M8 L2 Identifying Your Market

Identifying Your MarketMarketing Segmentation

Target Market

Market Segment

Geographic Segmentatio

n

Marketing Concepts

• Market: The group of potential customers who have similar needs/wants, sufficient buying power, and the willingness to give up a portion of that buying power in order to buy your product/service.

Marketing Concepts

• Market Segmentation: Dividing the total market into smaller, well-defined groups with similar wants/ needs and similar key characteristics.

Marketing Concepts

• Target Marketing: Identifying market segments with the greatest potential for sales and focusing marketing decisions on satisfying the individuals that make up these segments.

Marketing Concepts

• Target Market: The group or groups of potential customers identified as most likely to patronize the business and buy its products.

Analyzing Markets

Market segmentation is a way of analyzing a market by specific characteristics in order to create a target market

Segmentation Methods

•GEOGRAPHIC

•DEMOGRAPHIC

•PSYCHOGRAPHIC

•BEHAVIORAL

Demographics – statistics that describe a population

in terms of personal characteristics.

• Age– Baby Boom Generation

– Generation X

– Generation Y

• Gender

• Income– Disposable income –

money left after taking out taxes

– Discretionary income – money left after paying for basic living necessities such as food, shelter, and clothing

• Marital Status

• Ethnic Background

U.S. Trend – The percentage of the Caucasian population is declining, while

other ethnic populations increase.

Psychographics

• Involves grouping people with similar lifestyles, as well as shared attitudes, values, and opinions.– Activities– Attitudes– Personality & Values

Music teachers, dancers, and other

music lovers would be one category of people who share

psychographic characteristics.

VALS™ is a marketing and consulting tool that helps businesses worldwide develop and execute more effective strategies. The system identifies current and future opportunities by segmenting the consumer marketplace on the basis of the personality traits that drive consumer behavior. VALS applies in all phases of the marketing process, from new-product development and entry-stage targeting to communications strategy and advertising.

Go to the VALS site to learn more and to take a survey to determine your VALS type.

http://www.strategicbusinessinsights.com/vals/presurvey.shtml

Geographics – Segmentation

based on where people

live

Behavioral Segmentation

• Looking at the benefits desired by consumers, shopping patterns, and usage rate. Market benefits, not just the physical characteristics of a product.

Behavioral Segmentation

• Many businesses find that the 80/20 rule applies.

• 80 % of a company’s sales are generated by 20 % of its loyal customers.

Mass Marketing Vs Segmentation

• Mass marketing not as popular as it once was.

• Niche marketing (the current trend) – markets are narrowed down and defined with extreme precision.

Characteristics of a Market Segment

1. Measurable: Potential sales income must be measurable.

2. Substantial: Potential sales income must be substantial enough to warrant the investment required to reach the segment.

3. Reachable: Individuals in the segment must be reachable with available promotional tools.

4. Responsive: The likelihood of the segment responding positively to promotional efforts must by high enough to warrant the investment.

• Market potential: The total amount of revenue that can potentially be generated in a specific industry or market.

• Market share: The percentage of the total sales revenue captured by a firm within a market or industry.

• Market position: The perceived standing of a firm or a product in the minds of customers as compared to the competition.

Characteristics of a Market Segment

Positioning Strategies

To be successful in your business, you must:

• Play to the competition’s weaknesses.• Lead with your strengths.• Look for underserved markets.• Target different market segments.• Focus efforts on communicating its position

to its target market.• Plan its position in the market

Average Market Share

Total sales volume/number of competitors

in a given market.

Competition Analysis

• When developing a competition analysis for your business plan consider:– Who are your 5 nearest direct competitors?– Who are your indirect competitors?– How are their businesses performing?– What have you learned from their operations and

advertising?– What are their strengths and weaknesses?– How does their product/service differ from yours?