STRATEGIC MARKETING PROBLEMS BY KERIN AND PETERSON (12TH ED.)
Presented by: Ensar Mekić, Lejla Šećerović
Chapter 4. Opportunity Analysis, Market Segmentation, and Market Targeting
Opportunity analysis consists of three interrelated activities:
- Opportunity identification – opportunities arise from identifying new types of buyers, uncovering unsatisfied needs of buyers, or creating new ways or means for satisfying buyer needs. Opportunity analysis is finding markets that an organization can profitably serve.
- Opportunity-organization matching –determines whether an identified market opportunity is consistant with definition of organization's business, mission, vision and distinctive competencies.
- Opportunity evaluation – has 2 phases, qualitative and quantitative one. Qualitative phase focuses on matching the attractiveness of opportunity with the potential for uncovering market nitche, while quantitative phase yields estimates of market sales potential and sale forecasts.
What is a market?
Market is considered as prospective buyers (individuals or organizations) willing and able to purchase existing or potential offering (product or service) of an organization. Important implication for managers is effective demand which means that buyers should be in a need for offer, and they should be willing to buy it.
Market structure shows to us how market is composed of minimarkets and this allows to marketer to better catch opportunities.
Market share referes to sales (in $ or units) of a company, product or service or brand divided by the sales of „market“ expressed in percentage.
Market segmentation is useful technique for structuring market. It refers to breaking down the market or building it up of potential buyers into groups. This is very important because various groups of customers (segments of market) have unique needs. Mass customization is tailoring products and services to the tastes and preferences of individual buyers in high volumes and at relatively low costs.
Benefits of market segmentation are:
- Identifies opportunities for new product development – through analyzing various segments, we can find some group with unsatisfied needs;
- Helps in design of marketing programs that are most effective for reaching homogeneous group of customers – Proctor and Gamble market toothpaste at 6 market segments (children, Hispanic and senior citizens);
- Improves the allocation of marketing resources – it can provide guidance in directing marketing resources.
Bases for market segmentationare within two broad types of variables:
- Socioeconomic characteristicsof consumers (gender, age, occupation, income, education...)
- Behavioral variables(behavior during usage of products, lifestyle, attitudes...)
Requirements for effective Market Segmentation are:
-It needs to answer on 6 buyer-related questions: Who are they? What/How/When/Where/Why they want to buy?
-Each market segment should be: measurable (size and buying power of a market segment should be quantitatively deterministic), differentiable (market segment can be effectively distinguished from other segments and it responds differently to different marketing programs), accessible (segment should be effectively reached and served through an economically viable marketing program), substantial (segment should be large enough in terms of sales volume potential to cover the costs of an organization and to provide adequate profits.
Market Targeting
After segmenting a market, three questions need to be addressed:
Where, How and When to compete?
- Where to compete is a question manager has to answer first. It focuses on witch market segment(s) the company should choose for market targeting. Market targeting identifyes which groups of consumers are likely to buy a specific product.
- How to compete is the next step for a manager to decide.Two approaches are frequently used: differentiated marketing ( where an organisation simultaneously pursues several different market segments with a unique strategy for each) and concentrated marketing (with this approach organisation focuses on a single market segment).
- When to compete relates to timing. There are two ways organisations can pursue a market segment when it comes to timing, a „first-to-market“ posture and a „wait and see“ stance.
Market sales potential and profitability
Determening market sales potential and profitability is essential in opportunity evaluation.
Estimating Market sales potential is the maximum level of sales that might be available to all organisations serving a defined market in a specific time period given (1)the marketing-mix activities and effort of all organisations and (2) a set of enviromental conditions.
Three variables are used when estimating market sales potential:
Market sales potential = B x Q x P
Chain ratio method involves multiplying a base number by several adjusting factors that are believed to influence market sales potntial.
Sales and Profit Forecasting follow the estimation of market sales potential. A sales forecast is the level of sales a single organisation expects to achieve based on a chosen marketing strategy and an assumed competitive environment.
Forcasted sales reflect:
- the size of the target market chosen by the organisation
- the marketing mix chosen for the target market
- the assumed number of competitors and
- competitive intensity