Page 166 - Foundations of Marketing

Target Markets: Segmentation and Evaluation | Chapter 5 133

advertising, attractive promotional offers, competitive prices, and high-quality personal ser-
vice use considerable organizational resources. In some cases marketers may conclude that
the costs to reach some segments are so high that they are basically inaccessible. Marketers
also must consider whether the organization can reach a segment at costs equal to or below
competitors’ costs. If the firm’s costs are likely to be higher, it will be unable to compete in
that segment in the long run.

STEP 5: SELECT SPECIFIC TARGET LO 7 . Identify the factors that
influence the selection of
MARKETS specific market segments for
use as target markets.
Assuming one or more segments offer significant opportunities to achieve organizational
objectives, marketers must decide which offer the most potential at reasonable costs.
Ordinarily, information gathered in the previous step—concerning sales estimates, com-
petitors, and cost estimates—requires careful review in this final step to determining
long-term marketing opportunities. At this time, the firm’s management must investigate
whether the organization has sufficient financial resources, managerial skills, employee
expertise, and facilities to compete effectively in the selected segments. The firm must also
consider the possibility that the requirements of some market segments are at odds with the
firm’s overall objectives, and that possible legal problems, conflicts with interest groups,
and technological advancements will render certain segments unattractive. Finally, market-
ers must consider long-term versus short-term growth. If long-term prospects look poor,
a marketer may ultimately choose not to target a segment because it would be difficult to
recoup expenses.
Selecting appropriate target markets is important to an organization’s effective adoption
and use of the marketing concept philosophy. Identifying the right target market is the key
to implementing a successful marketing strategy. Failure to do so can lead to low sales, high
costs, and severe financial losses. A careful target market analysis places an organization in a
strong position to serve customers’ needs and achieve its objectives.

DEVELOPING SALES FORECASTS LO 8 . Become familiar with
sales forecasting methods.
After a company selects a target market or markets, it must develop a sales forecast —the
amount of a product the company expects to sell during a specific period at a specified level of
marketing activity. The sales forecast differs from the company sales potential in that it con-
centrates on what actual sales will be at a certain level of company marketing effort. The com-
pany sales potential assesses what sales are possible at various levels of marketing activities,
assuming certain environmental conditions exist. Businesses use the sales forecast for plan-
ning, organizing, implementing, and controlling activities. The success of numerous activities
depends on the forecast’s accuracy. Common problems in failing companies are improper
planning and lack of realistic sales forecasts. For example, overly ambitious sales forecasts
can lead to overbuying, overinvestment, and higher costs that can weaken a firm’s strength
and position.
To forecast sales, a marketer can choose from a number of forecasting methods, some
arbitrary and quick and others more scientifi c, complex, and time consuming. A fi rm’s choice
of method, or methods, depends on the costs involved, type of product, market characteris-
sales forecast The amount of
tics, time span and purpose of the forecast, stability of the historical sales data, availability of
a product a company expects
required information, managerial preferences, and forecasters’ areas of expertise and experi- to sell during a specific period
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ence. Common forecasting techniques fall into fi ve categories: executive judgment, surveys, at a specified level of marketing
time series analysis, regression analysis, and market tests. activities

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