Chapter 4

Opportunity Analysis, Market Segmentation, and Market Targeting

In this chapter, you will learn about

1. Opportunity Analysis 2. What is a Market? 3. Market Segmentation Benefits of Market Segmentation Bases for Market Segmentation Requirements for Effective Market Segmentation
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In this chapter, you will learn about

4. Offering-Market Matrix 5. Market Targeting 6. Market Sales Potential and Profitability Estimating Market Sales Potential Sales and Profit Forecasting

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Marketing Strategy involves

Selection of Markets
Customer Satisfaction

Development of programs to reach these markets

Organizational Objectives

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Opportunity Analysis Involves

Opportunity Identification Opportunity - Organization Matching

Opportunity Evaluation

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Opportunity Identification
Identifying new types of classes of buyers Uncovering unsatisfied needs of buyers Creating new ways or means for satisfying buyer needs
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Opportunity-Organization Matching
Determines whether an identified opportunity is consistent with an organizations business, mission, and competencies SWOT Analysis often employed Financially attractive opportunities are sometimes rejected at this stage due to lack of match
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Opportunity Evaluation
Has both qualitative & quantitative phases
Qualitative Evaluates the likelihood of capitalizing on a market niche Quantitative Yields estimates of market sales potential and company sales forecasts
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Opportunity Evaluation Matrix

Market niche criterion Political, Demand/ Technological, Organizational and Capabilities Supply Socioeconomic Forces

Competitive Activity

Buyer Requirements

Buyer Type

Buyer Needs Means for Buyer Needs

A Market Consists of
Prospective buyers willing and able to purchase the existing or potential offering of an organization. Focus on Buyers Effective Demand

Offering rather than product or service Market Share

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What is Market Segmentation?

The breaking down or building up of potential buyers into groups called Market Segments

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Benefits of Market Segmentation

1. Identifies opportunities for new product development

2. Helps design marketing programs most effective for reaching homogenous groups of buyers

3. Improves allocation of marketing resources

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Market Segmentation Variables

Socioeconomic Behavioral

Market Segmentation Variables

Psychographic Benefits Sought

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Fundamental-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?
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Each Market Segment should be

Measurable

Differentiable

Substantial

Accessible

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Sample Offering - Market Matrix for Handheld Calculators

Market Segments (User Groups) Business Scientific Simple Moderate Complex Very complex
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Home

School

Market Targeting
Specifying segments to pursue

Organization Differentiated Marketing The organization pursues several different market segments simultaneously

Market
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Market Targeting
Specifying segments to pursue

Organization Concentrated Marketing The organization focuses on a single market segment

Market
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Market Sales Potential

Maximum level of sales available to all firms serving a defined market in a specific time period given: 1. The marketing mix activities and efforts of all organizations 2. A set of environmental conditions

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Market Sales Potential and Profitability

Chain Ratio Method
Market Sales Potential is a function of: 1. The number of Prospective Buyers (B) 2. The Quantity Purchased (Q) 3. The Price of an Average Unit (P)

Market Sales Potential = B x Q x P

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Chain Ratio Method

Example
Market Potential for cola-flavored carbonated drink in Canada: 1. Population (P) = 32,000,000 2. Proportion of P that consumes carbonated beverages (R) = 95% 3. Proportion of R that consumes cola-flavored carbonated beverages (C) = 70% 4. Average number of liters of cola consumed per colaconsumer per week (L) = 1.7 liters 5. Average price per liter of cola (A) = $ 0.50 Market Sales Potential = P x R x C x L x A = 32 Million x 0.95 x 0.70 x 1.7 x 52 x 0.50 = $94.06 Million
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What is a Sales Forecast?

Level of sales a single organization expects to achieve based on a chosen market strategy and an assumed competitive environment.

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Forecasted Sales reflect

1. The size of the target market 2. The marketing mix chosen for the target market 3. The assumed number of competitors and competitive intensity in the target market

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Making a Sales Forecast

Sales Forecast is a function of: 1. Market potential (M) 2. Proportion of market you are Targeting (T) 3. Extent of market Coverage (C) 4. Number of Units expected to sell per customer during the year (U) 5. Average Price per unit (P) Sales Forecast = M x T x C x U x P
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Making a Sales Forecast

Example
Total number of potential buyers = 1 Million Target Market (25%) Market Coverage (75%) Units purchased per year (20) Average Price ($10) Forecasted Sales = x 0.25 = x 0.75 = x 20 = x $10 = $ 37.5 Million

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