: gathering information on choice
made after the purchase.
 Ongoing search: continuous information gathering to stay
“marketplace-current.”

AVINASH BBA-4 081107 10-18

Copyright Atomic Dog Publishing, 2002
Internal and External Information
Search
 Internal search: search based on existing
information in memory.
– Information quantity, quality, relevance, currency
– Experts vs. novices
 External search: the search of information beyond
one’s memory.
– Personal sources: friends, experts, salespeople
– Impersonal sources: advertising, in-store displays, trade
reports, the Internet.
– Experts vs. novices

AVINASH BBA-4 081107 10-19

Copyright Atomic Dog Publishing, 2002
Why Do Consumers Engage in
External Information Search?
 High perceived value versus perceived cost of search
 Need to acquire information
 Ease of acquiring and using information
 Confidence in decision-making ability
 Locus of control (internals vs. externals)
 Actual or perceived risk
 Costs of external search
 Types of products sought
 Characteristics of the purchase decision

AVINASH BBA-4 081107 10-20

Copyright Atomic Dog Publishing, 2002
Types of Risk
 Functional or
performance
 Financial
 Psychological
 Social
 Physiological
 Time
 Linked-decision

AVINASH BBA-4 081107 10-21

Copyright Atomic Dog Publishing, 2002
Costs of External Search
 Financial
 Time
 Decision delay
(opportunity cost)
 Physical cost
 Psychological cost
 Information overload

AVINASH BBA-4 081107 10-22

Copyright Atomic Dog Publishing, 2002
Type of Product Sought
 Specialty goods: search willingness is high when
consumer has developed strong preferences
 Shopping goods: less search willingness for
products that the consumer must devote time and
effort to compare and contrast.
 Convenience goods: consumer is reluctant to
spend any time and effort in search and evaluation
before purchase.

AVINASH BBA-4 081107 10-23

Copyright Atomic Dog Publishing, 2002
Characteristics of Purchase
Decision
 If number of possible
solutions is limited –
extensive search is
acceptable
 If need for trial is high
– more likely to search
 Difficulty of trial high
– search is for quality
supplier

AVINASH BBA-4 081107 10-24

Copyright Atomic Dog Publishing, 2002
External Search Strategy
 Consideration set: those brands, outlets, etc. that
have front-of-mind presence and from among
which there is intention to choose.
– Which brands of computers would you consider
purchasing?
– Also called “evoked set” or “relevant set”
 Marketplace information sources:
– General (face-to-face or mass media)
– Marketer-controlled (face-to-face or mass media)

AVINASH BBA-4 081107 10-25

Copyright Atomic Dog Publishing, 2002
Special Thanks
To

Students……….
AVINASH BBA-4 081107 10-26
Copyright Atomic Dog Publishing, 2002