Download WHAT IS A MARKET?

Opportunity Analysis, Market
CHAPTER 4 Segmentation, and Market
Targeting
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Identify, match, and evaluate
opportunities available to an
organization.
2. Define the nature of a market.
3. Describe the benefits and bases of,
and the requirements for effective
market segmentation.
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
4. Construct an offering-market matrix.
5. Describe the approaches to market
targeting.
6. Estimate market sales potential and
profitability.
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-3
MARKETING STRATEGY FRAMEWORK
Marketing
Strategy
Market
Selection
Marketing
Programs
Target
Markets
Realized
Organization
Objectives
Satisfied
Customers
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-4
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
OPPORTUNITY ANALYSIS
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-5
OPPORTUNITY ANALYSIS
Opportunity analysis consists of
three interrelated activities:
Opportunity
Identification
OpportunityOrganization
Matching
Opportunity
Evaluation
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-6
OPPORTUNITY ANALYSIS
Opportunity Identification
 Opportunities arise from:
• Identifying new types of buyers
• Uncovering unsatisfied needs of buyers
• Creating new ways or means for satisfying
buyer needs
 Opportunity analysis focuses on finding
markets that an organization can profitably
serve
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-7
OPPORTUNITY ANALYSIS
Opportunity-Organization Matching
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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-8
OPPORTUNITY ANALYSIS
Opportunity Evaluation
Qualitative
Quantitative
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
Consists of:
• Market sales
potential estimates
• Sales forecasts
• Budgets
• Organizational
capabilities
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-9
EXHIBIT 4.1: OPPORTUNITY EVALUATION
MATRIX—ATTRACTIVENESS CRITERIA
Market Niche
Criterion
Buyer
Type
Competitive
Activity
Buyer
Requirements
Demand/
Supply
Environmental
Forces
Organizational
Capabilities
 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 sensitive are
different buyers to
these forces?
 Can we gain
access to buyers
through marketing
mix variables?
 How important are
adequate sources
of supply?
Buyer
Needs
Means for
Satisfying
Buyer Needs
 Which firms are
satisfying which
buyer needs?
 What are the
strategies being
employed to
satisfy buyer
needs?
 Are there buyer
needs that are not
being satisfied?
 Are buyer needs
likely to be
long-term?
 What are they?
 Do we have or
can we acquire
resources 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?
© 2013 Pearson Education, Inc. publishing as Prentice Hall
 Can we supply
these buyers?
 How sensitive are
buyer needs to
these forces?
 Which buyer needs
can our firm
profitably satisfy?
 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?
Slide 1-10
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
WHAT IS A MARKET?
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-11
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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-12
WHAT IS A MARKET?
Implications for marketers:
Buyers
Focus on buyers, not products or
services
Effective
Demand
Exchanges cannot occur unless
buyers are able and willing to
purchase a product or service
Offerings
Purchases consist of offerings, not
products or services, due to the
values or benefits that buyers derive
from them
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-13
WHAT IS A MARKET?
Market Structure
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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-14
EXHIBIT 4.2: MARKET STRUCTURE
FOR COFFEE IN THE UNITED STATES
Total U. S. Coffee Market
Institutional Sales
Retail Sales
(restaurants, institutions, etc.)
(retail food stores)
…
Ground
Caffeinated
Whole Bean
Instant
…
…
Decaffeinated
…
New England
Midwest
Southeast
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Northwest
Slide 1-15
WHAT IS A MARKET?
Market Share
Market share is the sales dollars ($) or units(#)
of a firm, offering, or brand divided by the sales
of the “market,” expressed as a percentage (%):
Firm, Offering, or Brand Sales
($ or #)
Market
Share
=
=
X%
Market Sales
($ or #)
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-16
WHAT IS A MARKET?
Market
Definition
Coffee
Dollar Sales
Atlantic
Blend Sales
Market
Share
Total U.S. coffee market
$8.0 billion
$80 million
1.0%
U.S. retail coffee market
$6.0 billion
$80 million
1.3%
U.S. retail ground coffee
market
$4.5 billion
$80 million
1.8%
U.S. retail caffeinated
ground coffee market
$3.0 billion
$80 million
2.7%
$230 million
$80 million
32.0%
U.S. retail caffeinated
ground coffee market in
the Mid-Atlantic region
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-17
WHAT IS A MARKET?
