Department of Business

Administration

Principles Of Marketing
Course Code: MKT 227
Program: BBA
Credit Hours: 03

Instructor: Muhammad Faheem

Ullah
PRINCIPLES OF
MARKETING
Market Segmentation, Targeting and Positioning
What is Market Segmentation

A process of dividing the

total (heterogeneous)
market for a good or
service into several smaller
homogenous groups.
Market Segmentation
 Previously, a Market was defined as people or organizations
with (i) needs & wants to satisfy, (ii) money to spend, and (iii)
willingness to spend it.
 However, all people in a market are not similar with respect to
their needs and wants of the products.
 For example;
 market of movies: Adventure, Drama, Sci-Fi, History, Mystery,
Thriller.
 market of cars: Family, Luxury, Sports, Comfort & Space.
 market of magazines: Economy & Business, Fashion, Technology,
Politics, Teens.
Market Segmentation
Some important definitions:

Market Segment: Market Segment is a sub-group of the total

market which includes people with similar wants, buying
preferences, and product use behavior.

Target Markets: A specific market segment or segments on

which a seller focuses its effort is called a target market.
Market Segmentation
Positioning: A position is the way products, brands, or
organizations are viewed relative to the competition by current
and prospective customers.

Marketing Mix: Marketing Mix is a combination of the four

elements namely product, price, placement (distribution), and
promotion (the 4 Ps). These four elements are used to satisfy the
needs and wants of an organization’s target market(s) and at the
same time achieve its marketing objectives.
Benefits of Market Segmentation
Benefits of Market Segmentation

1. Efficient use of resources: Segmentation helps marketers

in utilizing their resources in the best possible way. A market
segment in which consumers are majorly interested in music
are easily approached via music channels such as MTV,
Channel V, AAG TV, VH1 or Radio Programing or Music
Concerts. Similarly, segmentation can also help in locating
the highest concentration of the consumers of a product in a
geographic region thus helping in minimizing the
distributing cost of the products.
Benefits of Market Segmentation

2. Refine your Pricing to

Maximize Revenue/Margins:
With segmentation, the
customers get a tailored
product while marketers can
get the maximum margin from
their offerings. A good
example of maximizing firms
margins is the energy drink red
bull which was made from a
mediocre drink in Thailand
Untargeted Targeted
called Krating Daeng.
Benefits of Market Segmentation
3. Maximize Sales
Since the essence of market segmentation is to tailor products
according to the needs and wants of the customers, therefore an
important factor of segmentation is that the frequency of
usage/consumption of a product is maximized.

4. In Depth Insight of Markets

When a mass market is divided into smaller homogenous groups, it is
easier to categorize these segments with respect to the common
attributes that most of the members of the segment possess. Further
research into finding hidden patterns of consumer behavior is possible
only if the total market is divided into small segments.
Benefits of Market Segmentation

5. Benefitsto Small Firms

A small firm with limited sources might compete very
effectively in one or two small market segments whereas the
same firm would be buried if it aimed for the total market.
Process of Market Segmentation
 Common Market Segmentation
Processes
There are two basic (yet most common) ways
to Segment a Market.
1.Segmentation based on intuition: Marketers
rely on experience and judgment to make a
decision about segments that exist in a market
and how much potential each offers.
2.Segment by following the lead of others:
Most of the times, marketers follow other
organizations/businesses in providing new
offerings. For Example Gatorade was a drink
invented by University of Florida scientists to
rapidly replenish the body fluids of school
football team. Later pepsi and coke introduced
Powerade and All Sport for sports drink
segment.
Segmenting Consumer Markets
Segmenting Consumer Markets
There are four main basis of segmenting consumer markets
namely;

