Market Segmentation and Analysis Tool


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From a high-level, the goal of a marketing strategy is to identify a target market and develop a marketing mix that will appeal to those potential customers. Decisions regarding the ideal marketing mix can be organized in terms of Price, Promotion, Product, and Price. However, the goal is not to just come up with a particular strategy, but rather to focus on providing value to your key market segments.

With limited resources, you can't pursue all possible market opportunities. This Market Segmentation and Analysis Tool helps you select the markets that represent the best opportunity for your organization. This tool is used to to analyze market segment sizes and develop Customer Profiles based on Demographic, Psychographic, and Environmental criterion.

Key functionality include:
*Suggests segmentation criteria
*Provides segment sizing example to follow
*Perform weighted segment analysis
*Review segment rankings
*Charts prioritized segments

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Market Segmentation and Analysis Tool

  1. 1. Market Segmentation & Analysis Tool Instructions 1. Use the "Segmenters" tab to generate ideas and help you narrow down the 2 major segmentation criteria that will be used for the remainder of this exercise. 2. View the examples in the "Sizing (Example)" and "Segments (Example)" tabs below to see a real-world sample of how this process works. Delete these tabs when you finish this analysis. 3. In the "Sizes (Actual)" tab, enter the major segmentation criteria into the matrix (green area). Further refine those segments with minor segmentation criteria (beige area). 4. Enter the market research data you have collected into the matrix to generate micro-segment sizes and calculate the Total Addressable Market for your product. 5. In the "Segments (Actual)" tab, define your key market segments by merging the cells. Total up the market segment size and add a description like in the example. 6. Once you have selected the key market segments to target, prioritize them using the exercise in the "Weightings", "Segment Analysis", "Rankings" and "Segment Map" tabs. 7. In the "Weightings" tab, weight the importance for each prioritization criteria. Be sure that your total weight equals no more or less than 100%. 8. We have set up the evaluation criteria based on Competitiveness, Market Opportunity, and Attractiveness perspectives. Feel free to customize as you see fit. 9. In the "Segment Analysis" tab, rank each market segment (Green, Amber, Red cells) on a scale of 1-10 based on the criteria. 10. In the "Rankings" tab, sort the results to identify the segments that are most attractive to your business presently. 11. View the automatically generated "Segment Map" and "Chart" tabs which provide visual representations of the data from the segment analysis. 12. Identify which segments to target and which to ignore and communicate your findings internally with key stakeholders.
  2. 2. Market Segmentation & Analysis Tool Demographic (who they are) B2B B2C Psychographic (how they think) B2B B2C Behavioural (what they do) B2B Annual Revenue Age Resistance to Change Brand Preferences Website Visits # Employees Income Market Focused Price Sensitivity Industry Marital Status Open-Minded/Rigid Conservative/Liberal # Locations Education Decision Process Years in Business Family Size Markets Served B2C Purchase History Environment (where they are) B2B B2C Technology Country of Residence Response to Marketing Where they shop Purchasing Power Political Climate Purchasing Methods Store preferences Management Style Currency Enviro-Friendly Memberships Memberships Purchasing Process Payment Methods Early Adopter Hobbies Internet Usage Internet Usage Purchasing Power Shipping & Receiving Gender Growth vs. Static Lifestyle Collateral Consumed Impulsiveness Business Culture Languages Spoken Products/Service Geographic Location Tech Sophistication Information Sources Job Title Social Circles Professionalism Service Preference Level of Experience Occupation Require Referrals Buy based on trends Awareness of options Spontaneous Risk Aversion Influenced by peers Loyalty Relationships
