6 - Assessing Market Opportunities

Assessing
Market
Opportunities
Company Customer
Insights Insights
Market
Insight
STRATEGIC
Competitor Segmentation
Insights Insights
MARKET Opportunity Assessment
PLANNING
& Targeting
Strategy Objectives & Strategic Focus
MODEL Development
Positioning
Program Value Creation, Value Delivery,

Design Value Communication, & Value Extraction
Macro-
Analysis
Micro-
Budgeting
Analysis
Execution
Basic Principle
Value of Market Inherent Likelihood of

Opportunity
= Attractiveness x Success
Methodology
 Identify the set of market opportunities
• geographical markets, new product markets, market segments, major
customers, …
 For each opportunity, assess (a) inherent attractiveness for the company
and (b) company’s relative competitiveness with respect to this
opportunity
 Compare across opportunities in terms of both (a) and (b)
 Target and allocate resources accordingly

Attractiveness x Competitiveness
Analysis
Attractiveness Competitiveness
Attractiveness Assessment
Define Attractiveness
Criteria
Determine Relative
Importance
Rate each Segment

on each Criterion
Compute Overall
Attractiveness Scores
Criteria
Determine Relative
Importance
Rate each Segment

on each Criterion
Compute Overall
Define Attractiveness Criteria
Assuming that we would be competitive,

what would make a given market opportunity
attractive or unattractive to us given our
company’s culture and objectives?
Common Attractiveness Criteria
 Current size  Potential for differentiation
 Potential size  Consistency with identity
 Growth rate  Financial risk (e.g., inflation, currency)
 Expected life cycle  Synergies (e.g., channel)
 Customer willingness to pay  Cross-selling potential
 Cost of operation  Customer loyalty
 Profit margins  Willingness to commit to long-term
 Lifetime-value of customers contracts
 Low competitive intensity  Low market volatility

Criteria
Determine Relative
Importance
Rate each Segment

on each Criterion
Compute Overall
Attractiveness Criteria &
Relative Importance
What criteria define
attractiveness in your What is their relative
company/ division? importance?
Relative
Attractiveness Criteria Weights
100
Attractiveness of Credit Card
Customers (South American Bank)
Attractiveness Criteria Weight
Low credit risk 15
Annual fee revenue potential 15
Loyalty 7
Segment size 7
Typical card usage and spending 10
Use of revolving credit 25
Cross-selling potential 7
Segment growth rate 6
Low account acquisition and

8
maintenance costs
100
Criteria
Determine Relative
Importance
Rate each Segment

on each Criterion
Compute Overall
Segment Opportunities Ratings
Rate each segment, criterion by criterion, on a 0 (very poor) to 10 (excellent) scale
Criteria Segment 1 Segment 2 Segment 3 Segment 4

Middle
Attractiveness Criteria Sub-prime
Class
Travel Premium
Low credit risk 3 5 6 8
Annual fee revenue potential 2 4 6 10
Loyalty 7 6 5 4
Segment size 8 7 3 1
Typical card usage and spending 2 4 5 7
Use of revolving credit 7 6 5 4
Cross-selling potential 7 7 6 5
Segment growth potential 8 6 3 1
Low account acquisition and

8 6 5 3
maintenance costs
Criteria
Determine Relative
Importance
Rate each Segment

on each Criterion
Compute Overall
Sub- Middle
Attractiveness Criteria Weight Travel Premium
prime Class
Low credit risk 15 3 5 6 8
Annual fee revenue potential 15 2 4 6 10
Loyalty 7 7 6 5 4
Segment size 7 8 7 3 1
Typical card usage and spending 10 2 4 5 7
Use of revolving credit 25 7 6 5 4
Cross-selling potential 7 7 7 6 5
Segment growth potential 6 8 6 3 1
Low account acquisition and maintenance

8 8 6 5 3
costs
Attractiveness scores: 536 549 511 540
Competitiveness Assessment
 Do not pursue a market opportunity only because it seems attractive
 Take also into account your likelihood of being successful in
competing for this market opportunity

