Segments and Gaps

7/29/2019 Segments and Gaps

1/21

Industry/Market Potential

Understanding Segments

and

Exploiting Gaps


2/21

Mapping the Industry or Market

Key Questions:

What products are in the industry?

Which markets or customers are served?

Who are the current competitors?

Where are the competitors found?


3/21

THE BASIS FOR SEGMENTATION: CUSTOMER AND PRODUCT

CHARACTERISTICS

BUYER

Industrial Buyers

Household Buyers

Distribution Channel

Geographic Region

Size

Industry

Technical Sophistication

OEM/ Replacement

Demographics

Lifestyle

Purchase Occasion

Distributor/ Broker

Size

Exclusive/ Non-exclusive

General/ Special List

PRODUCTS

Physical Size

Price Level

Features

Technology/ Design

Imports Employede. . Princi al Raw Material

Performance

Bundled/ Unbundled


4/21

Segment of the U.S. Beer Market

Distribution channel

Customer Type

(Geographic Region)

Product Type

Malt liquor

Popular budget-priced

Light beers

Premium beers (except light)

Super premium

Luxury-priced imports

North-east

Midwest

South-east

South-west

West


5/21

INDUSTRY

RIVALRY

BARRIER TO ENTRY / EXIT

BUYERSSUPPLIERS

SUBSTITUTES

NICHE MARKET

CORE MARKET OLD RULES

NEW RULES


6/21

DEVELOP A PRODUCT-MARKET MATRIX

- List products on the vertical axis.

- List markets on the horizontal axis.

- List competitors in each product market.

Market 1 Market 2 Market 3 Market 4

Product 1 Competitor1Competitor3

Competitor1 Competitor1 Competitor1

Product 2 Competitor3 Competitor5Competitor5

Competitor5Competitor6

Competitor2


Competitor1

Advantages:

- We begin to understand the product-markets evolution of the industry.

- We identify sequence of new entrants.

- We identify products and markets that are under-served = GAPS

Core


7/21

Which are the Biggest, Fastest Growing, and

Most Profitable Customer Segments?

SEGMENT

PROFITABILITY

High

Low

Low High

Segments to Focus On

CUSTOMER SEGMENTS

Data Needed

Identification of customer

segments (according to needs,

behaviors, and keycharacteristics)

Current size and value of each

customer segment

Probability of each customer

segments

Circle size represents millions spend


8/21

Analyzing segment alternatives: Applying the five forces of

competition.

Suppliers

Threat of

mobility

Segment

Rivalry Substitute

Buyers

Buyer types

Producttypes


9/21

Two-Dimensional Niche Space for Two Competitors, A and B

Brand A Brand B

Core Customers 11 7

Niche Potential 15 11

Niche Share 11/15 = 73.3% 7/11 = 63.6%

Market Potential 29 29

Market Share 17/29 = 58.6% 12/29 = 41.4%Competitive Niche Share 3/15 = 20.0% 4/11 = 36.4%


10/21

Outcomes of Segmentation

Analysis Who buys our product and why

(buyer profiles-psycho/socio/geo/demographic)

Need or function fulfilled

Problems solved

Who does not buy our product (light usersnon-

buyer profiles) When purchased

Where (channel) purchased


11/21

Rivals & Substitutes

Which competitors are selling what and to

whom

What alternatives are buyers purchasing to

satisfy the need/function/problem for which

our product competes

Segment Attractiveness

Current size-revenue/profit potential

Demand penetration/growth

Competition

Compatibility with

strategy/supply/distribution chain


12/21

Segmentation Gap Analysis

Allows Managers to:Divide the market into meaningful and measurable

segments according to customers profiles (needs,

attitudes, behaviors, attributes) and products offered

(existing or new).

Estimate the size and profit potential of each

segment by analyzing the revenue and cost impacts

of serving each segment.


13/21

Target segments according to their potential (profit,

entry, defensive) and to the companys ability to

serve them in a proprietary way.

Invest resources to tailor product, service, marketing,

and distribution programs to conform to the needs of

each targeted segment.

Continuously monitor each segment

(customer/product shifts, competition, penetration)

and adjust the approach over time as conditionschange.


14/21

Before Entry - Some Important Questions to Ask

What gaps will you fill? And why does that gap exist?

Will your entry give rise to a new product market?

How will your entry affect current product markets?

How might current competitors respond to your entry?

How will targeted customers respond to your entry?

What competitive advantage (if any) will you possess?

What might be your major vulnerabilities?

What can your firm do to preempt and respond to

competitors?


15/21

Identify Potential Market Gaps

PotentialNo. of

Customers

Untapped

Market

Demand

Current

Business

Segment

60%

Personal Users

40%

Price/cost

Competitive

Gap

Usage vs.Needs

Compatibility

Performance,

speed, features,

etc.

Distribution

gap

Usage Gap

Cant afford

at this price

Competitors

products

satisfy

Product doesnot fit

customers

needs or

situation

Noncustomers

cannot obtain

Noncustomers

unaware


16/21

Expand the product line

a. Fill out existing product line

b. Add product line elementsExpand distribution

a. Broaden distribution coverage

b. Increase distribution intensity

c. Improve distribution exposure

Stimulate heavier use

a. Find new users by1 1.Stimulating nonusers to use

2 2.Stimulate light users to use more

3 3.Increase amount used each occasion

b. Find new uses for the product

c. Promote product usage at new times

Penetrate competitors positionsa. Direct assault on competitors

b. Attack substitutes

Defend your present position

Price/Product

line gap

Distribution

gap

Usage gap

Competitivegap

Your sales


17/21


18/21

DEVELOP A PRODUCT-MARKET MATRIX

- List products on the vertical axis.

- List markets on the horizontal axis.

- List competitors in each product market.

Market 1 Market 2 Market 3 Market 4

Product 1 Competitor1Competitor3

Competitor1 Competitor1 Competitor1


Competitor5Competitor6

Competitor2


Competitor1

Advantages:

- We begin to understand the product-markets evolution of the industry.

- We identify sequence of new entrants.

- We identify products and markets that are under-served = GAPS

Core


19/21

Analyzing segment alternatives: Applying the five forces of

competition.

Suppliers

Threat of

mobility

Segment

Rivalry Substitute

Buyers

Buyer types

Producttypes


20/21

Market

Penetration

Strategy

Product

Development

Strategy

Market

Development

Strategy

Product/Market

Diversification

Strategy

New ProductsExisting Products

Existing

Markets

New

Markets

Levis possible growth modes


21/21

Repositioning Levis

Lewis has figured out that kids

dont wear the same jeans their

parents do and that trendyretailers dont stock the same

lines as J.C.Penny. So its creat-

ing a portfolio of dozens of brands

and sub-brands, from cheap

basics to high-priced fashion

Dockers K-1 $65

Slates Collection$60Red Tab Dry Good

$45

Red Tab Ele$60

Red Line

$100

Vintag

$125+

Silver Tab

$45

Sta-Prest

$75

L2$30

Dockers

Equipment

For legs

$100+Slates

$65Dockers

Premium

$50

501

$35Red Tab

Basics

$30

Dockers

Classic

$30

Low Price

High Price

ClassicDesigner

Documents

Segments and Gaps