Chapter 4: Opportunity Analysis, Market Segmentation, and Market Targeting PDF

7/12/2024 Opportunity Analysis, Market AFTER READING THIS C...

7/12/2024 Opportunity Analysis, Market AFTER READING THIS CHAPTER CHAPTER 4 Segmentation, and Market YOU SHOULD BE ABLE TO: Targeting 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. © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-1 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-2 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: Marketing Strategy Framework Marketing 4. Construct an offering-market matrix. Strategy involves---- 5. Describe the approaches to market Crafting Market targeting. Selection To reach Marketing Programs 6. Estimate market sales potential and Target profitability. Markets Realized Satisfied Organization Customers Objectives © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-3 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-4 Opportunity Analysis Opportunity analysis consists of 3 interrelated activities: Opportunity Identification OPPORTUNITY ANALYSIS Opportunity- Opportunity Organization Evaluation Matching © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-5 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-6 1  7/12/2024 Opportunity Identification Opportunity-Organization Matching Opportunities arise from: Identified opportunities must be consistent − Identifying new types of buyers with the org's business definition, mission, & − Uncovering unsatisfied needs of buyers distinctive competencies − Creating new ways or means for satisfying buyer This determination requires: needs − Evaluating the org's strengths & weaknesses Opportunity analysis focuses on finding − Identifying the success criteria for profitable market markets that an org can profitably serve operations Reject those that do not conform to a firm’s character © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-7 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-8 Exhibit 4.1: Opportunity Evaluation Matrix— Opportunity Evaluation Attractiveness Criteria Market Niche Competitive Buyer Demand/ Environmental Organizational Criterion Activity Requirements Supply Forces Capabilities Qualitative Quantitative  How many and which firms  What affects buyer willingness and  Do different buyer types have  How sensitive are different buyers to  Can we gain access to buyers Buyer compete for this ability to buy? different levels of these forces? through marketing user group? effective demand? mix variables? Type Focuses on opportunity Yields estimates of:  How important are adequate sources  Can we supply these buyers? attractiveness with niche potential − Market sales potential of supply? Attractiveness depends on: − Sales forecasts  Which firms are satisfying which  Are there buyer needs that are not  Are buyer needs likely to be  How sensitive are buyer needs to  Which buyer needs can our firm − Competitive activity Buyer buyer needs? being satisfied? long-term? these forces? profitably satisfy? − Budgets for financial, MKT, & Needs  What are they?  Do we have or − Buyer requirements production resources can we acquire resources to satisfy buyer − Market demand & supplier sources needs? − Social, political, economic & technological  What are the  Is the technology  To what extent are  How sensitive are  Do we have the Means for strategies being for satisfying the means for the means for financial, human, forces employed to buyer needs satisfying buyer satisfying buyer technological, Satisfying satisfy buyer changing? needs affected by needs to these and marketing − Organizational capabilities Buyer Needs needs? supply sources? forces? expertise to satisfy buyer  Is the demand for needs? the means for satisfying buyer needs changing? © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-9 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-10 What Is a Market? A market is a set of present & potential buyers of existing & potential offering having needs to satisfy, WHAT IS A MARKET? money to spend & willingness to spend money © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-11 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-12 2  7/12/2024 What Is a Market? Market Structure Implications for marketers: Views a market as composed of mini-markets, enabling marketers to better gauge opportunities Focus on buyers, not on products or Buyers services Market structure helps the manager Effective demand is created only when to: Effective buyers are able & willing to buy a product Demand − identify competitors & their strategies or service − track sales volume fluctuations We buy offerings (a bundle of tangible and − understand regional buyer preferences Offerings intangible benefits), not products or & competition services, © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-13 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-14 Exhibit 4.2: Market Structure for Coffee in The United States Market Share Total U. S. Coffee Market Market share is the sales dollars or units of a firm’s Institutional Sales Retail Sales (restaurants, institutions, etc.) (retail food stores) offering divided by the market sales expressed as a percentage (%): … Ground Whole Bean Instant Firm’s Offering / Brand Sales ($ or #) … … Market Caffeinated Decaffeinated Share = = X% … Market Sales ($ or #) New England Midwest Southeast Northwest © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-15 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-16 Market Share Served Market A served market is the