Identify Success Factors

Segment by Segment
Determine Relative
Importance
Comparatively Rate
Yourself on each Factor
Compute Competitiveness
Estimates
Sub- Middle
Attractiveness Criteria Weight Travel Premium
prime Class
Low credit risk 15 3 5 6 8
Annual fee revenue potential 15 2 4 6 10
Loyalty 7 7 6 5 4
Segment size 7 8 7 3 1
Typical card usage and spending 10 2 4 5 7
Use of revolving credit 25 7 6 5 4
Cross-selling potential 7 7 7 6 5
Segment growth potential 6 8 6 3 1
Low account acquisition and maintenance

8 8 6 5 3
costs
Attractiveness scores: 536 549 511 540

Segment by Segment
Determine Relative
Importance
Comparatively Rate
Estimates
For this particular opportunity (set of customers, product,

market), what would make anyone in our industry more
competitive (i.e., more likely to be successful)? What
would the ideal marketer need to have to compete
successfully for this opportunity?
Common Success Factors
 Marketing excellence  Low barriers to entry for us
 Strong fit between product features & benefits  High barriers to entry for competitors
sought by customers  Proprietary technology
 Brand awareness  Patent protection
 Brand credibility  Low production costs
 Strong sales force  Low labor costs
 Access to distribution channels  Production capacity
 Strong customer and field service  Production flexibility
 Low price  Product certification
 Innovative design skills  Access to capital
 Financial resources
 Government support

Segment by Segment
Determine Relative
Importance
Comparatively Rate
Estimates
Competitiveness Estimate
for Brazilian Bank
Segment: Sub-prime credit card customers
Importance
Success Factors
Weight
Low annual fee 12
Low interest rates 5
Low documentation requirements 18
Sales representatives 15
Department store relationship 7

Telemarketing 15
Brand reputation of the bank 8
Breadth of branch distribution 20
100
for Brazilian Bank
Segment: Middle class credit card customers
Importance
Success Factors
Weight
Reward programs 12
Telemarketing 20
Sales representatives 8
Low annual fee 15
Promotions 11
Merchant relationship 7
Large business scale 9
Electronic services 6
Bank brand reputation 8
Electronic marketing 4
100

Segment by Segment
Determine Relative
Importance
Comparatively Rate
Estimates
Comparative Scoring
Relative strength on this factor Score

“We are among the worst” 2 points
“We are about average” 4 points
“We are well above average” 6 points
“We are almost the best” 8 points
“We are by far the best” 10 points

for Brazilian Bank
Importance Relative
Success Factors
Weight Score
Low annual fee 12 4
Low interest rates 5 6
Low documentation requirements 18 7
Sales representatives 15 8
Department store relationship 7 9

Telemarketing 15 5
Brand reputation of the bank 8 7
Breadth of branch distribution 20 8
100
for Brazilian Bank
Importance Relative
Success Factors
Weight Score
Reward programs 12 0
Telemarketing 20 4
Sales representatives 8 6
Low annual fee 15 4
Promotions 11 3
Merchant relationship 7 3
Large business scale 9 4
Electronic services 6 0
Bank brand reputation 8 7
Electronic marketing 4 0
100

Segment by Segment
Determine Relative
Importance
Comparatively Rate
Estimates
for Brazilian Bank
Importance Relative Weighted
Success Factors
Weight Score Score
Low annual fee 12 4 48
Low interest rates 5 6 30
Low documentation requirements 18 7 126
Sales representatives 15 8 120
Department store relationship 7 9 63

Telemarketing 15 5 75
Brand reputation of the bank 8 7 56
Breadth of branch distribution 20 8 160

Competitiveness estimate:
100 678
for Brazilian Bank
Success Factors
Weight Score Score
Reward programs 12 0 0
Telemarketing 20 4 80
Sales representatives 8 6 48
Low annual fee 15 4 60
Promotions 11 3 33
Merchant relationship 7 3 21
Large business scale 9 4 36
Electronic services 6 0 0
Bank brand reputation 8 7 56
Electronic marketing 4 0 0
100 Competitiveness
estimate: 334
Attractiveness/Competitiveness Matrix
1000
666
Attractiveness
Score
333
0
0 333 666 1000
Attractiveness/Competitiveness Matrix
1000
666 Middle
Premiu
Class Sub-
m
Attractiveness prime
Travel
Score
333
0
0 333 666 1000
General Principle:
Allocate resources across segments/
opportunities as a function of expected ROI
Competitiveness
1000
$$
Attractiveness
$$
$
666
$ $$
333
x
0
0 333 666 1000
General Principle:
Allocate resources across segments/
opportunities as a function of expected ROI
Competitiveness
1000
$$
Attractiveness
$$
$
666
$ $$
333
x
0
0 333 666 1000
Principle 1:
Focus on opportunities that rate high on
both attractiveness and
competitiveness
Competitiveness
1000
Attractiveness
666
333
0 0 333 666 1000

