1. 4 Opportunity Analysis, Market Segmentation, and Market Targeting
CHAPTER
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 weaknesses via 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
Opportunity evaluation has two phases:
Qualitative
Quantitative
Matches the attractiveness of an opportunity with the potential for uncovering a market niche, which depends on:
Consists of:
Market sales potential estimates
Sales forecasts
Competitive activity
Environmental forces
Budgets
Buyer requirements
Organizational capabilities
Market demand
Supplier sources

4. CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING
WHAT IS A MARKET?

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? Implications for marketers: Buyers Effective Demand
Focus on buyers, not products or services.
Effective Demand
Exchanges cannot occur unless buyers are able and willing to purchase a product or service.
Offerings
Purchases consist of offerings, not products or services, due to the values or benefits that buyers derive from them.

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: = X% Market Share
Sales ($ or #) of a Firm, Product, Service, or Brand = X%
Sales ($ or #) of the Market

9. “High” Served Market Share “Low” Served Market Share
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
Use a market development strategy.
“Low” Served Market Share
Use either a product development or market penetration strategy.

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

11. 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.”

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. Socioeconomic Characteristics Socioeconomic Characteristics
BASES FOR MARKET SEGMENTATION
Consumers
Industrial Buyers
Socioeconomic Characteristics
Behavioral Variables
Socioeconomic Characteristics
Behavioral Variables
Gender
Benefits Sought
Company Size
Purchasing Objectives
Age
Usage
Location
Product Benefits
Occupation
Lifestyle
Industry
Income
Attitudes
Customers Served
Family Life Cycle
Education
Location

14. 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?

15. REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION
Each market segment should be:
Measurable
Differentiable
Accessible
Substantial

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

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

18. Differentiated Marketing Concentrated Marketing
MARKET TARGETING
Two market targeting approaches:
Differentiated Marketing
Concentrated Marketing
Simultaneously pursues several different market segments with a unique marketing strategy for each segment.
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.
Manages multiple products across multiple market segments, which increases marketing expenditures.
Provides operating economies.
Limits growth opportunities if the segment size declines.

19. MARKET SALES POTENTIAL AND PROFITABILITY
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING
MARKET SALES POTENTIAL AND PROFITABILITY

20. MARKET SALES POTENTIAL
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.

21. EXHIBIT 4.4: NOKIA OFFERING-MATRIX FOR CELL PHONES DEPICTING A DIFFERENTIATED MARKETING STRATEGY (FEATURING EARLY 2005 PRODUCT LINE MARKET TARGETS)
Series 3000
Series 5000
Series 1000/ Series 2000
Series 6000
Series 7000
Series 8000

22. 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.

23. Market Sales Potential
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.
Quantity (Q)
Price (P)
The price (P) of an average unit of the offering.
Market Sales Potential B Q P = × ×

24. 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
Market sales potential for cola-flavored carbonated soft drinks in a country =

25. 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.

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):