Market Targeting

Topics: Porter five forces analysis, Complementors, Barriers to entry Pages: 7 (2031 words) Published: November 13, 2011
Market Targeting
After a firm has identified the various market segments it might pursue, it evaluates each segment’s attractiveness and decides which to pursue using a process known as target marketing or simply targeting. Example:

Disney realizes that its primary appeal for the Magic Kingdom is to young families so the bulk of its marketing efforts for this business is directed towards that group. Similarly on a large scale Coke also is specific about its market targets and hence makes several different types of Coke, Coke II, Cherry Coke, Diet Coke and caffeine free. It also markets Sprite for those who don’t like colas/Minute Maids etc.

Market targeting sometimes generates public controversy. Consumers become concerned when marketers take unfair advantage of vulnerable groups (such as children) or disadvantaged groups (such as poor people) or promote potentially harmful products. For example, the cereal industry has been criticized for marketing to children. Critics worry that high-powered appeals presented through the mouths of animated characters will lead children to eat too much sugared cereal or poorly balanced breakfast. Not all attempts to target children, minorities or other segments draw criticism. Colgate-Palmolive’s Colgate Junior toothpaste has special features designed to get children to brush longer and more often. Thus the issue is not who is targeted, but rather how and for what purpose. Socially responsible marketing calls for targeting and positioning that serve not only the company’s interests but also the interests of the targeted segments.

The Porter's 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable

1. Threat of substitute products
Threat of substitute products means how easily your customers can switch to your competitors product. Threat of substitute is high when: * There are many substitute products available
* Customer can easily find the product or service that you’re offering at the same or less price * Quality of the competitors’ product is better
* Substitute product is by a company earning high profits so can reduce prices to the lowest level. In the above mentioned situations, Customer can easily switch to substitute products. So substitutes are a threat to your company. When there are actual and potential substitute products available then segment is unattractive. Profits and prices are affected by substitutes so; there is need to closely monitor price trends. In substitute industries, if competition rises or technology modernizes then prices and profits decline.

2. Threat of new entrants
A new entry of a competitor into your market also weakens your power. Threat of new entry depends upon entry and exit barriers. Threat of new entry is high when: * Capital requirements to start the business are less

* Few economies of scale are in place
* Customers can easily switch (low switching cost)
* Your key technology is not hard to acquire or isn’t protected well * Your product is not differentiated
There is variation in attractiveness of segment depending upon entry and exit barriers. That segment is more attractive which has high entry barriers and low exit barriers. Some new firms enter into industry and low performing companies leave the market easily. When both entry and exit barriers are high then profit...
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