Chapter 4

Opportunity Analysis,

Market Segmentation, and

Market Targeting

4-2

In this chapter, you will learn about…

1. Opportunity Analysis

2. What is a Market?

3. Market Segmentation

Benefits of Market Segmentation

Bases for Market Segmentation

Requirements for Effective

Market Segmentation

4-3

In this chapter, you will learn about…

4. Offering-Market Matrix

5. Market Targeting

6. Market Sales Potential and Profitability

Estimating Market Sales Potential

Sales and Profit Forecasting

4-4

Marketing Strategy involves…

Selection of Markets

Development of programs to reach these markets

• Customer Satisfaction

• Organizational Objectives

4-5

Opportunity Analysis Involves…

Opportunity Identification

Opportunity

- Organization Matching

Opportunity Evaluation

4-6

Opportunity Identification

Identifying new types of classes of

buyers

Uncovering unsatisfied needs of

buyers

Creating new ways or means for

satisfying buyer needs

4-7

Opportunity-Organization Matching

Determines whether an identified

opportunity is consistent with an

organization’s business, mission, and

competencies

SWOT Analysis often employed

Financially attractive opportunities are

sometimes rejected at this stage due

to lack of match

4-8

Opportunity Evaluation

Qualitative

– Evaluates the likelihood of capitalizing on

a market niche

Quantitative

– Yields estimates of market sales potential

and company sales forecasts

Has both qualitative & quantitative phases

Opportunity Evaluation Matrix

Market niche

criterion

Competitive Activity

Buyer Requirements

Demand/

Supply

Political, Technological,

and Socioeconomic

Forces

Organizational Capabilities

Buyer Type

Buyer Needs

Means for Buyer

Needs

4-10

A Market Consists of…

Prospective buyers willing and able to purchase the existing or potential offering of an organization.Focus on

Buyers EffectiveDemand “Offering”

rather than product or

service Market Share

4-11

What is Market Segmentation?

The breaking down or building up

of potential buyers into groups

called

Market Segments

4-12

Benefits of Market Segmentation

1. Identifies opportunities for new product development

2. Helps design marketing programs most effective for reaching homogenous groups of buyers

3. Improves allocation of marketing resources

4-13

Market Segmentation Variables

Market Market SegmentationSegmentation

VariablesVariables

Benefits SoughtBenefits SoughtPsychographicPsychographic

SocioeconomicSocioeconomic BehavioralBehavioral

4-14

Fundamental-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?

4-15

Each Market Segment should be…

MeasurableMeasurable

DifferentiableDifferentiable

AccessibleAccessible

SubstantialSubstantial

4-16

Sample Offering - Market Matrix for Handheld Calculators

Business Scientific Home School

Simple

Moderate

Complex

Very complex

Market Segments (User Groups)

4-17

Market TargetingSpecifying segments to pursue

Differentiated Marketing

The organization pursues

several different market

segments simultaneously

Organization

Market

4-18

Concentrated Marketing

The organization focuses

on a single market

segment

Organization

Market

Market TargetingSpecifying segments to pursue

4-19

Market Sales Potential

1. The marketing mix activities and

efforts of all organizations

2. A set of environmental conditions

Maximum level of sales available to all

firms serving a defined market in a

specific time period given:

4-20

Market Sales Potential and Profitability

Chain Ratio Method

Market Sales Potential is a function of:

1. The number of Prospective Buyers (B)

2. The Quantity Purchased (Q)

3. The Price of an Average Unit (P)

Market Sales Potential = B x Q x P

4-21

Chain Ratio MethodExample

Market Potential for cola-flavored carbonated drink in Canada:

1. Population (P) = 32,000,000

2. Proportion of P that consumes carbonated beverages (R)

= 95%

3. Proportion of R that consumes cola-flavored carbonated

beverages (C) = 70%

4. Average number of liters of cola consumed per cola-

consumer per week (L) = 1.7 liters

5. Average price per liter of cola (A) = $ 0.50

Market Sales Potential = P x R x C x L x A

= 32 Million x 0.95 x 0.70 x 1.7 x 52 x 0.50 = $94.06 Million

4-22

What is a Sales Forecast?

Level of sales a single

organization expects to achieve

based on a chosen market

strategy and an assumed

competitive environment.

4-23

Forecasted Sales reflect…

1. The size of the target market

2. The marketing mix chosen for

the target market

3. The assumed number of

competitors and competitive

intensity in the target market

4-24

Making aSales Forecast

1. Market potential (M)

2. Proportion of market you are

Targeting (T)

3. Extent of market Coverage (C)

4. Number of Units expected to sell per

customer during the year (U)

5. Average Price per unit (P)

Sales Forecast is a function of:

Sales Forecast = M x T x C x U x P

4-25

Making a Sales ForecastExample

Total number of potential buyers = 1 Million

Target Market (25%) = x 0.25

Market Coverage (75%) = x 0.75

Units purchased per year (20) = x 20

Average Price ($10) = x $10

Forecasted Sales = $ 37.5

Million