Marketing Management Dawn Iacobucci © 2010 South-Western, a part of Cengage Learning

Targeting Chapter 3

What Is Targeting & Why Do It? What is Targeting? –Selecting a market(s) to pursue Why do it? –It’s difficult to be all things to all people

How to Choose a Target When choosing target market(s), marketers should consider 1.The market’s fit with the firm’s capabilities –More subjective/challenging to assess 2.The profitability potential of the market –More objective

1. Fit with Firm’s Capabilities Does this market “fit” with what we are? –Questions Can we satisfy this market? What are our strengths? What resources do we have? What is our experience? What is our corporate culture? What are our current brand personalities, etc.?

SWOT Analysis Internal –Strengths What do we do well? –Weaknesses What do we not do well? –Assess firm relative to competitors –Utilize the customer point of view

SWOT Analysis External –Opportunities What is occurring in the external world that is favorable to us? –Threats What is occurring in the external world that is unfavorable to us? –Created by changes in the 5 C’s

Competitive Analysis Perceptual Map –Shows how customers perceive firm relative to competitors Most attributes and benefits can be represented by Price & Quality –Dimensions for quality will vary by industry

2. Profitability Potential How likely is it that the market will be profitable? –Function of market size anticipated market growth current and anticipated levels of competition customer behavior and expectations

Market Size Project the size of various segments –Considerations The more precisely defined the target, the easier it is to estimate Be as precise as possible in estimating Determine upper and lower bounds of estimates Run scenarios to determine sensitivity of estimates Compare the size of each segment

Market Growth Project the market growth for various segments –Projecting market growth is risky –One technique Obtain industry sales data for previous years Compute a moving average mean –years 1, 2 and 3; years 3, 4 and 5; etc. Utilize regression to fit a curve to these data Compare growth rates for each market

Identify Competitive Threat Identify the number of competitors in each market –Look in the yellow pages –Conduct an on-line search Utilize various terms to ensure thoroughness –e.g., hair salon, beauty shop, etc. Compare the competitive threat in each market

Estimate Profitability Estimate profitability of each segment –Estimate price for each segment –Estimate costs for each segment variable costs: product material, etc. fixed costs: insurance, rent, etc. Compare profitability of each segment

B2B Market Size One approach –Start with the total population –Break it down into relevant proportions –Example: (population x %aware x %trial x %repeat) x per annum purchase –Census.gov cross-classifies businesses by sector (e.g., NAICS codes) and size (e.g., by sales or number of employees)