Sunday, January 17, 2010

Attractiveness of a Market Segment

The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment:

  • Size of the segment (number of customers and/or number of units)

  • Growth rate of the segment

  • Competition in the segment

  • Brand loyalty of existing customers in the segment

  • Attainable market share given promotional budget and competitors' expenditures

  • Required market share to break even

  • Sales potential for the firm in the segment

  • Expected profit margins in the segment

Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, salesforce estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable micro-environmental and macro-environmental variables on the market segment should be considered.