Editing Market segmentation (section)

== Selecting target markets ==
{{main|Target market}}
{{see also|Market analysis}}

Another major decision in developing the segmentation strategy is the selection of market segments that will become the focus of special attention (known as ''[[target market]]s''). The marketer faces important decisions:

* What criteria should be used to evaluate markets?
* How many markets to enter (one, two, or more)?
* Which market segments are the most valuable?

When a marketer enters more than one market, the segments are often labeled the ''primary target market'' and ''secondary target market.'' The primary market is the target market selected as the main focus of marketing activities. The secondary target market is likely to be a segment that is not as large as the primary market, but has growth potential. Alternatively, the secondary target group might consist of a small number of purchasers that account for a relatively high proportion of sales volume perhaps due to purchase value or purchase frequency.

In terms of evaluating markets, three core considerations are essential:<ref>Marketing Insider, "Evaluating Market Segments", Online: http://targetmarketsegmentation.com/target-market/secondary-target-markets/ {{Webarchive|url=https://web.archive.org/web/20161023145354/http://targetmarketsegmentation.com/target-market/secondary-target-markets/ |date=2016-10-23 }}</ref>

* Segment size and growth
* Segment structural attractiveness
* Company objectives and resources.

=== Criteria for evaluating segment attractiveness ===

There are no formulas for evaluating the attractiveness of market segments and a good deal of judgment must be exercised.<ref>Applbaum, K., The Marketing Era: From Professional Practice to Global Provisioning, Routledge, 2004, p. 33-35</ref> There are approaches to assist in evaluating market segments for overall attractiveness. The following lists a series of questions to evaluate target segments.

==== Segment size and growth ====
* How large is the market?
* Is the market segment substantial enough to be profitable? (Segment size can be measured in the number of customers, but superior measures are likely to include sales value or volume)
* Is the market segment growing or contracting?
* What are the indications that growth will be sustained in the long term? Is any observed growth sustainable?
* Is the segment stable over time? (Segment must have sufficient time to reach desired performance level)

==== Segment structural attractiveness ====
* To what extent are competitors targeting this market segment?
* Do buyers have bargaining power in the market?
* Are substitute products available?
* Can we carve out a viable position to differentiate from any competitors?
* How responsive are members of the market segment to the marketing program?
* Is this market segment reachable and accessible? (i.e., concerning distribution and promotion)

==== Company objectives and resources ====
* Is this market segment aligned with our company's operating philosophy?
* Do we have the resources necessary to enter this market segment?
* Do we have prior experience with this market segment or similar market segments?
* Do we have the skills and/or know-how to enter this market segment successfully?