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

2. Slide 4-2 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. Slide 4-3 Opportunity evaluation has two phases: QualitativeQuantitative 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. Slide 4-4 WHAT IS A MARKET? CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

5. Slide 4-5 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. Slide 4-6 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. Effective Demand Offerings Buyers

7. Slide 4-7 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. Slide 4-8 WHAT IS A MARKET? Assess market share: Market Share Sales ($ or #) of a Firm, Product, Service, or Brand == X% Sales ($ or #) of the Market

9. Slide 4-9 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” Served Market Share “Low” Served Market Share

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

11. Slide 4-11 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 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.” Market Segmentation  Information technology and flexible manufacturing and service delivery systems can create “segments of one.”

12. Slide 4-12 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. Slide 4-13 BASES FOR MARKET SEGMENTATION Behavioral Variables Gender Age ConsumersIndustrial Buyers Socioeconomic Characteristics Behavioral Variables Socioeconomic Characteristics Occupation Income Family Life Cycle Education Location Benefits Sought Usage Lifestyle Attitudes Company Size Location Industry Customers Served Purchasing Objectives Product Benefits

14. Slide 4-14 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. Slide 4-15 REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION Each market segment should be: MeasurableDifferentiable AccessibleSubstantial

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

17. Slide 4-17 MARKET TARGETING Market targeting (or target marketing) is the specification of the segment(s) the organization wishes to pursue.

18. Slide 4-18 MARKET TARGETING Two market targeting approaches: Differentiated Marketing Concentrated 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.  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. Slide 4-19 MARKET SALES POTENTIAL AND PROFITABILITY CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

20. Slide 4-20  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. Slide 4-21 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. Slide 4-22  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. Slide 4-23 Variables used to estimate market sales potential: The number of prospective buyers (B) who are willing and able to purchase an offering. ESTIMATING MARKET SALES POTENTIAL 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) Quantity (Q) Price (P) Market Sales Potential =× BQP ×

24. Slide 4-24 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. Slide 4-25 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. Slide 4-26 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. Slide 4-27 SALES AND PROFIT FORECASTING Example of a sales forecast ( chain ratio method ):