market in which a Market Coffee Atlantic Market company, product, or brand competes for Definition Dollar Sales Blend Sales Share targeted customers Total U.S. coffee market $8.0 billion $80 million 1.0% − Focus on served market share when evaluating strategic options 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% “High” Served Use a market development strategy Market Share U.S. retail caffeinated ground coffee market $3.0 billion $80 million 2.7% “Low” Served Use either a product development or U.S. retail caffeinated Market Share ground coffee market in $230 million $80 million 32.0% market penetration strategy the Mid-Atlantic region © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-17 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-18 3  7/12/2024 Market Segmentation A technique of dividing potential buyers into smaller, homogenous groups based on buying behavior & marketing response MARKET Why to segment? − Address specific customer needs & preferences SEGMENTATION − Move beyond "one size fits all" − Leverage tech & flexible manufacturing for ultra- personalized experiences (segments of one) © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-19 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-20 Benefits of Market Segmentation Bases for Market Segmentation Consumers Industrial Buyers Unfold new product possibilities Socioeconomic Behavioral Socioeconomic Behavioral Characteristics Variables Characteristics Variables Design targeted MKT campaigns Gender Benefits Sought Company Size Purchasing Objectives Age Usage Location Optimize MKT resource allocation Occupation Loyalty status Industry Product Benefits Income Customers Served Psychographic Family Life Cycle Variables Education Lifestyle Personality Location Attitudes Social class © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-21 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-22 Market Segmentation Market Segmentation © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-23 ©[email protected] © 2024 Pearson Education, Inc. publishing as Prentice Hall. Slide 4-24 4  7/12/2024 Market Segmentation Finer Segmentation Strategies Use One or More Variables? Logic Tailored offerings for a diverse customer base Fostering close customer relationships Use more variables if they relate to purchasing, usage, or consumption behavior, & responsiveness Type to MKT programs Micro-segmentation Creative research can provide insights into buyer Variety-seeking strategy behavior Mass customization © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-25 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-26 Finer Segmentation Strategies Finer Segmentation Issues Finding the balance: Micro-segmentation divides a market into ‒ Variety: How much to offer? Which features matter extremely small, highly specific groups based on most? unique characteristics and needs ‒ Confusion: Will too many choices overwhelm Variety-seeking strategy offers buyers a wide buyers? range of products for novelty and changes ‒ Advantage: Can customization spark preference & market dominance? Mass customization produces personalized products at scale by leveraging tech & flexible Unlocking preferences: processes to ensure effectiveness & efficiency ‒ Effective methods: How to truly understand what buyers want? © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-27 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-28 Requirements for Effective Market Segmentation MARKET SEGMENTATION Requirements for effective market segmentation Need to answer six buyer-related questions: Who are they? What do they want to buy? Measurable Accessible Substantial How do they want to buy? When do they want to buy? Where do they want to buy? Differentiable Actionable Why do they want to buy? © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-29 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-30 5  7/12/2024 Market Targeting Marketers need to address 3 questions, after a market has been segmented: Where to MARKET TARGETING Compete? When to How to Compete? Compete? © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-31 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-32 Where to Compete? How to Compete? Which market segment(s) to choose for Undifferentiated MKT efforts? Marketing How many market − Market targeting identifies & defines the ideal segments the org will Differentiated or profitable customers for maximum impact pursue & MKT Marketing strategies to employ? Concentrated Marketing © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-33 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-34 Undifferentiated Marketing Differentiated Marketing Organization A mass marketing strategy The org simultaneously pursues where a singular MKT program several different market is designed to appeal to a larger segments, with a unique MKT pool of customers strategy for each segment − Marketers don’t recognize the − Managing multiple products differences in customer needs & across multiple market segments wants in the entire market increases MKT, inventory, admin, − They ignore segments & promotion costs Market © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-35 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-36 6  7/12/2024 Differentiated Marketing Concentrated Marketing Organization Organization Focuses on a single market segment with one or limited MKT program(s) − Provides operating economies − Limits growth opportunities if the segment size declines Market Market © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-37 