BUS M 300 Lecture 5 Outline of Last Lecture I Review Slide II Why forecast sales III Judgment Approaches to Forecasting Sales Outline of Current Lecture I Review Slide II What is marketing segmentation III Five Steps to Target Marketing and Segmentation Current Lecture o Review Slide o Know the different types of judgment forecasting techniques o Understand how to calculate MAM N 2 means what o Understand ESM We use the previous years actual and forecasted sales to predict sales What does a low high alpha mean o What assumptions must be made when starting ESM o Know how to calculate APE s and MAPE Understand how the table works o What is marketing segmentation o Marketing recognizes that in most cases only certain groups or segments want to buy our products or services The process of dividing the total market for a product into several relatively homogeneous groups using factors such as demographics psychographics and geography is termed market segmentation o To be effective a segment must meet the following criteria The segment must be measurable The segment must be reachable through promotion and distribution These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute The segment must be profitable The segment must be relevant or able to be served effectively by the firm o Five Steps to Target Marketing and Segmenting o Step 1 Form potential buyers into segments Geography dividing the overall market into groups based on geography Most products derive the majority of their sales from a very small number of regions Demographics dividing consumers into groups based on sex income age occupation race religion education etc Psychographics or Lifestyle variables dividing the population into homogeneous groups based on behavioral and lifestyle profiles developed by analyzing consumer activities interests and opinions AIO and values attitudes and lifestyles VALS through surveys Usage Segmentation dividing a population into groups based on purchase frequency and usage level Benefit Segmentation dividing a population into groups based on the benefits they seek in the product or service o Step 2 Form products to be sold into groups A firm s products must be grouped into meaningful categories so customers can relate to them o Step 3 Develop a market product grid and estimate size of markets Firms develop Market Product Grids once they know their customer product segments o Step 4 Select target markets When a company picks its target market it must consider the following Market size The estimated size of the market is a critical factor in deciding whether it s worth targeting Expected growth Assess whether the market segment is projected to grow in the future Competitive position Assess the firm s position in the segment relative to current and expected future competition Cost of reaching the segment If inaccessible to a firm s marketing actions the segment should not be pursued Compatibility with the organization s objectives and resources The firm must be able to reach the segment economically with the good or service it offers o Step 5 Reaching Target Markets