  3. 3. Company Size (Revenue) United States Australia International Markets Canada 100M+ Revenue 5-100M Revenue 0-5M Revenue 2,496 184,953 Total Addressable Market (TAM) 73,895 2,429,133 29,054 1,495 1,204,493 78,395 784,960 69,392 For this example, we have selected a fictional company that sells helpdesk software and is looking to target organizations in English-speaking countries (USA, Canada and Australia) and do further segmentation based on the size of company (annual revenue). This is designed to give you a sample of how you might want to consider setting up your market sizing and segmentation.
  4. 4. Company Size (Revenue) 100M+ Revenue 5-100M Revenue 0-5M Revenue Market Segment Sizes Canada Small Business 928,247 small businesses in USA, Canada & Australia North America Corporate 1,420,996 mid-sized and large corporations in USA & Canada United States North America Corporate Australia International Markets Segment Small Business Australia Corporate Australia Corporate 79,890 mid-sized and large corporations in Australia
  5. 5. Minor Criteria 3 Minor Criteria 3 Major Segmentation Criteria 2 Minor Criteria 2 - - - Total Addressable Market (TAM) - Minor Criteria 1 Minor Criteria 1 Minor Criteria 2 Major Segmentation Criteria 1 0 - - - - - Determine the major and minor segmentation criteria you will be using and plug them into the green and beige cells on the matrix on the left side of this worksheet. Conduct market research to identify how many target organizations (B2B) or consumers (B2C) fit your segmentation criteria. Plug the numbers from your research into the matrix. This will calculate an overall number for the "Total Addressable Market" for your product. You might want to use information resources such as Hoovers, Dun & Bradstreet, Jigsaw, or ZoomInfo to gather data.
  6. 6. Minor Criteria 3 Major Segmentation Criteria 2 Minor Criteria 3 - - - Segment 1 Minor Criteria 2 Segment Minor Criteria 2 - - - Segment 2 Minor Criteria 1 Major Segmentation Criteria 1 Minor Criteria 1 - - - Segment 3 Market Segment Sizes
  7. 7. Market Segmentation & Analysis Tool Weighting Scale Competitiveness Market Opportunity Attractiveness Ability to Differentiate Competitive Intensity Barriers to Entry Market Size Growth Rate Profitability Strategic & Technical Fit Capabilities Maturity & Timing 15% 15% 20% 10% 15% 5% 10% 5% 5% Ranking Criteria & Definitions: Ability to Differentiate - is there a specific competitive advantage that you can provide to this market? Competitive Intensity - are there few competitors actively engaged in this market segment? Are they weak? Barriers to Entry - are there any major barriers to entry (technology, patents, distribution, etc)? Market Size - how large is the total addressable market? Growth Rate - what is the anticipated growth rate for this segment? Profitability - are profit margins attractive? Strategic & Technical Fit - how aligned is this market opportunity with our strategic direction? Capabilities - do you have the technical capabilities to effectively compete in this market? Maturity & Timing - how mature is this market? Is now the right time to enter? Total 100%
  8. 8. Market Segmentation & Analysis Tool Competitiveness Market Opportunity Attractiveness Ability to Differentiate Competitive Intensity Barriers to Entry 15% 15% 20% 10% 15% 5% 10% 5% 5% Australia Corporate 8 8 7 8 9 7 5 4 7 North America Corporate 4 5 8 10 6 8 7 8 6 Small Business 9 6 6 9 8 6 3 5 2 Sample Segment 3 1 4 4 7 5 6 3 8 Undesirable Segment 2 2 2 3 3 3 2 2 3 Market Segments Weighting Market Size Growth Rate Profitability Strategic & Capabilities Technical Fit Maturity & Timing
  9. 9. Market Segmentation & Analysis Tool Note: Sort by selecting all cells then click "Data"in the navigation menu and "Sort". You can sort by Segment Score (Largest to Smallest). Market Segments Segment Score Competitiveness Market Opportunity Attractiveness Australia Corporate 7.4 3.8 2.5 1.1 North America Corporate 6.7 3.0 2.3 1.4 Small Business 6.5 3.5 2.4 0.7 Sample Segment 4.3 1.4 1.7 1.2 Undesirable Segment 2.4 1.0 0.9 0.5
  10. 10. Highly Competitive Top Priority High North America Corporate Sample Segment Attractiveness Australia Corporate Bubble Size = Market Opportunity Small Business Undesirable Segment Low Segments to Ignore Low Low Competition Competitiveness High
  11. 11. Ability to Differentiate 10 Market Segment Rankings Chart 9 Maturity & Timing 8 Competitive Intensity 7 Australia Corporate 6 5 4 North America Corporate 3 Capabilities Barriers to Entry 2 Small Business 1 Sample Segment Strategic & Technical Fit Market Size Undesirable Segment Profitability Growth Rate