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Industry/Market Potential

Understanding Segments and Exploiting Gaps

Mapping the Industry or Market
Key Questions:
– – – – What products are in the industry? Which markets or customers are served? Who are the current competitors? Where are the competitors found?

Principal Raw Material) Performance Bundled/ Unbundled Distribution Channel Exclusive/ Non-exclusive General/ Special List Geographic Region ..g.THE BASIS FOR SEGMENTATION: CUSTOMER AND PRODUCT CHARACTERISTICS Industry Size Industrial Buyers Technical Sophistication OEM/ Replacement Physical Size Price Level Demographics Household Buyers BUYER S Features Lifestyle Purchase Occasion Size Distributor/ Broker PRODUCTS Technology/ Design Imports Employed (e.

Beer Market North-east Midwest South-east Customer Type (Geographic Region) South-west West Luxury-priced imports Product Type Super premium Premium beers (except light) Light beers Popular budget-priced Malt liquor Distribution channel .S.Segment of the U.

BARRIER TO ENTRY / EXIT SUPPLIERS INDUSTRY RIVALRY BUYERS SUBSTITUTES NICHE MARKET CORE MARKET OLD RULES NEW RULES .

We identify products and markets that are under-served = GAPS Competitor1 Competitor3 Competitor3 Competitor3 Market 2 Competitor1 Competitor5 Competitor5 Market 3 Competitor1 Competitor5 Competitor6 Competitor1 Competitor3 Market 4 Competitor1 Competitor2 Competitor1 .DEVELOP A PRODUCT-MARKET MATRIX List products on the vertical axis. List markets on the horizontal axis. We identify sequence of new entrants. List competitors in each product market. Core Market 1 Product 1 Product 2 Product 3 Advantages: We begin to understand the product-markets evolution of the industry.

and Most Profitable Customer Segments? CUSTOMER SEGMENTS Segments to Focus On High Data Needed Identification SEGMENT PROFITABILITY of customer segments (according to needs. Fastest Growing. behaviors.Which are the Biggest. and key characteristics) Current size and value of each customer segment Probability of each customer segments Low Low High Circle size represents millions spend .

Analyzing segment alternatives: Applying the five forces of competition. Buyer types Suppliers Product types Threat of mobility Segment Rivalry Substitute Buyers .

3% 29 17/29 = 58.6% 3/15 = 20.4% . A and B Core Customers Niche Potential Niche Share Market Potential Market Share Competitive Niche Share Brand A 11 15 11/15 = 73.6% 29 12/29 = 41.Two-Dimensional Niche Space for Two Competitors.4% 4/11 = 36.0% Brand B 7 11 7/11 = 63.

Outcomes of Segmentation Analysis • Who buys our product and why ° (buyer profiles-psycho/socio/geo/demographic) ° Need or function fulfilled ° Problems solved • Who does not buy our product (light users—nonbuyer profiles) ° When purchased ° Where (channel) purchased .

•Rivals & Substitutes ° Which competitors are selling what and to whom ° What alternatives are buyers purchasing to satisfy the need/function/problem for which our product competes • Segment Attractiveness ° Current size-revenue/profit potential ° Demand penetration/growth ° Competition ° Compatibility with strategy/supply/distribution chain .

Segmentation Gap Analysis Allows Managers to: Divide the market into meaningful and measurable segments according to customers’ profiles (needs. behaviors. Estimate the size and profit potential of each segment by analyzing the revenue and cost impacts of serving each segment. attributes) and products offered (existing or new). . attitudes.

service. Continuously monitor each segment (customer/product shifts. entry.Target segments according to their potential (profit. penetration) and adjust the approach over time as conditions change. competition. . defensive) and to the company’s ability to serve them in a proprietary way. and distribution programs to conform to the needs of each targeted segment. marketing. Invest resources to tailor product.

Some Important Questions to Ask • • • • • • • • What gaps will you fill? And why does that gap exist? Will your entry give rise to a new product market? How will your entry affect current product markets? How might current competitors respond to your entry? How will targeted customers respond to your entry? What competitive advantage (if any) will you possess? What might be your major vulnerabilities? What can your firm do to preempt and respond to competitors? .Before Entry .

Distribution gap Usage Gap . Needs Compatibility Performance. of Customers Current Business Segment 60% Personal Users 40% Usage vs. features.Identify Potential Market Gaps Untapped Market Demand Can’t afford at this price Competitor’s products satisfy Product does not fit customer’s needs or situation Noncustomers cannot obtain Noncustomers unaware Price/cost Competitive Gap Potential No. etc. speed.

Increase distribution intensity c. Fill out existing product line b. Find new uses for the product c. Improve distribution exposure Stimulate heavier use a. Broaden distribution coverage b.Stimulating nonusers to use 2 2. Attack substitutes Defend your present position . Find new users by 1 1. Direct assault on competitors b.Stimulate light users to use more 3 3. Promote product usage at new times Penetrate competitors’ positions a. Add product line elements Expand distribution a.Increase amount used each occasion b.Price/Product line gap Distribution gap Usage gap Competitive gap Your sales Expand the product line a.

Distribution INTENSITY Gap Firm has an inadequate number of outlets to distribute its products 3.Three Different Types of Distribution Gaps 1. location. Distribution COVERAGE Gap Firm fails to distribute its products in all geographic regions 2. displays. within outlets . etc. Distribution EXPOSURE Gap Firm has poor or inadequate shelf space.

Core Market 1 Product 1 Product 2 Product 3 Advantages: We begin to understand the product-markets evolution of the industry. We identify products and markets that are under-served = GAPS Competitor1 Competitor3 Competitor3 Competitor3 Market 2 Competitor1 Competitor5 Competitor5 Market 3 Competitor1 Competitor5 Competitor6 Competitor1 Competitor3 Market 4 Competitor1 Competitor2 Competitor1 . List competitors in each product market. List markets on the horizontal axis.DEVELOP A PRODUCT-MARKET MATRIX List products on the vertical axis. We identify sequence of new entrants.

Analyzing segment alternatives: Applying the five forces of competition. Buyer types Suppliers Product types Threat of mobility Segment Rivalry Substitute Buyers .

Levi’s possible growth modes Existing Products Existing Markets Market Penetration Strategy Market Development Strategy New Products Product Development Strategy Product/Market Diversification Strategy New Markets .

So it’s creating a portfolio of dozens of brands and sub-brands.Repositioning Levi’s Lewis has figured out that kids don’t wear the same jeans their parents do and that trendy retailers don’t stock the same lines as J.Penny. from cheap Slates basics to high-priced fashion $65 High Price Classic Dockers Classic $30 Dockers Equipment Red Line For legs $100 $100+ Dockers K-1 $65Sta-Prest $75 Slates Collection Tab Eles Red Dockers $60 $60 Premium Red Tab Dry Good Silver Tab $45 $50 $45 Designer 501 L2 $35 $30 Red Tab Basics $30 Low Price Vintage $125+ .C.