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A
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Targeting
Attractive
Market
Segments

McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies,
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All Rights Reserved
Discussion Questions

1. What’s a market?
2. What’s a market segment?

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Discussion Questions

3. Why should we segment

markets and target certain
segments?

Are there benefits in doing so?

Are there drawbacks?

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Objectives of Market
Segmentation
Identify a homogeneous
segment that differs from other
segments
Specify criteria that define the
segment
Determine segment size and
potential

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Discussion Question

4. How should market segments

be defined?
Three good ways to do it.

Who the customers are

Where they are
How they behave

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Discussion Question

5.What are some commonly used

demographic, geographic and
behavioral descriptors?

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SAGA segmentation of UK
grandparents, where a complete
description of each category can be
found in this SAGA press release.
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Pharmaceutical industry
segmentation

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Inline skating segmentation

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Discussion Question

6. Do these same approaches

apply to organizational
markets?

Examples?

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How should we Decide Which Segments to
Target? - Steps in Constructing a Market-
Attractiveness/Competitive-Position Matrix
1. Choose criteria to measure market attractiveness and
competitive position.

2. Weigh market attractiveness and competitive position factors to

reflect their relative importance.

3. Assess the current position of each potential target market on each

factor.

4. Project the future position of each market based on expected environmental,

customer, and competitive trends

5. Evaluate implications of possible future changes for business strategies and

resources requirements.
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A Useful Tool for Assessing Market
Segments: Segment Rating Chart
WEIG RATING (0- TOTA
HT 10) L
Market attractiveness
factors
Customer needs and behavior .5 10 5.0
Segment size and growth rate .3 7 2.1
Macro trends .2 8 1.6
Total: Market attractiveness 1.0 8.7
Competitive position factors
Opportunity for competitive .6 7 4.2
advantage
Capabilities and resources .2 5 1.0
Industry attractiveness .2 7 1.4
Total: Competitive position 1.0 6.6
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 The Market Attractiveness/
Competitive Position Matrix
Market
Attractiveness
High
(8-10) l
Moderate
(4-7)
Low
(0-3)
Low Moderate High
(0-3) (4-7) (8-10)
Company’s Competitive Position
l = Market attractiveness and competitive position of distance runners segment

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 Implications of Alternative Positions
Within the Market-Attractiveness/
Competitive-Position Matrix
High
Market Attractiveness
Competitive Position
Weak Medium Strong
Build selectively: Desirable Potential Target Desirable Potential Target
• Spec. in limited strengths Invest to build: Protect position:
• Seek to overcome weak. • Challenge for leadership • Invest to grow at max. digestible
• Withdraw if indications of • Build selectively on strengths rate
sustainable growth are lacking • Reinforce vulnerable areas • Concentrate on maintaining
strength
Limited expansion or harvest: Desirable Potential Target

Manage for earnings:

• Look for ways to expand w/out Build selectively:
• Protect existing strengths
Med. high risk; otherwise min. invest.
• Invest to improve position only in • Emphasize profitability by
and focus operations increasing productivity
areas where risk is low
• Build up ability to counter
competition
Divest: Manage for earnings: Protect and refocus:
• Sell when possible to maximize cash • Protect position • Defend strengths
Low value • Minimize investment • Seek ways to increase current
• Meantime, cut fixed costs & avoid earnings without speeding market’s
further investment decline

Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems and Analytical Approaches (Englewood Cliffs, NJ: Prentice
Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic Planning,” Long Range Planning 11 (1978), pp. 8-15.

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Discussion Questions

7. What targeting strategies are

available?

When should each be used?

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Niche-Market Strategy
Mass-Market Strategy
Differentiated Marketing
Growth-Market Strategy

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