• Selecting Market, Segments

Royal Dutch Shell's directional policy matrix plots market attractiveness of segments against business strengths. We introduced the method, along with GE's matrix, in Chapter 3. Originally developed as a way of balancing business port

folios, it is also well suited to decision making about which markets to target. 41 Figure 9.4 shows an application by an Austrian industrial engineering and construction company. 42

414 • Chapter 9 Market Segmentation and Targeting

Figure 9.4

Portfolio of customer segments

"When a segment fits the company's strengths, the company must then decide whether it has the skills and resources needed to succeed in that segment. Each segment has certain success requirements. If the company lacks and cannot readily obtain the strengths needed to compete successfully in a segment, it should not enter the segment. Even if the company possesses the required strengths, it needs to employ skills find resources superior to those of the compe tition to really win in a market segment. The company should enter segments only where it can offer superior value and gain advantages over competitors. The company in Figure 9.4 is not very strong in any of the most attractive segments. Segments 13 and 17 look most appealing because they are moderately attractive and fit the firm's strengths. Segment 3 is similar, hut the firm needs to build its strengths if it is to compete there. Segments 1, 6 and 9 are attractive, but do not fit the firm's strengths. The firm has to develop new strengths if it is to compote in them. Without the investment the segments are not worth entering, so the firm has to consider the investment needed to enter more than one. Although the firm's

strengths are suitable for segments 2 and 12, they are not attractive. target market

A set of buyers sharing common needs or

Segment Strategy

characteristics iliut the company decides to

After evaluating different segments, the company must now deeide which and how serve.

many segments to serve. This is the problem of targetmarket selection. A target market consists of a set of buyers who share common needs or characteristics

un differentiated

that the company decides to serve. Figure c >.5 shows that the firm can adopt one marketing

of three marketcoverage strategies: undifferentiated marketing, differentiated

A marketcoverage

marketing and concentrated marketing.

strategy in 'which a firm decides to ignore market segment differences and

* Undifferentiated Marketing

go after tlie whole marker 'with one offer.

Using an undifferentiated marketing strategy, a firm might decide to ignore market segment differences and go after the whole market with one offer. This can

Market Targeting • 415

Figure 9.5

Three alternative marketcoverage strategic?

be because there are weak segment differences or through the belief that the product's appeal transcends segments. The offer will focus on what is common in the needs of consumers rather than on what is different. The company designs a product and a marketing programme that appeal to the largest number of buyers. It relies on quality, mass distribution and mass advertising to give the product a

superior image in people's minds. Advertising and promotions have to avoid alien ating segments, and so are often based on product features, like 'Polo, the mint with the hole', or associated with a personality of broad appeal, like Esso's tiger.

Undifferendated marketing provides cost economies. The narrow product line keeps down production, inventory and transportation costs. The undifferen tiated advertising programme keeps down advertising costs. The absence of segment marketing research and planning lowers the costs of market research

and product management. Most modern marketers, however, have strong doubts about this strategy. Difficulties arise in developing a product or brand that will satisfy all consumers. Finns using undiffereutiated marketing typically develop an offer aimed at the largest segments in the market. When several firms do this, there is heavy compe

tition in the largest segments and neglected customers in the smaller ones. The result is that the larger segments may be less profitable because they attract heavy competition. Recognition of this problem has led to firms addressing smaller market segments. Another problem is erosion of the mass market as competitors develop new appeals or segments. For example, Polo mints have

faced attacks from competitors aiming at different benefit segments: Extra Strong mints for people who want a strong taste and Clorets as breath fresheners. At the same time, Polo faces direct competition from similarly packaged Trobor Mints in Europe and Duplex in .southeast Asia.

416 • Chapter 1 ^ Market Segmentation and Targeting

• Selecting Market, Segments