Marketing ManagementDawn Iacobucci 2010 South-Western, a part of Cengage Learning

TargetingChapter 3

Marketing Framework

What Is Targeting & Why Do It?What is Targeting?Selecting a market(s) to pursue

Why do it?Its difficult to be all things to all people

How to Choose a TargetWhen choosing target market(s), marketers should considerThe markets fit with the firms capabilitiesMore subjective/challenging to assessThe profitability potential of the marketMore objective

Strategic Criteria for TargetingGo for it: Sports apparel producer in the attractive volley ball apparel market

Hmm: CD producer in the attractive video game market

Hmm: Typewriter producer in the unattractive typewriter market

Avoid: PC producer in the unattractive e-book market

Discussion QuestionAssume you are the market leader in the refrigerator market. Which markets might fall into each of the categories below?

1. Fit with Firms CapabilitiesDoes this market fit with what we are? QuestionsCan we satisfy this market?What are our strengths? What resources do we have? What is our experience?What is our corporate culture?What are our current brand personalities, etc.?

SWOT AnalysisInternalStrengthsWhat do we do well?

WeaknessesWhat do we not do well?

Assess firm relative to competitors

Utilize the customer point of view

SWOT AnalysisExternalOpportunitiesWhat is occurring in the external world that is favorable to us?

ThreatsWhat is occurring in the external world that is unfavorable to us?

Created by changes in the 5 Cs

Competitive AnalysisPerceptual MapShows how customers perceive firm relative to competitors

Most attributes and benefits can be represented by Price & QualityDimensions for quality will vary by industry

Discussion QuestionIf your firm, represented by Us below, wants to target the price sensitive market, which competitor should it be most concerned with? How would that competitor likely react to your firm targeting this market?

2. Profitability PotentialHow likely is it that the market will be profitable?Function ofmarket sizeanticipated market growthcurrent and anticipated levels of competitioncustomer behavior and expectations

Market SizeProject the size of various segmentsConsiderationsThe more precisely defined the target, the easier it is to estimateBe as precise as possible in estimatingDetermine upper and lower bounds of estimatesRun scenarios to determine sensitivity of estimates

Compare the size of each segment

Example: Market SizeHigh School Football Pants Market ComparisonMarket 1: 33 high schools x 90% of schools have teams x 75 players per team x 3.5 pairs of pants each= 7,796.25 pairs of pants x$35 contribution = $272,868.75

Market 285 high schools x90% of schools have teams x75 players per team x3.5 pairs of pants each= 20,081.25 pairs of pants x$35 contribution = $702,843.75

Example: Market Size

Market GrowthProject the market growth for various segmentsProjecting market growth is riskyOne techniqueObtain industry sales data for previous yearsCompute a moving average meanyears 1, 2 and 3; years 3, 4 and 5; etc.Utilize regression to fit a curve to these data

Compare growth rates for each market

Identify Competitive ThreatIdentify the number of competitors in each marketLook in the yellow pagesConduct an on-line searchUtilize various terms to ensure thoroughnesse.g., hair salon, beauty shop, etc.

Compare the competitive threat in each market

Estimate ProfitabilityEstimate profitability of each segmentEstimate price for each segmentEstimate costs for each segmentvariable costs: product material, etc.fixed costs: insurance, rent, etc.

Compare profitability of each segment

B2B Market SizeOne approachStart with the total populationBreak it down into relevant proportionsExample:(population x %aware x %trial x %repeat) x per annum purchaseCensus.gov cross-classifies businesses by sector (e.g., NAICS codes) and size (e.g., by sales or number of employees)

Discussion QuestionWhich market would you recommend this firm pursue and why?