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-38 Exhibit 4.3: Nokia’s Differentiated Marketing Concentrated Marketing Strategy Market Segments Offering Basic Expressio n Active Classic Fashion Premium Characte r -istics First-time users; Younger buyers who Cool, young active Travelers with Buyers who want to World travelers Organization Teens needing voice connectivity desi re customized and personalized products adults desi ring to connect with friends; sp orts enthusiasts various business needs who prefer functionality Ņsh ow offÓwith a personal sense of st yle wanting a PDA, connectivity, and games Durable; ease of use ; Series 1000/ and low price Series 2000 Changeable covers; color displays; downloadable ring Series 3000 tones; and games Small size; st ylish; durable; user friendly; color Series 5000 displays; and fitness monitor Traditional st yle; web browser; networki ng; phone book; Series 6000 calendar; and camera MP3 music player; st yling; games; camera; color Series 7000 display; and Internet access Enhanced user interface; camera; Market color display; multimedia; Series 8000 mess aging; and a PDA © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-39 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-40 Exhibit 4.4: Nestle’s Differentiated Marketing Strategy When to Compete? Options available are: − ‘First-to-market’ posture − ‘Wait-and-see’ stance Timing may have a significant effect on sales & profit © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-41 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-42 7  7/12/2024 Market Sales Potential and Profitability Assessing market sales potential & profitability is crucial in opportunity evaluation MARKET SALES It’s is notoriously challenging, even for seasoned marketers due to: POTENTIAL AND − Varying market & offering definitions, resulting in diverse estimates of dollar sales potential PROFITABILITY © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-43 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-44 Market Sales Potential Estimating Market Sales Potential MSP is the maximum achievable sales for all players in a defined market, within a specific Variables used to estimate: timeframe The number of prospective buyers (B) who are Buyers (B) This dynamic figure hinges on: willing and able to purchase an offering − MKT mix activities & expenditures from all Price (P) The price (P) of an average unit of the offering participating orgs − Environmental conditions (a set of influencing The quantity (Q) of an offering purchased by an factors) Quantity (Q) average buyer in a specific time period MSP is not static, but rather shaped by controllable & uncontrollable forces Market Sales Potential = B × P × Q © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-45 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-46 Estimating Market Sales Potential Estimating Market Sales Potential Chain ratio method involves multiplying a base number by several adjusting factors believed to influence market sales Market Potential for cola-flavored carbonated drink in Canada: potential 1. Population aged 8 years and over (P)= 32 million 2. Proportion of population that consumers soft drinks on a daily basis (R) Population aged 8 years and over =95% × proportion of the population that 3. Proportion of the population preferring cola-flavored soft drinks (C) = 70% consumers soft drinks on a daily basis × Market Sales proportion of the population 4. The average number of carbonated soft drink occasions per day (N) = 0.5 Potential for preferring cola-flavored soft drinks 5. The average amount consumed per consumption occasion (in lt r(O) =0.3 Cola-Flavored = × the average number of carbonated 6. 365 days in a calendar year (D) Soft Drinks soft drink occasions per day 7. The average price per ounce of cola (A) = $0.50 × the average amount consumed per in a Country consumption occasion (in ounces) Market Sales Potential = P x R x C x N x O x D x A × 365 days in a calendar year × the average price per ounce of cola = 32 Mill. x 0.95 x 0.70 x 0.5 x 0.3 x 365 x $ 0.50 = $582.54 Million © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-47 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-48 8  7/12/2024 Estimating Market Sales Potential Sales Forecast A single firm's expected sales under a chosen The chain ratio method serves 3 purposes: MKT strategy & assumed competition − Quantifies MSP Derived from: − Identifies controllable & uncontrollable factors − Market share: A fraction of estimated MSP − Enables flexible MSP estimation for diverse buyer − Target markets: Size & MKT mix chosen for specific groups & offerings segments − Competition: Anticipated number of competitors & their intensity © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-49 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-50 Sales Forecast Example: Sales Forecast Chain Ration Method Sales Forecast is a function of: 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 = M x T x C x U x P © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-51 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-52 Sales Forecast: Pro Forma Income Statement Predicts revenue, expenses, and profitability Guides opportunity selection for profitable ventures. All rights reserved. No part of this publication may be reproduced, stored in a Can be used as a proactive MKT tool retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-53 © 2024 Pearson Education, Inc. publishing as Prentice Hall Slide 4-54 9