Principles of Marketing: Segmentation Targeting Positioning - Evaluating Segment, Attractiveness Size Growth Profitability Fit with Company

What It Is

Evaluating segment attractiveness is a crucial step in marketing strategy development. It involves assessing the potential of a target market segment based on its size, growth, profitability, and fit with the company's goals and resources. For instance, Apple targets the premium smartphone segment, focusing on high-end customers who are willing to pay a premium for innovative products.

Key Concepts & Frameworks

• Segmentation: The process of dividing a market into distinct groups of buyers with similar needs or characteristics. Example: Coca-Cola segments its market by demographics (age, income), geographic location, and psychographics (lifestyle).
• Target Market: A specific segment of the market that a company chooses to focus on. Example: Nike targets young, active adults who value fitness and style.
• Market Attractiveness: A measure of a market's potential for growth and profitability. Example: Amazon's e-commerce market is highly attractive due to its large size and rapid growth.
• Ansoff Matrix: A framework for evaluating market opportunities based on market growth and company product offerings. Example: A company can enter a new market with a new product (e.g., Apple's entry into the smartwatch market).
• SWOT Analysis: A framework for evaluating a company's strengths, weaknesses, opportunities, and threats. Example: A company's strength in brand recognition can be an opportunity to enter new markets.
• PESTEL Analysis: A framework for evaluating the external environment's impact on a company. Example: A company's growth may be affected by changes in government regulations (e.g., GDPR).
• 4Ps/7Ps: A framework for evaluating a company's marketing mix. Example: A company's product (4P) and price (4P) strategies can affect its market attractiveness.
• Customer Lifetime Value (CLV): A measure of the total value of a customer over their lifetime. Example: A company may focus on high-CLV customers, such as frequent buyers.
• Return on Investment (ROI): A measure of the return on investment in a marketing campaign. Example: A company may evaluate the ROI of its social media advertising campaigns.

How to Apply It

• To evaluate segment attractiveness, start by analyzing the market size and growth potential.
• Consider the company's strengths and weaknesses in relation to the target market.
• Use tools like the Ansoff Matrix and SWOT Analysis to evaluate market opportunities and threats.
• Evaluate the customer lifetime value and return on investment to determine the segment's profitability.

Common Mistakes

• Mistake: Focusing solely on market size without considering growth potential.
• Correction: Evaluate both market size and growth potential to determine segment attractiveness.
• Mistake: Ignoring the company's strengths and weaknesses in relation to the target market.
• Correction: Conduct a SWOT Analysis to evaluate the company's internal and external environment.
• Mistake: Not considering the external environment's impact on the company.
• Correction: Conduct a PESTEL Analysis to evaluate the external environment's impact on the company.

Exam / Interview Tips

• Be prepared to explain the Ansoff Matrix and its application in market strategy development.
• Understand the difference between market research and marketing research.
• Be able to evaluate the customer lifetime value and return on investment in a marketing campaign.

Quick Practice

Scenario 1: A company is considering entering a new market with a new product. Which of the following is the best approach?

A) Use the Ansoff Matrix to evaluate market opportunities B) Conduct a SWOT Analysis to evaluate the company's internal and external environment C) Evaluate the customer lifetime value and return on investment D) Focus solely on market size and growth potential

Answer: A) Use the Ansoff Matrix to evaluate market opportunities

Explanation: The Ansoff Matrix is a framework for evaluating market opportunities based on market growth and company product offerings.

Scenario 2: A company is evaluating the attractiveness of a target market segment. Which of the following is a key consideration?

A) Market size and growth potential B) Company strengths and weaknesses C) External environment's impact on the company D) All of the above

Answer: D) All of the above

Explanation: Evaluating segment attractiveness involves considering market size and growth potential, company strengths and weaknesses, and the external environment's impact on the company.

Last-Minute Cram Sheet

• Segmentation: Dividing a market into distinct groups of buyers with similar needs or characteristics.
• Target Market: A specific segment of the market that a company chooses to focus on.
• Market Attractiveness: A measure of a market's potential for growth and profitability.
• Ansoff Matrix: A framework for evaluating market opportunities based on market growth and company product offerings.
• SWOT Analysis: A framework for evaluating a company's strengths, weaknesses, opportunities, and threats.
• PESTEL Analysis: A framework for evaluating the external environment's impact on a company.
• 4Ps/7Ps: A framework for evaluating a company's marketing mix.
• Customer Lifetime Value (CLV): A measure of the total value of a customer over their lifetime.
• Return on Investment (ROI): A measure of the return on investment in a marketing campaign.
  Marketing Myopia: Focusing on the product instead of the customer need.
  Market Research: Gathering data about the market and its trends.
  Marketing Research: Gathering data about the customer and their needs.