1. Opportunity Analysis, Market Segmentation, and Market Targeting
CHAPTER 4

2. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Identify, match, and evaluate opportunities available to an organization.
Define the nature of a market.
Describe the benefits and bases of, and the requirements for effective market segmentation.

3. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Construct an offering-market matrix.
Describe the approaches to market targeting.
Estimate market sales potential and profitability.

4. Realized Organization Objectives
MARKETING STRATEGY FRAMEWORK
Satisfied Customers
Realized Organization Objectives
Market Selection
Marketing Programs
Marketing Strategy
Target Markets

5. CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

6. Opportunity analysis consists of three interrelated activities:
Opportunity Identification
Opportunity-Organization Matching
Opportunity Evaluation

7. Opportunity Identification
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

8. Opportunity-Organization Matching
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

9. Opportunity Evaluation
OPPORTUNITY ANALYSIS
Opportunity Evaluation
Qualitative
Quantitative
Matches the attractiveness of an opportunity with the potential for uncovering a market niche, which depends on:
Consists of:
Market sales potential estimates
Sales forecasts
Budgets
Competitive activity
Buyer requirements
Market demand
Supplier sources
Environmental forces
Organizational capabilities

10. Market Niche Criterion Organizational Capabilities
EXHIBIT 4.1: OPPORTUNITY EVALUATION MATRIX—ATTRACTIVENESS CRITERIA
Market Niche Criterion
Competitive Activity
Buyer Requirements
Demand/ Supply
Environmental Forces
Organizational Capabilities
Buyer Type
 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 important are adequate sources of supply?
 How sensitive are different buyers to these forces?
 Can we gain access to buyers through marketing mix variables?
 Can we supply these buyers?
Buyer Needs
 Which firms are satisfying which buyer needs?
 Are there buyer needs that are not being satisfied?
 What are they?
 Are buyer needs likely to be long-term?
 Do we have or can we acquire resources to satisfy buyer needs?
 How sensitive are buyer needs to these forces?
 Which buyer needs can our firm profitably satisfy?
Means for Satisfying Buyer Needs
 What are the strategies being employed 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?
 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?

11. CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING
WHAT IS A MARKET?

12. 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.

13. WHAT IS A MARKET? Implications for marketers: Buyers Effective Demand
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

14. 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

15. EXHIBIT 4.2: MARKET STRUCTURE FOR COFFEE IN THE UNITED STATES
New England
Midwest
Southeast
Northwest
Caffeinated
Ground
Whole Bean
Instant
Institutional Sales (restaurants, institutions, etc.)
Decaffeinated …
Total U. S. Coffee Market
Retail Sales (retail food stores)

16. Firm, Offering, or Brand Sales ($ or #)
WHAT IS A MARKET?
Market Share
Market share is the sales dollars ($) or units(#) of a firm, offering, or brand divided by the sales of the “market,” expressed as a percentage (%):
Market Share
Firm, Offering, or Brand Sales ($ or #) = X%
Market Sales ($ or #)

17. WHAT IS A MARKET? Market Definition Coffee Dollar Sales
Atlantic Blend Sales
Market Share

18. “High” Served Market Share “Low” Served Market Share
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

19. CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

20. 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”

21. Competitive positioning and market segmentation

22. 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

23. 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

24. MARKET SEGMENTATION Consumers Industrial Buyers
Behavioral Variables
Gender
Age
Consumers
Industrial Buyers
Socioeconomic Characteristics
Occupation
Income
Family Life Cycle
Education
Location
Benefits Sought
Usage
Lifestyle
Attitudes
Company Size
Industry
Customers Served
Purchasing Objectives
Product Benefits
Bases for Market Segmentation
Psychographic Variables

25. Bases for Market Segmentation

26. 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?

27. Requirements for Effective Market Segmentation
Measurable
Differentiable
Accessible
Substantial

28. CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING

29. MARKET TARGETING
Marketers ask three questions after a market has been segmented:
Where to Compete?
How to Compete?
When to Compete?

30. 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

31. Differentiated Marketing Concentrated Marketing
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

32. Differentiated Marketing
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

33. Concentrated Marketing
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

34. EXHIBIT 4.3: NOKIA’S DIFFERNTIATED MARKETING STRATEGY
Series 3000
Series 5000
Series 1000/ Series 2000
Series 6000
Series 7000
Series 8000

35. MARKET SALES POTENTIAL AND PROFITABILITY
CHAPTER 4: OPPORTUNITY ANALYSIS, MARKET SEGMENTATION, AND MARKET TARGETING
MARKET SALES POTENTIAL AND PROFITABILITY

36. Market Sales Potential
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

37. Market Sales Potential
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

38. Estimating Market Sales Potential Market Sales Potential
MARKET SALES POTENTIAL AND PROFITABILITY
Estimating Market Sales Potential
Variables used to estimate:
The number of prospective buyers (B) who are willing and able to purchase an offering
Buyers (B)
The price (P) of an average unit of the offering
Price (P)
The quantity (Q) of an offering purchased by an average buyer in a specific time period
Quantity (Q)
Market Sales Potential B P Q = × ×

39. Estimating Market Sales Potential
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 =
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
Market Sales Potential for Cola-Flavored Soft Drinks in a Country

40. Estimating Market Sales Potential
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

41. 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)

42. Sales Forecast Example: Chain Ratio Method
SALES AND PROFIT FORECASTING
Sales Forecast Example: Chain Ratio Method

43. 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

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