Step 2: Choosing Market Segments

The second step in selecting target markets requires the marketer to critically evaluate the segments identified in Step 1 in order to select those which are most attractive. For small firms this step may not be very involving since they may lack the resources needed to do it effectively.

So they are often left with using their own intuition or judgment to determine which segments are the most promising. For companies with the time and money to commit to this step, the results may identify the segments that are primary candidates for current marketing efforts and also present segments that are future targets for the company’s offerings.

In determining whether a segment is worthy of being a target market, the marketer needs to address the following questions:

  • Is the segment large enough to support the marketer’s objectives? This is an especially critical question if the marketer is entering a market served by many competitors.
  • Is the segment showing signs of growth? One of the worst situations for a marketer is to enter a market whose growth is flat or declining, especially if competitors already exist.
  • Does the company have the necessary skills, knowledge and expertise to service the segment? The company should understand and be able to communicate with the customers in the segment, otherwise they may face a significant learning curve in understanding how to effectively market to a segment.
  • Does the segment meet the mission of the company? The segment should not extend too far beyond the direction the company has chosen to take.

Once one or more segments have been identified the marketer must choose the most attractive option(s) for their marketing efforts. At this point the choice becomes the firm’s target market(s).

Stage 3 Segmentation Variables
Step 3: Develop Marketing Strategy