Slide 4-1 CHAPTER 4 Opportunity Analysis, Market Segmentation, and Market Targeting.

1

CHAPTER4

Opportunity Analysis,

Market Segmentation,

and Market Targeting

2

OPPORTUNITY-ORGANIZATION MATCHING

Opportunity-organization matching determines whether an identified market opportunity is consistent with the definition of the organization’s business, mission statement, and distinctive competencies.

Assesses the organization’s strengths and weaknessesvia a SWOT analysis.

Identifies the success requirements for operating profitably in a market.

Rejects those that do not conform to an organization’s character even though they offer sizable sales and profit.

3

Opportunity evaluation has two phases:

QualitativeQualitative QuantitativeQuantitative

OPPORTUNITY EVALUATION

• Market sales potential estimates

• Sales forecasts

• Budgets

Matches the attractiveness of an opportunity with the potential for uncovering a market niche, which depends on:

• Competitive activity

• Buyer requirements

• Market demand

• Supplier sources

• Environmental forces

• Organizational capabilities

Consists of:

4

WHAT IS A MARKET?

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

5

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.

6

WHAT IS A MARKET?

Focus on buyers, not products or services.

Implications for marketers:

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.

EffectiveDemandEffectiveDemand

OfferingsOfferings

BuyersBuyers

7

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

8

WHAT IS A MARKET?

Assess market share:

MarketShareMarketShare

Sales ($ or #) of aFirm, Product, Service, or Brand

Sales ($ or #) of aFirm, Product, Service, or Brand

= = X%X%Sales ($ or #)of the MarketSales ($ or #)of the Market

9

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.

Use a market development strategy.

Use either a product development or market penetration strategy.

“High” ServedMarket Share

“High” ServedMarket Share

“Low” ServedMarket Share“Low” ServedMarket Share

10

MARKETSEGMENTATION


11

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 characteristicthat relates to its purchasing behavior and responseto a marketing program.

Market segmentation arose because an organization “cannot be all things to all people.”

MarketSegmentation

MarketSegmentation

Information technology and flexible manufacturing and service delivery systems can create “segments of one.”

12

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.

13

BASES FOR MARKET SEGMENTATION

BehavioralVariables

BehavioralVariables

• Gender

• Age

ConsumersConsumers Industrial BuyersIndustrial Buyers

SocioeconomicCharacteristicsSocioeconomicCharacteristics

BehavioralVariables

BehavioralVariables

SocioeconomicCharacteristicsSocioeconomicCharacteristics

• Occupation

• Income

• Family Life Cycle

• Education

• Location

• Benefits Sought

• Usage

• Lifestyle

• Attitudes

• Company Size

• Location

• Industry

• Customers Served

• PurchasingObjectives

• ProductBenefits

14

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

Who are they?

Need to answer six buyer-related questions:

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?

15

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

Each market segment should be:

MeasurableMeasurable DifferentiableDifferentiable

AccessibleAccessible SubstantialSubstantial

16

MARKET TARGETING


17

MARKET TARGETING

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

18

MARKET TARGETING

Two market targeting approaches:

DifferentiatedMarketing

DifferentiatedMarketing

ConcentratedMarketing

ConcentratedMarketing

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.

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.

19

MARKET SALES POTENTIAL AND PROFITABILITY


20

Estimating a market’s 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.

MARKET SALES POTENTIAL

21

EXHIBIT 4.4: NOKIA OFFERING-MATRIX FOR CELL PHONES DEPICTING A DIFFERENTIATED MARKETING STRATEGY(FEATURING EARLY 2005 PRODUCT LINE MARKET TARGETS)

Market Segments

Basic Expression Active Classic Fashion Premium Offering Character-istics

First-time users; Teens needing voice connectivity

Younger buyers who desire customized and personalized products

Cool, young active adults desiring to

connect with friends; sports enthusiasts

Travelers with various business needs who prefer functionality

Buyers who want to “show off” with a

personal sense of style

World travelers wanting a PDA, connectivity, and

games

Durable; ease of use; and low price

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

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

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

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

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

Series 3000Series 3000


Series 1000/Series 2000Series 1000/Series 2000

Series 6000



22

the marketing-mix activities and related expenditures of all organizations; and

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:

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

23

Variables used to estimate market sales potential:

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.

Buyers (B)Buyers (B)

Quantity (Q)Quantity (Q)

Price (P)Price (P)

Market Sales PotentialMarket Sales Potential = ×BB QQ PP×

24


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

Market sales potential forcola-flavored carbonatedsoft drinksin a country

25


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.

26

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).

27

SALES AND PROFIT FORECASTING

Example of a sales forecast (chain ratio method):

Total estimated prospective buyers 1,000,000

Target market (25% of total buyers) 0.25

Distribution/communication coverage (75% of target market)

0.75

Annual purchase rate (20 units per year) 20

Average offering unit price ($10.00) $10.00

Forecasted sales $37,500,000

Slide 4-1 CHAPTER 4 Opportunity Analysis, Market Segmentation, and Market Targeting.

Documents

Transcript of Slide 4-1 CHAPTER 4 Opportunity Analysis, Market Segmentation, and Market Targeting.