Opportunity Analysis,

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Chapter 4
Opportunity Analysis, Market Segmentation, and
Market Targeting
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In this chapter, you will learn about

• Opportunity Analysis
• What is a Market?
• Market Segmentation
• Benefits of Market Segmentation
• Bases for Market Segmentation
• Requirements for Effective Market Segmentation

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In this chapter, you will learn about

• Offering-Market Matrix
• Market Targeting
• Market Sales Potential and Profitability
• Estimating Market Sales Potential
• Sales and Profit Forecasting

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Marketing Strategy involves
Selection of Markets
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Opportunity Analysis Involves

• Opportunity Identification
• Opportunity
• - Organization Matching
• Opportunity Evaluation

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Opportunity Identification

• Identifying new types of classes of buyers
• Uncovering unsatisfied needs of buyers
• Creating new ways or means for satisfying buyer
  needs

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Opportunity-Organization Matching

• Determines whether an identified opportunity is
  consistent with an organizations business,
  mission, and competencies
• SWOT Analysis often employed
• Financially attractive opportunities are
  sometimes rejected at this stage due to lack of
  match

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Opportunity Evaluation
Has both qualitative quantitative phases

• Qualitative
• Evaluates the likelihood of capitalizing on a
  market niche
• Quantitative
• Yields estimates of market sales potential and
  company sales forecasts

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Opportunity Evaluation Matrix
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A Market Consists of
Prospective buyers willing and able to purchase
the existing or potential offering of an
organization.
Focus on Buyers
Effective Demand
Offering rather than product or service
Market Share
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What is Market Segmentation?

• The breaking down or building up of potential
  buyers into groups called
• Market Segments

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Benefits of Market Segmentation

• Identifies opportunities for new product
  development

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

• Improves allocation of marketing resources

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Market Segmentation Variables
Socioeconomic
Behavioral
Market Segmentation Variables
Benefits Sought
Psychographic
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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?

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Each Market Segment should be
Measurable
Differentiable
Substantial
Accessible
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Sample Offering - Market Matrix for Handheld
Calculators
Market Segments (User Groups)
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Market TargetingSpecifying segments to pursue
Organization
Differentiated Marketing
The organization pursues several different market
segments simultaneously
Market
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Market TargetingSpecifying segments to pursue
Organization
Concentrated Marketing
The organization focuses on a single market
segment
Market
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Market Sales Potential
Maximum level of sales available to all firms
serving a defined market in a specific time
period given

• The marketing mix activities and efforts of all
  organizations
• A set of environmental conditions

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Market Sales Potential and ProfitabilityChain
Ratio Method

• Market Sales Potential is a function of
• The number of Prospective Buyers (B)
• The Quantity Purchased (Q)
• The Price of an Average Unit (P)

Market Sales Potential B x Q x P
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Chain Ratio Method Example

• Market Potential for cola-flavored carbonated
  drink in Canada
• Population (P) 32,000,000
• Proportion of P that consumes carbonated
  beverages (R) 95
• Proportion of R that consumes cola-flavored
  carbonated beverages (C) 70
• Average number of liters of cola consumed per
  cola-consumer per week (L) 1.7 liters
• 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

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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.
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Forecasted Sales reflect

• The size of the target market
• The marketing mix chosen for the target market
• The assumed number of competitors and competitive
  intensity in the target market

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Making aSales Forecast
Sales Forecast is a function of

• Market potential (M)
• Proportion of market you are Targeting (T)
• Extent of market Coverage (C)
• Number of Units expected to sell per customer
  during the year (U)
• Average Price per unit (P)

Sales Forecast M x T x C x U x P
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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