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
Segment size	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
Segment growth rate	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
Profit margins	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
Competitors	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
Distribution channels	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
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
Goals	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
Resources	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
Capability	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
Role of brand	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).

Example of How to Select a Target Market

Market segment

Description of the segment

Segment Assessment Factor

Elites segment

Daily comfort segment

Fashion segment