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

2. Slide 1-2© 2013 Pearson Education, Inc. publishing as Prentice Hall 1.Identify, match, and evaluate opportunities available to an organization. 2.Define the nature of a market. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 3.Describe the benefits and bases of, and the requirements for effective market segmentation.

3. Slide 1-3© 2013 Pearson Education, Inc. publishing as Prentice Hall 5.Describe the approaches to market targeting. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 6.Estimate market sales potential and profitability. 4.Construct an offering-market matrix.

4. Slide 1-4© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKETING STRATEGY FRAMEWORK Satisfied Customers Realized Organization Objectives Market Selection Marketing Programs Marketing Strategy Target Markets

5. Slide 1-5© 2013 Pearson Education, Inc. publishing as Prentice Hall OPPORTUNITY ANALYSIS CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

6. Slide 1-6© 2013 Pearson Education, Inc. publishing as Prentice Hall OPPORTUNITY ANALYSIS Opportunity- Organization Matching Opportunity Evaluation Opportunity Identification Opportunity analysis consists of three interrelated activities:

7. Slide 1-7© 2013 Pearson Education, Inc. publishing as Prentice Hall OPPORTUNITY ANALYSIS  Opportunities arise from:  Opportunity analysis focuses on finding markets that an organization can profitably serve Identifying new types of buyers Creating new ways or means for satisfying buyer needs Uncovering unsatisfied needs of buyers Opportunity Identification

8. Slide 1-8© 2013 Pearson Education, Inc. publishing as Prentice Hall OPPORTUNITY ANALYSIS Determines whether an identified market opportunity is consistent with the definition of the firm’s business, mission statement, and distinctive competencies  Assesses strengths and weaknesses via a SWOT  Identifies the success requirements  Rejects those that do not conform to a firm’s character even if they offer sizable sales and profit Opportunity-Organization Matching

9. Slide 1-9© 2013 Pearson Education, Inc. publishing as Prentice Hall Market opportunity analysis Four key elements: Customer Analysis of the customer environment uncovers unmet or underserved customer needs, as well as the market they occupy Technology Analysis of the technology environment reveals the readiness of the particular technology, as well as any alternative technologies, on which the manager anticipates deploying the firm’s offering Competition Analysis of the company environment provides the current state of the company’s resources Company Analysis of the competition environment reveal the structure of the industry and market, key competitors in the marketplace, and the firm’s relative advantage to each of the key players

10. Slide 1-10© 2013 Pearson Education, Inc. publishing as Prentice Hall Market opportunity analysis Customer Technology Competition Company

11. Slide 1-11© 2013 Pearson Education, Inc. publishing as Prentice Hall OPPORTUNITY ANALYSIS 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: Opportunity Evaluation Qualitative Quantitative

12. Slide 1-12© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 4.1: OPPORTUNITY EVALUATION MATRIX—ATTRACTIVENESS CRITERIA Market Niche Criterion Competitive Activity Buyer Requirements Environmental Forces Organizational Capabilities Demand/ Supply Buyer Type  How many and which firms compete for this user group?  What affects buyer willingness and ability to buy?  Do different buyer types have different levels of effective demand?  How important are adequate sources of supply?  How sensitive are different buyers to these forces?  Can we gain access to buyers through marketing mix variables?  Can we supply these buyers? Buyer Needs  Which firms are satisfying which buyer needs?  Are there buyer needs that are not being satisfied?  What are they?  Are buyer needs likely to be long-term?  Do we have or can we acquire resources to satisfy buyer needs?  How sensitive are buyer needs to these forces?  Which buyer needs can our firm profitably satisfy? Means for Satisfying Buyer Needs  What are the strategies being employed to satisfy buyer needs?  Is the technology for satisfying buyer needs changing?  To what extent are the means for satisfying buyer needs affected by supply sources?  Is the demand for the means for satisfying buyer needs changing?  How sensitive are the means for satisfying buyer needs to these forces?  Do we have the financial, human, technological, and marketing expertise to satisfy buyer needs?

