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The selection of target markets is the second major phase of the STEP process, as shown in the diagram below. (Where STEP stands for segmentation, targeting and positioning. ) As shown, firms initially segment the market and, as part of this process, construct segment profiles for each segment. Included In a segment profile Is a detailed description of the segment, along with various size and profit measures. Sing this Information In conjunction with the firm’s strategy, resources and goals organization appropriate target markets can then be selected. Basic STEP Process of segmentation, targeting and positioning The selection of a target market is a very important decision for a firm as it then requires significant effort and commitment to implement an appropriate and targeted marketing mix. Target market selection is a key part of marketing strategy and typically involves significant analysis, discussion and review throughout the firm.

There is a separate section in this study guide that outlines an example of target racket selection, but as a quick introduction, some of the factors that are organization would consider are as follows: Selection Factor What to consider? Segment size What is the size of the segment (mainly in terms of unit and revenue sales)? And is this substantial enough for the firm to consider entering? Segment growth rate At what rate is the segment growing (or perhaps declining)? What Is its future outlook? Profit margins Is this a high profit margin segment or one that Is price competitive?

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Competitors How dominant are the established competitors? What degree of competitive rivalry exists? Are there significant Indirect competitors (or close substitute products)? Distribution channels How easy would It be to gain access to the appropriate distribution channels? What level of new Investment would be required In this regard? Role of brand Would the firm be required to create a new brand, or could an existing brand be leveraged Into the new target market, or Is brand relatively unimportant? Strategy/goals How well does the proposed target market fit with the firm’s strategic deletion and growth goals?

Resources Does the firm have the capability, in terms of financial and marketing resources, to successfully compete in this segment? Market Segment By Morgan segment profiles for each segment. Included in a segment profile is a detailed description of the segment, along with various size and profit measures. Using this information in conjunction with the firm’s strategy, resources and goals organization Basic STEP Process of segmentation, targeting and positioning growth rate At what rate is the segment growing (or perhaps declining)? What is its

Is this a high profit margin segment or one that is What degree of competitive rivalry exists? Are there significant indirect competitors (or close substitute products)? Distribution channels How easy would it be to gain access to the appropriate distribution channels? What level of new investment would be required in this regard? Role of brand Would the firm be required to create a new brand, or could an existing brand be leveraged into the new target market, or is market fit with the firm’s strategic direction and growth goals?

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