Last modified:Thursday 31 October 2019
As soon as you have identified the possible market segments, you should naturally choose the one which will earn you the most money. The choice of a market segment is decisive for the future development of your company. Carefully evaluate the market segment you want to target based on different criteria,
During the evaluation of different market segments, it is a good idea to analyse two elements: the overall attractiveness of the segment and the company’s objectives and resources.
The attractiveness of a segment is established by analysing characteristics such as its scope, its growth expectations, its profitability, its risks, its ease of access, its possible economies of scale, and its stability.
In addition, you need to make sure that you have sufficient resources to invest in a certain segment. It is sometimes necessary to rule out certain attractive segments because they do not meet the company's long-term objectives, or this company does not have the resources necessary to access them.
You should also establish criteria for undesirable segments (illegal, controversy, political risks, etc.)
Give the different criteria (good or bad) a score, and apply this to the segments. You will then be able to evaluate the attractiveness of the segments by ranking the them based on the total score obtained.
Final selection of segments
After having evaluated and ranked the segments, you will be in a position to make a selection. Which segments are you going to invest in? You have five strategies to choose from in this respect:
You can concentrate on a single segment
You will acquire significant expertise and be very present in a segment. The benefit is that you will be able to make significant savings in terms of production, distribution, and promotional costs. However, you also run the risk of putting all your eggs in one basket: if the segment becomes less attractive due to a change in purchasing behaviour or the arrival of a new competitor, your future will be immediately compromised.
You can specialise selectively
You choose several attractive segments due to their potential profitability for the company. You balance the risks.
You can opt for product specialisation
You manufacture one product and aim it toward several groups of customers. The risk in this case is that the arrival of a new technology may weaken your entire range of products.
You can opt for market specialisation
You devote yourself to a single segment and sell a specific range of products therein. If the customers are satisfied, you can then offer new products.
You can decide to cover the entire market
In this case, you will target all market segments with all products. Note that this option is reserved for companies with a very large scope with sufficient resources.
Do you want to enter a new market segment? In this case, it would be a good idea to carry out a market study beforehand.