1. Geographic Segmentation
2. Demographic Segmentation
3. Psychographic Segmentation
4. Behavioral Segmentation
Segmenting Consumer Markets
1. Geographic Segmentation
Subdividing markets into segments based on location- the regions,
provinces, cities, towns where people live and work – is called
geographic segmentation.
The reason why we study geographic segmentation is because
WHERE people live has a big effect on their consumption patterns.
Additionally, WHERE people live in a city is also a reflection of their
income level and we can make certain assumptions about their
ABILITY TO SPEND based upon their address.
World Region or Country: North America, Mid East, Asia.
Country Region: North (KPK, AJK), Central(Punjab), South (Sindh,
Baluchistan)
City or Metro Size: New York, Islamabad, Karachi.
Segmenting Consumer Markets
Many firms market their
products in limited number of
geographic regions or they
may market modify their
product according to a specific
region’s requirements. For
example McDonald's McAloo
Tikki in India and Pizza Hut’s
Behari Chicken Pizza or
Shawarma Pizza in Pakistan.
 Segmenting Consumer Markets
2. Demographic Segmentation
Demographic Segmentation is the most common approach to Market
Segmentation.
Variables are:
Age – Age has a strong impact on consumption patterns e.g., diapers are for
babies, toys for children, cars for people “over 18”. Similarly, children and
teenagers drink a lot of milk for calcium but adults don’t and may take flavored
drinks and senior citizens need calcium, but don’t drink milk; they take pills.
Education – Often education determines what occupation people choose
which in turn determine the social class to which they belong.
Income – The level of income directly impacts the purchasing power of the
consumers (lower class, middle class, upper class).
Occupation - A lawyer and plumber may have same income level but their
social class varies causing a drastic change in their choice and pattern of
spending.
Gender – A number many products are gender-specific e.g., clothing, sports
products, entertainment etc.
Segmenting Consumer Markets
3. Behavioral Segmentation
Behavioral segmentation involves consumers behavior related to
specific products. It has two dimensions.
a. Benefits desired:
“It is based on the benefits (characteristics) of products, as seen
by the customers”. This concept states that people buy
something because it provides a benefit.
For example:
Diet coke - less sugar, lose weight.
Extra White Toothpaste - whiter teeth, better smile
Segmenting Consumer Markets
b. Usage Rate
It identifies the rate at which people consume a product. Common
categorization of rate is nonusers, light users, medium users, and
heavy users. Normally a company is mostly interested in the heavy
users because typically fewer than 50% of all users of a product
typically account for 80% to 90% of the total firms purchases.
Markets must give special attention to these users to make them feel
special and loyal.
Some marketers may also go after the non-users or light users to
identify factors that is holding them back or stimulate their interest
and shift them from a lower category to a higher one i.e. from lower
user to medium user and from medium to higher user.
 Segmenting Consumer Markets
4. Psychographic Segmentation
Psychographic segmentation involves examining attributes related to
how a person thinks, feels, and behaves. It studies consumers in the
following two dimensions;
a. Personality Characteristics
The sum total of ways in which an individual reacts to and interacts
with others. Personality characteristics influence behavior such as
compulsive, cautious, aggressive, timid, etc. However personality
characteristics often pose problems that limit their usefulness in
practical market segmentation.
Examples: When you care enough to send the very best (Hallmark) is
a tag line to appeal sensitive people.
Segmenting Consumer Markets
Types of Personalities
Reserved Vs Outgoing
Submissive Vs Dominant
Serious Vs Happy-go-lucky
Timid Vs Venturesome
Relaxed Vs Tense
Sensitive Vs Tough-Minded
Trusting Vs Suspicion
Practical Vs Imaginative
Forthright Vs Shrewd
Group Dependent Vs Self-sufficient
Uncontrolled Vs Controlled
Segmenting Consumer Markets
b. Lifestyle
Lifestyle is defined as a distinctive mode of living. Lifestyle of customers is
measured using three basic elements (AIO);
Activities – How people spend their time
Interests – What they place importance on in their immediate surrounding
Opinions - Their opinion of themselves & the world around them.
Segmenting Consumer Markets
These elements together reflect people’s lifestyles. It represents
how one spends their time and what their beliefs are on various
social, economic and political issues. The basic principle is that
the more you know and understand about your customers the
better you can communicate and market to them.
Lifestyle attempts to answer questions like: What do women
think about the job of house keeping? Are they interested in
contemporary fashion? Do they participate in community
activities? Are they optimistic about the future?