CHAPTER

Opportunity Analysis, Market Segmentation, and Market Targeting

Slide 4-1

OPPORTUNITY-ORGANIZATION MATCHING
Opportunity-organization matching determines whether an identified market opportunity is consistent with the definition of the organizations business, mission statement, and distinctive competencies.
Assesses the organizations strengths and weaknesses via a SWOT analysis.

Identifies the success requirements for operating profitably in a market.

Rejects those that do not conform to an organizations character even though they offer sizable sales and profit.
Slide 4-2

OPPORTUNITY EVALUATION
Opportunity evaluation has two phases:
Qualitative
Matches the attractiveness of an opportunity with the potential for uncovering a market niche, which depends on:
Competitive activity Environmental forces Buyer requirements Organizational Market demand capabilities Supplier sources

Quantitative
Consists of:
Market sales potential estimates Sales forecasts Budgets

Slide 4-3

CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

WHAT IS A MARKET?

Slide 4-4

WHAT IS A MARKET?

A market consists of the prospective buyers (individuals or organizations) willing and able to purchase the existing or potential offering (product or service) of an organization.
Slide 4-5

WHAT IS A MARKET?
Implications for marketers:
Buyers
Focus on buyers, not products or services. Exchanges cannot occur unless buyers are able and willing to purchase a product or service. Purchases consist of offerings, not products or services, due to the values or benefits that buyers derive from them.
Slide 4-6

Effective Demand

Offerings

WHAT IS A MARKET?
View as a composite of mini- or regional markets to:
Identify competitors and how they compete

Monitor changes in sales volume Assess differences between buyers taste preferences and the competition
Slide 4-7

WHAT IS A MARKET?
Assess market share:

Sales ($ or #) of a Firm, Product, Service, or Brand

Market Share

=
Sales ($ or #) of the Market

X%

Slide 4-8

WHAT IS A MARKET?
A served market is the market in which a company, product, service, or brand competes for targeted customers. Marketing managers often look closely at served market share when considering strategic options.
High Served Market Share Low Served Market Share

Use a market development strategy. Use either a product development or market penetration strategy.
Slide 4-9

CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

MARKET SEGMENTATION

Slide 4-10

MARKET SEGMENTATION
Market Segmentation
A technique that involves breaking down or building up of potential buyers into groups, which are called market segments.

Each segment possesses a homogeneous characteristic that relates to its purchasing behavior and response to a marketing program. Market segmentation arose because an organization cannot be all things to all people.
Information technology and flexible manufacturing and service delivery systems can create segments of one.
Slide 4-11

BENEFITS OF MARKET SEGMENTATION

Identifies opportunities for new product development. Helps in the design of marketing programs that are most effective for reaching homogeneous groups of consumers.

Improves the allocation of marketing resources.

Slide 4-12

BASES FOR MARKET SEGMENTATION

Consumers Industrial Buyers

Socioeconomic Characteristics
Gender Age Occupation Income Family Life Cycle Education

Behavioral Variables
Benefits Sought Usage Lifestyle Attitudes

Socioeconomic Characteristics
Company Size Location Industry Customers Served

Behavioral Variables
Purchasing Objectives Product Benefits

Location
Slide 4-13

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

Need to answer six buyer-related questions:
Who are they? What do they want to buy? How do they want to buy? When do they want to buy? Where do they want to buy? Why do they want to buy?
Slide 4-14

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

Each market segment should be: Measurable Differentiable

Accessible

Substantial

Slide 4-15

CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

MARKET TARGETING

Slide 4-16

MARKET TARGETING

Market targeting (or target marketing) is the specification of the segment(s) the organization wishes to pursue.

Slide 4-17

MARKET TARGETING
Two market targeting approaches:
Differentiated Marketing
Simultaneously pursues several different market segments with a unique marketing strategy for each segment. Manages multiple products across multiple market segments, which increases marketing expenditures.

Concentrated Marketing
Focuses on a single market segment, sometimes marketing one product to one segment.
More commonly, offers one or more product lines to a single market segment. Provides operating economies. Limits growth opportunities if the segment size declines. Slide 4-18

CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

MARKET SALES POTENTIAL AND PROFITABILITY

Slide 4-19

MARKET SALES POTENTIAL

Estimating a markets sales potential for offerings is a difficult task. Markets and offerings can be defined in ways that can lead to different estimates of market size and dollar sales potential. For innovative offerings or new markets, marketers may rely entirely on judgment and creativity when estimating market sales potential.
Slide 4-20

EXHIBIT 4.4: NOKIA OFFERING-MATRIX FOR CELL PHONES DEPICTING A DIFFERENTIATED MARKETING STRATEGY (FEATURING EARLY 2005 PRODUCT LINE MARKET TARGETS)
Market Segments Offering Characteristics
Basic
First-time users; Teens needing voice connectivity

Expression
Younger buyers who desire customized and personalized products

Active
Cool, young active adults desiring to connect with friends; sports enthusiasts

Classic
Travelers with various business needs who prefer functionality

Fashion
Buyers who want to show off with a personal sense of style

Premium
World travelers wanting a PDA, connectivity, and games

Durable; ease of use; and low price

Series 1000/ Series 2000

Changeable covers; color displays; downloadable ring tones; and games

Series 3000

Small size; stylish; durable; user friendly; color displays; and fitness monitor

Series 5000

Traditional style; web browser; networking; phone book; calendar; and camera

Series 6000

MP3 music player; styling; games; camera; color display; and Internet access

Series 7000

Enhanced user interface; camera; color display; multimedia; messaging; and a PDA

Series 8000

Slide 4-21

ESTIMATING MARKET SALES POTENTIAL

Market sales potential is the maximum level of sales that might be available to all organizations serving a defined market in a specific time period given:
the marketing-mix activities and related expenditures of all organizations; and

a set of environmental conditions, such as consumer disposable income, government regulations, socioeconomic trends, etc.
Slide 4-22

ESTIMATING MARKET SALES POTENTIAL

Variables used to estimate market sales potential:
Buyers (B)

The number of prospective buyers (B) who are willing and able to purchase an offering. The quantity (Q) of an offering purchased by an average buyer in a specific time period, typically one calendar year. The price (P) of an average unit of the offering.

Quantity (Q)

Price (P)

Market Sales Potential

P
Slide 4-23

ESTIMATING MARKET SALES POTENTIAL

Chain ratio method involves multiplying a base number by several adjusting factors that are believed to influence market sales potential:
Population aged 8 years and over proportion of the population that consumes soft drinks on a daily basis proportion of the population preferring cola-flavored soft drinks the average number of carbonated soft drink occasions per day the average amount consumed per consumption occasion (expressed in ounces) 365 days in a calendar year the average price per ounce of cola
Slide 4-24

Market sales potential for cola-flavored carbonated soft drinks in a country

ESTIMATING MARKET SALES POTENTIAL

The chain ratio method serves three purposes:
Yields a quantitative estimate of market sales potential.

Highlights factors that are controllable (e.g. advertising and pricing) and not controllable by organizations (e.g. population). Is flexible in estimating market sales potential for different buyer groups and offerings.
Slide 4-25

SALES AND PROFIT FORECASTING

A sales forecast:
Is the level of sales a single organization expects to achieve based on a chosen marketing strategy and an assumed competitive environment. Is some fraction of estimated market sales potential. Reflects the size of the target market(s) chosen by the organization and the marketing mix chosen for the target market(s). Reflects the assumed number of competitors and competitive intensity in the chosen target market(s).
Slide 4-26

SALES AND PROFIT FORECASTING

Example of a sales forecast (chain ratio method):

Slide 4-27