MARKET

SEGMENTS AND
CUSTOMER VALUE

BY: AIZA N. VICEDO

AC2A

STRAMA- STRATEGIC MANAGEMENT

 Contents

1. Introduction

2. MARKET AND STRATEGY

2.1. What is Market?

2.2. Classification of market

2.3. What is Strategy?

3. PRODUCT, MARKET SCOPE AND STRUCTURE

3.1 Product and market scope

3.2 Market structure

4. END USERS

5. MARKET SIZE
1. Introduction

Markets allow buyers and sellers to exchange goods and services in return for a monetary
payment. Markets come in a myriad of different varieties. Examples are your local farmers'
markets (local) and the market for passenger jets (global), the market for computer software
(product) and software support (service), the market for electricity (homogeneous product) and
markets for highly specialized steel (differentiated product). These markets may exist in physical
or virtual space.

Strategy (from Greek στρατηγία stratēgia, "art of troop leader; office of general, command,
generalship") is a general plan to achieve one or more long-term or overall goals under
conditions of uncertainty. The term came into use in the 6th century C.E. in Eastern
Roman terminology, and was translated into Western vernacular languages only in the 18th
century. From then until the 20th century, the word "strategy" came to denote "a comprehensive
way to try to pursue political ends, including the threat or actual use of force, in a dialectic of
wills" in a military conflict, in which both adversaries interact.
Strategy is important because the resources available to achieve goals are usually limited.
Strategy generally involves setting goals and priorities, determining actions to achieve the goals,
and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will
be achieved by the means (resources). Strategy can be intended or can emerge as a pattern of
activity as the organization adapts to its environment or competes. It involves activities such
as strategic planning and strategic thinking.
 2. ENUMERATE MARKET AND STRATEGIES

2.1 WHAT IS MARKET?

When we talk about a market we generally visualize a crowded place with a lot of consumers and a
few shops. People are buying various goods like groceries, clothing, electronics, etc.
And the shops are also selling a variety of products and services as well. So in a traditional sense, a
market is where buyers and seller meet to exchange goods and services.

In economics, we do not refer to a market as a physical place. Economists will describe a market as
coming together of the buyers and sellers, i.e. an arrangement where buyers and sellers come in
direct or indirect contact to sell/buy goods and services.

FEATURES OF MARKET

 In economics, the term market will refer to the market for one commodity or a set of
commodities. For example a market for coffee, a market for rice, a market for TV’s, etc.

 A market is also not restricted to one physical or geographical location. It covers a general
wide area and the demand and supply forces of the region.

 There must be a group of buyers and sellers of the commodity to constitute a market. And
the relations between these sellers and buyers must be business relations.

 Both the sellers and buyers must have access to knowledge about the market. There should
be an awareness of the demand for products, consumer choices, and
preferences, fashion trends, etc.

 At any given time only one price can be prevalent in the market for the goods and services.
This is only possible in the existence of perfect competition.

2.2 Classification of Markets

Now we have seen what is a market. Let us learn more about the classification of markets. Broadly
there are two classifications of markets – the product market and the factor market. The factor
market refers to the market for the buying and selling of factors of production like land, capital,
labor, etc. The other classification of markets are as follows,
 Local Markets: In such a market the buyers and sellers are limited to the local region or area.
They usually sell perishable goods of daily use since the transport of such goods can be
expensive.

 Regional Markets: These markets cover a wider are than local markets like a district, or a
cluster of few smaller states

 National Market: This is when the demand for the goods is limited to one specific country.
Or the government may not allow the trade of such goods outside national boundaries.

 International Market: When the demand for the product is international and the goods are
also traded internationally in bulk quantities, we call it an international market.
On the Basis of Time

 Very Short Period Market: This is when the supply of the goods is fixed, and so it cannot
be changed instantaneously. Say for example the market for flowers, vegetables. Fruits etc.
The price of goods will depend on demand.

 Short Period Market: The market is slightly longer than the previous one. Here the supply
can be slightly adjusted.

 Long Period Market: Here the supply can be changed easily by scaling production. So it
can change according to the demand of the market. So the market will determine
its equilibrium price in time.
On the Basis of Nature of Transaction

 Spot Market: This is where spot transactions occur, that is the money is paid immediately.
There is no system of credit

 Future Market: This is where the transactions are credit transactions. There is a promise to
pay the consideration sometime in the future.

On the Basis of Regulation

 Regulated Market: In such a market there is some oversight by appropriate government

authorities. This is to ensure there are no unfair trade practices in the market. Such markets
may refer to a product or even a group of products. For example, the stock market is a highly
regulated market.

 Unregulated Market: This is an absolutely free market. There is no oversight or regulation,

the market forces decide everything
 2.3 WHAT IS STRATEGY?

A strategy is a way of describing how you are going to get things done. It is less specific than an
action plan (which tells the who-what-when); instead, it tries to broadly answer the question,
"How do we get there from here?" (Do we want to take the train? Fly? Walk?)
A good strategy will take into account existing barriers and resources (people, money, power,
materials, etc.). It will also stay with the overall vision, mission, and objectives of the initiative.
Often, an initiative will use many different strategies--providing information, enhancing support,
removing barriers, providing resources, etc.--to achieve its goals.
Objectives outline the aims of an initiative--what success would look like in achieving the vision
and mission. By contrast, strategies suggest paths to take (and how to move along) on the road to
success. That is, strategies help you determine how you will realize your vision and objectives
through the nitty-gritty world of action.

