Market Segmentation: How to Do It and How to Profit from It, Revised and updated 4th Edition

Chapter 9

Determining the attractiveness of market segments

Summary

It is neither essential, nor always desirable, to serve every segment in the market. The financial and managerial resources of the company need to be focused into those segments that provide the greatest opportunities for the organization to achieve its objectives. This chapter looks at how a company determines segment attractiveness and is the sixth step in the segmentation process, as illustrated in Figure 9.1.

Figure 9.1 The segmentation process – Step 6

This step requires an objective assessment of segment attractiveness using data external to the organization. The criteria themselves will, of course, be determined by the organization carrying out the exercise, but it is important to remember that the criteria should be independent of the organization’s position in its segments. As one of these criteria is likely to be the size of the segments, it is essential that you have access to all the current data available that can help you establish, or at least derive informed estimates of, their size by the end of the chosen time period, which is usually three years ahead. The reason for such a lengthy period is that you are interested in sustainable competitive advantage, not just the short-termism that comes with looking only one year ahead.

Segment attractiveness on its own as a basis for allocating scarce ...