A Market Segment Toward Which A Company Directs Its Marketing Effort Is Called A

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Target Markets: Segmentation, Evaluation, and Positioning

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SummaryA market is an aggregate of people who, as individuals or as organizations, have needs for products in a product class and have the ability, willingness, and authority to purchase such products.In general, marketers employ a five-step process when selecting a target market. Step 1 is to identify the appropriate targeting strategy. When a company designs a single marketing mix and directs it at the entire market for a particular product, it is using an undifferentiated targeting strategy. The undifferentiated strategy is effective in a homogeneous market, whereas a heterogeneous market needs to be segmented through a concentrated targeting strategy or a differentiated targeting strategy. Both these strategies divide markets into segments consisting of individuals, groups, or organizations that have one or more similar characteristics and thus can be linked to similar product needs. When using a concentrated strategy, an organization directs marketing efforts toward a single market segment through one marketing mix. With a differentiated targeting strategy, an organization directs customized marketing efforts at two or more segments.Certain conditions must exist for effective market segmentation. First, customers” needs for the product should be heterogeneous. Second, the segments of the market should be identifiable and divisible. Third, the total market should be divided so that segments can be compared with respect to estimated sales, costs, and profits. Fourth, at least one segment must have enough profit potential to justify developing and maintaining a special marketing mix for that segment. Fifth, the firm must be able to reach the chosen segment with a particular marketing mix.Step 2 is determining which segmentation variables to use. Segmentation variables are the characteristics of individuals, groups, or organizations used to divide a total market into segments. The segmentation variable should relate to customers” needs for, uses of, or behavior toward the product. Segmentation variables for consumer markets can be grouped into four categories: demographic (e.g., age, gender, income, ethnicity, family life cycle), geographic (population, market density, climate), psychographic (personality traits, motives, lifestyles), and behavioristic (volume usage, end use, expected benefits, brand loyalty, price sensitivity). Variables for segmenting business markets include geographic location, type of organization, customer size, and product use.Step 3 in the target market selection process is to develop market segment profiles. Such profiles describe the similarities among potential customers within a segment and explain the differences among people and organizations in different market segments. Step 4 is evaluating relevant market segments, which requires that several important factors – including sales estimates, competition, and estimated costs associated with each segment – be determined and analyzed. Step 5 involves the actual selection of specific target markets. In this final step, the company considers whether customers” needs differ enough to warrant segmentation and which segments to target.Product positioning relates to the decisions and activities that create and maintain a certain concept of the firm”s product in customers” minds. It plays a role in market segmentation. Organizations can position a product to compete head to head with another brand or to avoid competition. Repositioning by making physical changes in the product, changing its price or distribution, or changing its image, can boost a brand”s market share and profitability.A sales forecast is the amount of a product the company actually expects to sell during a specific period at a specified level of marketing activities. To forecast sales, marketers can choose from a number of methods. The choice depends on various factors, including the costs involved, type of product, market characteristics, and time span and purposes of the forecast. There are five categories of forecasting techniques: executive judgment, surveys, time series analysis, regression analysis, and market tests. Executive judgment is based on the intuition of one or more executives. Surveys include customer, sales force, and expert forecasting surveys. Time series analysis uses the firm”s historical sales data to discover patterns in the firm”s sales over time and employs four major types of analyses: trend, cycle, seasonal, and random factor. With regression analysis, forecasters attempt to find a relationship between past sales and one or more independent variables. Market testing involves making a product available to buyers in one or more test areas and measuring purchases and consumer responses to distribution, promotion, and price. Many companies employ multiple forecasting methods.

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