What are the criteria for developing a good strategy?

 Give overall direction? A strategy, such as enhancing experience and skill or increasing
resources and opportunities, should point out the overall path without dictating a particular
narrow approach (e.g., using a specific skills training program).

 Fit resources and opportunities? A good strategy takes advantage of current resources and
assets, such as people's willingness to act or a tradition of self-help and community pride.

 Minimize resistance and barriers? When initiatives set out to accomplish important things,
resistance (even opposition) is inevitable. However, strategies need not provide a reason for
opponents to attack the initiative. Good strategies attract allies and deter opponents.

 Reach those affected? To address the issue or problem, strategies must connect the intervention
with those who it should benefit.

 Advance the mission? Taken together, are strategies likely to make a difference on the mission
and objectives? If the aim is to reduce a problem such as unemployment, are the strategies
enough to make a difference on rates of employment? If the aim is to prevent a problem, such as
substance use, have factors contributing to risk (and protection) been changed sufficiently to
reduce use of alcohol, tobacco, and other drugs?

WHY DEVELOP STRATEGIES?

Developing strategies is really a way to focus your efforts and figure out how you're going to get
things done. By doing so, you can achieve the following advantages:

 Taking advantage of resources and emerging opportunities

  Responding effectively to resistance and barriers
 A more efficient use of time, energy, and resources

WHEN SHOULD YOU DEVELOPED STRATEGIES FOR YOUR INITIATIVE?

Developing strategies is the fourth step in the VMOSA (Vision, Mission, Objectives, Strategies,
and Action Plans) process outlined at the beginning of this chapter. Developing strategies is the
essential step between figuring out your objectives and making the changes to reach them.
Strategies should always be formed in advance of taking action, not deciding how to do
something after you have done it. Without a clear idea of the how, your group's actions may
waste time and effort and fail to take advantage of emerging opportunities. Strategies should also
be updated periodically to meet the needs of a changing environment, including new
opportunities and emerging opposition to the group's efforts.

HOW DO YOU DEVELOP STRATEGIES?

We'll walk through the process of developing strategies with this group so as to better explain the
who, what, and why of strategies.
As with the process you went through to write your vision and mission statements and to set your
objectives, developing strategies involves brainstorming and talking to community members.

3. PRODUCT, MARKET SCOPE AND STRUCTURE

3.1 WHAT IS PRODUCT SCOPE?

Product scope refers to the number of different items your company offers for sale. Your
business goals usually determine the scope of products you carry. You may run a successful
business based on a single product strategy or offer a much deeper line of products to serve a
wider range of customers. Your product scope determines your future marketing strategies,
profit goals and territory saturation.

A well-defined product scope is used to communicate to project managers and their teams what
steps need to be taken to bring the product to a viable state. The product scope should include the
function and defining characteristics of the product, such as dimensions, functional description,
and the materials necessary to construct the product.
WHY PRODUCT IS IMPORTANT?

Product development isn’t an overnight process and can span months or even years. Throughout
that process, team members and business strategies can change drastically. Regardless of these
and other challenges, it’s important that the final product remains aligned with the purpose or
end-use it was designed to fulfill. The product scope establishes these baseline requirements and
provides a necessary framework for the team to follow.

3.2 WHAT IS MARKET STRUCTURE

Market structure refers to the way that various industries are classified and differentiated in
accordance with their degree and nature of competition for products and services. It consists of
four types: perfect competition, oligopolistic markets, monopolistic markets, and monopolistic
competition.

TYPE OF MARKET STRUCTURE

According to economic theory, market structure describes how firms are differentiated and
categorized by the types of products they sell and how those items influence their operations. A
market structure helps us to understand what differentiates markets from one another.

In economics, market structure is the number of firms producing identical products which are
homogeneous. The types of market structures include the following:

1. Monopolistic competition, also called competitive market, where there is a large number of
firms, each having a small proportion of the market share and slightly differentiated products.

2. Oligopoly, in which a market is by a small number of firms that together control the majority
of the market share.

3. Duopoly, a special case of an oligopoly with two firms.

4. Monopsony, when there is only one buyer in a market.

5. Oligopoly, a market in which many sellers can be present but meet only a few buyers.

6. Monopoly, in which there is only one provider of a product or service.

7. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase

continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the
entire market demand at a lower cost than any combination of two or more smaller, more
specialized firms.

8. Perfect competition, a theoretical market structure that features no barriers to entry, an

unlimitd number of producers and consumers, and a perfectly elastic demand curve.
[Link] IS AND END USER?

The term "end user" refers to the consumer of a good or service, often one who has some innate
know-how that is unique to consumers.

In a literal sense, the term is used to distinguish the person who purchases and uses the good or
service from individuals who are involved in the stages of its design, development, and
production.

