What is Market Targeting?



Market Targeting

Market segmentation reveals the firm’s market segment opportunities. The firm now must evaluate the various segments and decide how many and which segments it can serve best. We now look at how companies evaluate and select target segments.
Evaluating Market Segments

In evaluating different market segments, a firm must look at three factors: segment size and growth, segment structure attractiveness, and company objectives and resources. The company must first collect and analyze data on current segment sales, growth rates, and expected profitability for various segments. It will be interested in segments that have the right size and growth characteristics. But “right size and growth” is a relative mater. The largest, fastest growing segments are not always the most attractive ones for every company. Smaller companies may lack the skills and resources needed to serve the larger segments the are smaller and less attractive, in an absolute a sense, but that are potentially more profitable for them.

The company also needs to examine major structural factors that affect long-run segment attractiveness. For example, a segment is less attractive if it already contains many strong and aggressive competitors. The existence of many actual or potential substitute products may limit prices and the profits that can be earned in segment. The relative power of buyers also affects segment attractiveness. Buyers with strong bargaining power relative to sellers will try to force prices sown, demand more services, and set competitors against one another—all at the expense of seller profitability. Finally a segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.

Even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources. Some attractive segments can be dismissed quickly because they do not mesh with the company’s long-run objectives. Or the company may lack the skills and resources needed to succeed in an attractive segment. The company should enter only segments in which it can offer superior value and gain advantages over competitors.
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