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
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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.
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MARKETING STRATEGY FRAMEWORK
Marketing
Strategy
Market
Selection
Marketing
Programs
Target
Markets
Realized
Organization
Objectives
Satisfied
Customers
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CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
OPPORTUNITY ANALYSIS
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OPPORTUNITY ANALYSIS
Opportunity analysis consists of
three interrelated activities:
Opportunity
Identification
OpportunityOrganization
Matching
Opportunity
Evaluation
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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
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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
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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

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

Analysis of the company environment provides the current
state of the company’s resources

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
Technology
Company
Competition
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Market opportunity analysis
Identify
Identify the
the Unmet
Unmet and/
and/ or
or Underserved
Underserved Customer
Customer Need
Need
Customer
Identify
Identify the
the Specific
Specific Customers
Customers aa Company
Company Will
Will Pursue
Pursue
Competition
Assess
Assess Advantage
Advantage Relative
Relative to
to Competition
Competition
Company
Assess
Assess the
the Company’s
Company’s Resources
Resources to
to Deliver
Deliver the
the Offering
Offering
Technology
Assess
Assess Market
Market Readiness
Readiness of
of Technology
Technology
Specify
Specify Opportunity
Opportunity in
in Concrete
Concrete Terms
Terms
Assess
Assess Opportunity
Opportunity Attractiveness
Attractiveness
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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
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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?
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 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?
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CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
WHAT IS A MARKET?
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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
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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
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Northwest
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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
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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
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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
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CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET
SEGMENTATION
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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
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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
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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
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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
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CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET TARGETING
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MARKET TARGETING
Marketers ask three questions after a
market has been segmented:
Where to
Compete?
How to
Compete?
When to
Compete?
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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
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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
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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
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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
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SAMSUNG’S DIFFERENTIATED
MARKETING STRATEGY
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CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET
SEGMENTATION, AND MARKET TARGETING
MARKET SALES
POTENTIAL AND
PROFITABILITY
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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
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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
×
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P
× Q
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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
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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
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