Market Share
 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
“High” Served
Market Share
Use a market development strategy
“Low” Served
Market Share
Use either a product development
or market penetration strategy
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-18
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET
SEGMENTATION
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-19
MARKET SEGMENTATION
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
 “Cannot be all things to all people”
 Information technology and flexible manufacturing and
service delivery systems can create “segments of one”
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-20
Competitive positioning and market
segmentation
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-21
MARKET SEGMENTATION
Mass Customization
 Tailors products and services to the tastes
and preferences of individual buyers in high
volumes and at a relatively low cost
 Combines the efficiencies of mass
production and the effectiveness of
designing offerings to a single buyer’s
unique wants
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-22
MARKET SEGMENTATION
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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-23
MARKET SEGMENTATION
Bases for Market Segmentation
Consumers
Socioeconomic
Characteristics
Industrial Buyers
Behavioral
Variables
Socioeconomic
Characteristics
• Gender
• Benefits Sought
• Company Size
• Age
• Usage
• Location
• Occupation
• Income
• Family Life Cycle
• Industry
Psychographic
Variables
• Education
• Lifestyle
• Location
• Attitudes
Behavioral
Variables
• Purchasing
Objectives
• Product
Benefits
• Customers Served
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-24
Bases for Market Segmentation
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-25
MARKET SEGMENTATION
Requirements for Effective Market Segmentation
Need to answer six 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?
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-26
MARKET SEGMENTATION
Requirements for Effective Market Segmentation
Measurable
Differentiable
Accessible
Substantial
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-27
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET TARGETING
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-28
MARKET TARGETING
Marketers ask three questions after a
market has been segmented:
Where to
Compete?
How to
Compete?
When to
Compete?
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-29
MARKET TARGETING
Where to Compete?
 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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-30
MARKET TARGETING
How to Compete?
 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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-31
MARKET TARGETING
How to Compete?
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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-32
MARKET TARGETING
How to Compete?
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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-33
EXHIBIT 4.3: NOKIA’S DIFFERNTIATED
MARKETING STRATEGY
Market Segments
Offering
Character
-istics
Durable; ease of use;
and low price
Changeable covers;
color displays;
downloadable ring
tones; and games
Small size; stylish;
durable; user
friendly; color
displays; and fitness
monitor
Traditional style; web
browser; networking;
phone book;
calendar; and
camera
Basic
Expression
Active
Classic
Fashion
Premium
First-time users;
Teens needing voice
connectivity
Younger buyers w ho
desire customized
and personalized
products
Cool, young active
adults desiring to
connect w ith friends;
sports enthusiasts
Travelers with
various business
needs who prefer
functionality
Buyers who w ant to
Òshow of fÓwith a
personal sense of
style
World travelers
w anting a PD A,
connectivity, and
games
Series 1000/
Series 2000
Series 3000
Series 5000
Series 6000
MP3 music player;
styling; games;
camera; color
display; and Internet
access
Series 7000
Enhanced user
interface; camera;
color display;
multimed ia;
messaging; and a
PDA
Series 8000
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-34
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET SALES
POTENTIAL AND
PROFITABILITY
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-35
MARKET SALES POTENTIAL AND
PROFITABILITY
Market Sales Potential
 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
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-36
MARKET SALES POTENTIAL AND
PROFITABILITY
Market Sales Potential
Is the maximum sales level that might be
available to all organizations serving a defined
market in a specific time period given:
 The marketing-mix activities and related
expenditures of all organizations and
 A set of environmental conditions
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-37
MARKET SALES POTENTIAL AND
PROFITABILITY
Estimating Market Sales Potential
Variables used to estimate:
Buyers (B)
The number of prospective buyers (B) who are
willing and able to purchase an offering
Price (P)
The price (P) of an average unit of the offering
Quantity (Q)
The quantity (Q) of an offering purchased by
an average buyer in a specific time period
Market Sales Potential
=
B
×
© 2013 Pearson Education, Inc. publishing as Prentice Hall
P
× Q
Slide 1-38
MARKET SALES POTENTIAL AND
PROFITABILITY
Estimating Market Sales Potential
Chain ratio method: Multiplying a base number by several
adjusting factors believed to influence market sales potential
Market Sales
Potential for
Cola-Flavored
Soft Drinks
in a Country
=
Population aged 8 years and over
× proportion of the population that
consumers 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 (in ounces)
× 365 days in a calendar year
× the average price per ounce of cola
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-39
MARKET SALES POTENTIAL AND
PROFITABILITY
Estimating Market Sales Potential
The chain ratio method serves three purposes:
 Is a quantitative estimate of market sales potential
 Highlights factors that are controllable and not
controllable
 Is flexible in estimating market sales potential for
different buyer groups and offerings
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-40
SALES AND PROFIT FORECASTING
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)
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-41
SALES AND PROFIT FORECASTING
Sales Forecast Example: Chain Ratio Method
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-42
SALES AND PROFIT FORECASTING
Sales Forecast
 Prepare a pro forma income statement
that shows forecasted sales, budgeted
expenses, and estimated net profit
 Review the identified opportunities and
decide which one can be most profitably
pursued given organizational capabilities
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-43
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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall
Slide 1-44