Financially Responsible Marketing

Evaluating Your Segment’s Attractiveness

Posted by on Mar 13, 2014

Now that you have identified the various segments of the market and their needs, your company must now evaluate the attractiveness of each of these customer segments. By doing this evaluation using a set of five criteria, you can determine which segment is the most viable and worth pursuing for your company. You must ask yourself: Is the segment identifiable, reachable, substantial, responsive and profitable?

 

Identifiable

Your firm must determine who is within your market to be able to design products or services to meet their needs. It is equally important to ensure that the segments are distinct from one another in terms of needs because too much overlap between segments means that distinct marketing strategies aren’t necessary to meet segment members’ needs.

 

Reachable

The best product or service cannot have any impact if that market is not easily accessible or reached through persuasive communications and product distribution. Consumers in the segment must be able to receive your marketing messages to know the product or service exists, understand what it can do for them, and recognize how to buy it.

 

Responsive

For a segmentation strategy to be successful, the customers in the segment must react similarly and positively to your firm’s offering. Even if a segment meets all the other criteria for a successful segment, you should not pursue it if the market probably won’t be responsive to your product due to the competitiveness in the market

 

Substantial and Profitable

Once the firm has identified its potential target markets, it needs to measure their size and growth potential. If a market is too small or its buying power is insignificant, it won’t generate sufficient profits or be able to support marketing mix activities. You must focus your assessment on the potential profitability of each segment, both current and future. Key factors to keep in mind in this analysis include market growth (current size and expected growth rate), market competitiveness (number of competitors, entry barriers, product substitutes), and market access. Some straightforward calculations can help illustrate the profitability of a segment. Segment profitability = (Segment size x Segment adoption percentage x Purchase behaviour x Profit margin percentage) – Fixed costs.

By identifying the attractiveness of each market segment in your marketing plan using a set of descriptive criteria, you are better able to choose the right target market and then develop an effective positioning strategy based on the target market you have chosen to pursue.

 

Would love to hear how you’re doing with segmenting your target audiences.  Share your story with us or connect on Twitter @ImaginisInc.