Developing a decision tool for identifying operational and attractive segments

Abstract

Although market segmentation is a well recognized and accepted aspect of marketing theory, problems for companies trying to implement the concept are not uncommon. In some companies poor understanding of basic segmentation principles is the cause. In others, industries have become geared to serving specific sectors and distribution is organized accordingly — any restructuring of the customer base would create considerable practical difficulties. Other companies complain of too few tools to help them make appropriate and effective targeting decisions. The use of boxes and matrices as an aid to strategic thinking is widespread in modern marketing and strategic planning. Amongst the more commonly cited are the Boston Consulting Group's (BCG) Boston Box and the Directional Policy Matrix (DPM). This paper considers a new matrix, developed from the DPM, which could help consumer and industrial planners make more effective decisions about which market segments to target. The Segment Evaluation Matrix (SEM) directly tackles the issues of segment attractiveness and operational issues associated with segmentation. The matrix is demonstrated using an example from the European construction and agricultural equipment market. The strategic implications of the analysis are also explained.

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