Page 169 - Foundations of Marketing

136 Part 2 | Marketing Research and Target Markets

can be towns or small cities with populations of 50,000 to 200,000 . Test areas are chosen for
their representativeness of a firm’s target markets.
A market test provides information about consumers’ actual, rather than intended, pur-
chases. In addition, purchase volume can be evaluated in relation to the intensity of other mar-
keting activities such as advertising, in-store promotions, pricing, packaging, and distribution.
Forecasters base their sales estimates for larger geographic units on customer response in test
areas. For example, McDonald’s launched a new menu addition, chicken wings, in response
to its popularity. The company chose Atlanta as the test market for the product, expanding the
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test to a very different market, Chicago, after receiving positive feedback in the South.
Because it does not require historical sales data, a market test is effective for forecasting
sales of new products or of existing products in new geographic areas. A market test also
gives a marketer an opportunity to test the success of various elements of the marketing mix.
However, these tests are often time consuming and expensive. In addition, a marketer cannot
be certain that consumer response during a market test represents the total market response, or
that the same response will continue in the future.

Using Multiple Forecasting Methods

Although some businesses depend on a single sales forecasting method, most firms use sev-
eral techniques. Sometimes a company is forced to use multiple methods when marketing
diverse product lines, but even a single product line may require several forecasts, especially
when the product is sold to different market segments. Thus, a producer of automobile tires
may rely on one technique to forecast tire sales for new cars and on another to forecast sales of
replacement tires. Variation in the length of forecasts may call for several forecasting methods
as well. A firm that employs one method for a short-range forecast may find it inappropriate
for long-range forecasting. Sometimes a marketer verifies results of one method by using one
or more other methods and comparing outcomes.

Chapter Review

1. Understand what markets are and how they are targeting strategy. Step two is determining which segmen-
generally classified. tation variables to use. Step three is to develop a market
segment profile. Step four is evaluating relevant market seg-
A market is a group of people who, as individuals or as organi-
ments. Finally, step five is selecting specific target markets.
zations, have needs for products in a product class and have the
Not all marketers will follow all of these five steps in this
ability, willingness, and authority to purchase such products.
order, but this process provides a good general guide.
Markets can be categorized as consumer markets or business
markets, based on the characteristics of the individuals and 3. Understand the differences among general
groups that make up a specific market and the purposes for
which they buy products. A consumer market, also known as a targeting strategies.
business-to-consumer (B2C) market, consists of purchasers and Step one of the target market selection process is to identify
household members who intend to consume or benefit from the appropriate targeting strategy. When a company designs
the purchased products and do not buy products for the main a single marketing mix and directs it at the entire market for
purpose of making a profit. A business market, also known as a particular product, it is using an undifferentiated targeting
business-to-business (B2B), industrial, or organizational mar- strategy. The undifferentiated strategy is effective in a homo-
ket, consists of individuals or groups that purchase a specific geneous market, whereas a heterogeneous market needs to be
kind of product for one of three purposes: resale, direct use in segmented through a concentrated targeting strategy or a dif-
producing other products, or use in general daily operations. ferentiated targeting strategy. Both of these strategies divide
markets into segments consisting of individuals, groups,
2. Grasp an overview of the five steps of the or organizations that have one or more similar characteris-
target market selection process. tics and thus can be linked to similar product needs. When
In general, marketers employ a five-step process when select- using a concentrated strategy, an organization directs mar-
ing a target market. Step one is to identify the appropriate keting efforts toward a single market segment through one

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