Principle 2:
Consider divesting from or “milking”
segments that score low on both
attractiveness and likelihood of success
1000
Competitiveness
Attractiveness
666
333
0
0 333 666 1000
Principle 3:
Keep a balance of (a) secure cash-generating
options and (b) promising cash-absorbing
opportunities such that (a) support (b)
Competitiveness
1000
Attractiveness
B
666
A
A
333
0
0 333 666 1000
Principle 4:
Try to increase your competitiveness for
the most attractive opportunities
Competitiveness
1000
Attractiveness
666
333
0
0 333 666 1000
Improving Competitiveness for
Flower Company
Segment: __________________
Corporate decoration

Success Factors Weight Score Score
Variety of arrangements 10 5 50
Timing of deliveries 15 3 45
Corporate relationships 15 3 45
Onsite support/ consultation 30 1--> 6? 30 --> 180
Local branches 30 0 --> 4? 0 --> 120
Competitiveness
100
estimate: 170 -> 440
Principle 5:
Attractiveness may sometimes be
increased through refined segmentation
Competitiveness
1000
Attractiveness
666
333
0
0 333 666 1000
 Use multiple criteria to assess market segment
Conclusion 
attractiveness
Take into account competitiveness (likelihood of success)
I 
and be explicit and realistic about success factors
Use Attractiveness x Competitiveness Matrix to prioritize
and allocate resources across segment opportunities

6 - Assessing Market Opportunities

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6 - Assessing Market Opportunities

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Assessing

MARKET Opportunity Assessment

Strategy Objectives & Strategic Focus

Program Value Creation, Value Delivery,

Value of Market Inherent Likelihood of

 Identify the set of market opportunities

• geographical markets, new product markets, market segments, major

and (b) company’s relative competitiveness with respect to this

 Compare across opportunities in terms of both (a) and (b)

 Target and allocate resources accordingly

Rate each Segment

Rate each Segment

Assuming that we would be competitive,

 Potential size  Consistency with identity

 Growth rate  Financial risk (e.g., inflation, currency)

 Expected life cycle  Synergies (e.g., channel)

 Customer willingness to pay  Cross-selling potential

 Cost of operation  Customer loyalty

 Profit margins  Willingness to commit to long-term

 Lifetime-value of customers contracts

 Low competitive intensity  Low market volatility

Rate each Segment

Low credit risk 15

Annual fee revenue potential 15

Typical card usage and spending 10

Use of revolving credit 25

Segment growth rate 6

Low account acquisition and

Rate each Segment

Rate each segment, criterion by criterion, on a 0 (very poor) to 10 (excellent) scale

Criteria Segment 1 Segment 2 Segment 3 Segment 4

Low credit risk 3 5 6 8

Annual fee revenue potential 2 4 6 10

Typical card usage and spending 2 4 5 7

Use of revolving credit 7 6 5 4

Segment growth potential 8 6 3 1

Low account acquisition and

Rate each Segment

Low credit risk 15 3 5 6 8

Annual fee revenue potential 15 2 4 6 10

Typical card usage and spending 10 2 4 5 7

Use of revolving credit 25 7 6 5 4

Segment growth potential 6 8 6 3 1

Low account acquisition and maintenance

 Do not pursue a market opportunity only because it seems attractive

 Take also into account your likelihood of being successful in

competing for this market opportunity

Identify Success Factors

Low credit risk 15 3 5 6 8

Annual fee revenue potential 15 2 4 6 10

Typical card usage and spending 10 2 4 5 7

Use of revolving credit 25 7 6 5 4

Segment growth potential 6 8 6 3 1

Low account acquisition and maintenance

Identify Success Factors

For this particular opportunity (set of customers, product,

sought by customers  Proprietary technology

 Brand awareness  Patent protection

 Brand credibility  Low production costs

 Strong sales force  Low labor costs

 Access to distribution channels  Production capacity

 Strong customer and field service  Production flexibility

 Low price  Product certification