Selecting a Target Market Example

 

Example of How to Select a Target Market

Using the list of evaluation/assessment points, let’s review how a firm would evaluate three different market segments. For this example, we will use a manufacturer of sports shoes who has identified four market segments, as per the following segmentation tree diagram.

 

 

A quick description of each of these market segments is provided in the following table:

Market segment

Description of the segment

Elites These are professional sports people or consumers who compete in sports at a top level. There are after the latest technology and features in a sports shoe for specifically designed for their chosen sport.
Keeping fit Note: This is the firm’s current target market.This segment consists of consumers who regularly exercise or play sports at a social level. They want a good quality shoe that provides reasonably good value.
Daily comfort These are people who wear sports shoes on an everyday basis, simply because they are comfortable. They do not generally participate in sports. They sports shoes for walking, going to the shops, around the house, and so on. They are interested in the comfortable shoes at a fair price.
Fashion This group of consumers are very interested in the fashion elements of sports shoes. They generally do not participate in regular sports, but do like shoes that have an unusual design, color, features and so on. They wear the shoes as part of their fashion and dress sense.

 

As noted above, the firm currently targets the ‘keeping fit’ market segment. This means that they have three additional market segments to evaluate and consider. Using the assessment criteria outlined in the above section, these three potential markets will be explored, as shown in the following table.

 

Segment Assessment Factor

Elites segment

Daily comfort segment

Fashion segment

Financial Issues
Segment size

Likely to be a relatively small segment

 

Would be the largest segment of the three under consideration

Probably a small to medium-sized segment

 

Rating: Poor

Rating: Good

Rating: Fair

Segment growth rate

Would be a fairly stable segment with limited growth prospects

Would be a mature market as well

Probably has reasonable growth prospects

 

Rating: Poor

Rating: Poor

Rating: Good

Profit margins

Higher profit margins are likely, as consumers would not be overly price sensitive

Moderate profit margins, as significant competition exist, with a reasonable number of budget offerings

Likely to have higher profit margins, as price is a minor attribute in the purchase decision

Rating: Good

Rating: Poor

Rating: Good

Structural Attractiveness
Competitors

Would have a number of specialist competitors, who would have a strong brand and loyal customers

This segment would be targeted by an array of competition including many indirect competitors

Fairly competitive segment as well, mainly from traditional fashion shoe providers

Rating: Poor

Rating: Poor

Rating: Poor

Distribution channels

Would have a good degree of channel overlap with current target market, but would need to access some specialty retailers

Would be able to meet this shopping preferences of some of the target market, it would probably have to move into Department stores and discount stores to a large extent

May have some exposure to the target market, but would have to look at more fashion oriented stores

Rating: Good

Rating: Fair

Rating: Poor

Strategic Direction
Strategy

Would assume that the brand reputation of competing in this target market would align to strategy

Probably a relatively easy market development approach for the firm

Is a move into an unrelated market segment and may not be part of their core strategy

Rating: Good

Rating: Good

Rating: Poor

Goals

Would assume that they have growth goals and enhancing the credibility of their brand

Would assume growth goals, but they may be concerned about being seen as a generalist shoe

Access to the target market would help the company grow, but it is quite divergent from their current operations

Rating: Good

Rating: Good

Rating: Fair

Marketing Expertise
Resources

Would require is new products to be designed and developed, so a reasonable level of cost

Could market to this segment with your existing product range and some existing retailers, so relatively low-cost

Would require new products, potentially new designers in the firm, and the establishment of new distribution channels so relatively high-cost

Rating: Fair

Rating: Good

Rating: Poor

Capability

May be concerned whether they have the technical ability to produce a range of elite sports shoes

Minor concern of the challenge of accessing department stores and discount channels

The major skill set challenge here is their ability to produce fashionable designs on a regular basis

Rating: Poor

Rating: Good

Rating: Poor

Role of brand

Brand reputation is important and they will be competing against established specialists. They may have trouble in gaining credibility with some of the target market audience

Their existing brand would be easily leveraged into this more general market, but there is a concern that  their existing brand equity may be eroded in their traditional target market

Leveraging the brand into a fashion segment may dilute the value of their existing brand equity, or alternatively they would need to build a new brand for this segment

Rating: Fair

Rating: Fair

Rating: Poor

Opportunity Cost
Growth options

As little is known about the other growth prospects, we would need make the assumption, across the three market segments, that a market development approach is the best choice at this stage for the firm

Rating: Good

Rating: Good

Rating: Good

OVERALL ASSESSMENT

Rating: Fair-Good

Rating: Good

Rating: Poor

The overall assessment at the bottom of the table has been based upon a simple review of each assessment rating. In real life, organizations are likely to have weightings each of these assessment items, which means, that depending upon their current position, some assessment items might be considered more important others. In particular strategic and financial issues are often highly regarded by organizations.

However, as you can see, at the end of this evaluation process, we have a fairly objective assessment of each of three market segments. In this case (based on the information presented), the firm would most likely select the ‘daily comfort’ segment to become their next target market. They may also select the ‘elite’ segment as another target market (perhaps now or in the future). And finally, it is likely that the organization would rule out competing in the fashion/sports shoe market at this time, (however, they may revisit that decision sometime in the future).