14. Slide 1-14© 2013 Pearson Education, Inc. publishing as Prentice Hall WHAT IS A MARKET? CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

15. Slide 1-15© 2013 Pearson Education, Inc. publishing as Prentice Hall 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.

16. Slide 1-16© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 4.2: MARKET STRUCTURE FOR COFFEE IN THE UNITED STATES New England MidwestSoutheast Northwest Caffeinated GroundWhole BeanInstant Institutional Sales (restaurants, institutions, etc.) Decaffeinated … …… … Total U. S. Coffee Market Retail Sales (retail food stores)

17. Slide 1-17© 2013 Pearson Education, Inc. publishing as Prentice Hall WHAT IS A MARKET? Market Share Firm, Offering, or Brand Sales ($ or #) == X% Market Sales ($ or #) Market Share Market share is the sales dollars ($) or units(#) of a firm, offering, or brand divided by the sales of the “market,” expressed as a percentage (%):

18. Slide 1-18© 2013 Pearson Education, Inc. publishing as Prentice Hall Coffee Dollar Sales Atlantic Blend Sales Market Definition WHAT IS A MARKET? Market Share

19. Slide 1-19© 2013 Pearson Education, Inc. publishing as Prentice Hall WHAT IS A MARKET?  A served market is one in which a company, offering, 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 Market Share

20. Slide 1-20© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET SEGMENTATION CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

21. Slide 1-21© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET SEGMENTATION  Each segment possesses a homogeneous characteristic that relates to its purchasing behavior and response to a marketing program  “Cannot be all things to all people” Market Segmentation  Information technology and flexible manufacturing and service delivery systems can create “segments of one”  A technique that involves breaking down or building up of potential buyers into groups, which are called market segments

22. Slide 1-22© 2013 Pearson Education, Inc. publishing as Prentice Hall 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 Benefits of Market Segmentation

23. Slide 1-23© 2013 Pearson Education, Inc. publishing as Prentice Hall 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 Bases for Market Segmentation Psychographic Variables

25. Slide 1-25© 2013 Pearson Education, Inc. publishing as Prentice Hall 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? Requirements for Effective Market Segmentation

26. Slide 1-26© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

27. Slide 1-27© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING Marketers ask three questions after a market has been segmented: Where to Compete? How to Compete? When to Compete?

28. Slide 1-28© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING  Question focuses on which market segments should be chosen for marketing efforts  Market targeting (or target marketing) is the specification of the segment(s) the organization wishes to pursue Where to Compete?

29. Slide 1-29© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING  Question focuses on how many market segments the organization will pursue and the marketing strategies to employ  Two market targeting approaches are: Differentiated Marketing Concentrated Marketing How to Compete?

30. Slide 1-30© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING 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-related expenditures How to Compete?

31. Slide 1-31© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET TARGETING 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 How to Compete?

32. Slide 1-32© 2013 Pearson Education, Inc. publishing as Prentice Hall SAMSUNG’S DIFFERENTIATED MARKETING STRATEGY

33. Slide 1-33© 2013 Pearson Education, Inc. publishing as Prentice Hall MARKET SALES POTENTIAL AND PROFITABILITY CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

34. Slide 1-34© 2013 Pearson Education, Inc. publishing as Prentice Hall  Estimating a market’s sales potential for an offering 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 new offerings or markets, marketers may rely entirely on judgment and creativity when estimating market sales potential MARKET SALES POTENTIAL AND PROFITABILITY Market Sales Potential

35. Slide 1-35© 2013 Pearson Education, Inc. publishing as Prentice Hall Variables used to estimate: MARKET SALES POTENTIAL AND PROFITABILITY The number of prospective buyers (B) who are willing and able to purchase an offering Buyers (B) The quantity (Q) of an offering purchased by an average buyer in a specific time period Quantity (Q) The price (P) of an average unit of the offering Price (P) Market Sales Potential =× BP × Estimating Market Sales Potential Q

36. Slide 1-36© 2013 Pearson Education, Inc. publishing as Prentice Hall SALES AND PROFIT FORECASTING  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) Sales Forecast

37. Slide 1-37© 2013 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.