In product development, an end user (sometimes end-user) is a person who ultimately uses or is
intended to ultimately use a product.

The end user stands in contrast to users who support or maintain the product, such
as sysops, system administrators, database administrators, information technology (IT) experts,
software professionals, and computer technicians.

End users typically do not possess the technical understanding or skill of the product designers, a
fact easily overlooked and forgotten by designers: leading to features creating low customer
satisfaction.

In information technology, end users are not customers in the usual sense—they are typically
employees of the customer.

UNDERSTANDING END USERS

Delivery to the end user is the last step after a company creates, develops, tests, and markets a
product. One goal of the business is to empower the end user to accomplish something that
wasn't possible for them before using its well-conceived quality product.

In order to create a successful product or service, the people who manage and handle the
processes above must think not of their own needs, but of those of the various people—the end
users—who ultimately will use the product.

A computer programmer who designs a software platform for foreign currency trading must
think about the level of interface sophistication versus simplicity, and all of the steps an end
user needs to take to trade effectively.

They must consider, for example, how a trader approaches a trade, what the trader
needs to see and the tools they need to use, how easily they need to access these tools,
the speed at which they need to access data and information, how trades are to be
executed, and what has to be done after a trade has been transacted.

Putting oneself into the shoes of an end user is a key to producing the product the end
user not only needs, but wants.

End users are not always the ones who purchase a product or service from a provider.

END USER EXPERIENCE

If the end user experience is difficult or frustrating, the company's product is unlikely to be
successful. This is especially the case in the age of social media and online reviews where
dissatisfied customers can instantly air their grievances for all to see.

END USER VS. CUSTOMER

As stated, the term "end user" is common when it comes to technology. It may also go by the
more technical term "revenue-generating unit" or RGU.

In comparison, a customer is the person purchasing the technology. They may or may not also
be the end user. At a place of business, for example, the boss may be the one who purchases a
computer. So the boss is the customer, but a junior-level employee might be the actual end user.

EXAMPLES OF END USERS

Tech companies have millions, if not billions of end users. Microsoft's end users are anyone
who owns or works with a Windows machine or uses MS Office tools such as Word, Excel, or
PowerPoint. Apple's end users are those who use an iPhone or a Mac computer.

The number of a company's end users is likely to change according to changing demand,
competition, innovation, or in response to some external pressure.

For instance, the number of end users of video conferencing platforms like Microsoft Teams
and Zoom skyrocketed during the COVID-19 pandemic as people around the world entered
lockdowns and were forced to work from home or take classes online.3

5. HOW TO ESTIMATE MARKET SIZE: BUSINESS AND MARKETING PLANNING

FOR STARTUPS

Sizing the market is a necessary task for business and marketing planning, and budgeting for all
startups, especially those that seek third-party financing such as venture capital (VC). Even
though their investment philosophies may differ, most VCs and angel investors would like to
know that they are investing in a market with a large potential size (typically, at least $1 billion).

UNDERSTANDING YOUR MARKET POTENTIAL

Even if you do not seek external financing, understanding your market potential is
essential for a range of different strategic decisions, in areas such as:

 Product development
 Partnering and distribution
 Organizational design and critical employee skills

The starting point for estimating market size is to understand the problem you solve for
customers and the potential value your product generates for them. This is an aspect that many
startup founders in the innovation community tend to overlook, since they get excited about the
product they’ve developed without thinking about how it benefits their audience.

Depending on your technology, you may have to choose which customer problem to solve first.
If this is the case, completing the exercise below may help you better grasp the market size for
each application. This will make it easier to prioritize which problem to solve first.

STEPS TO ESTIMATE YOUR MARKET SIZE

For most businesses, the concept of market sizing is readily understood but not easily
accomplished. Many get stuck on establishing boundaries or defining the market before they even
get to the data analysis and implications of their research. Determining market size can answer
strategic questions about levels of investments in the business and profitable growth targets. Market
sizing can also serve as a quick understanding of the potential for a B2B market opportunity in terms
of volume or value, and is therefore pertinent to business strategy and decision making.

.
1 DEFINING THE MARKET
Knowing the level of detail necessary to approach your strategic questions is the key to properly
scoping your market sizing approach. Defining your target market should always be the first step
in estimating market size, and it is critical that you do not stray from your determined market
definition through the data collection process.
Market size can be viewed in terms of Total Available Market (TAM), Served Available Market
(SAM), and Share of Market (SOM). Total Available Market refers to the combined revenue or
unit volume in a specified market. Often a company or investor will require the market size or
Total Available Market for a particular geographic area. If we take the example of food
packaging, the Total Available Market can be calculated by adding sales of food packaging
producers in a particular geographic region or market segment.

[Link] YOUR APPROACH

There are two basic methodologies for determining market size: top-down and bottom-up
The top-down methodology uses a broad market size figure and determines the percentage that
the target market represents.
In general, a top-down approach is typically a quicker, more time efficient approach. It is great
for validation or a quick assessment of market size but seldom will provide the detail necessary
for a true opportunity analysis.

The bottom-up methodology builds the TAM by totaling the main variables of the target market.
This method is generally considered to be more accurate and takes considerably more time to
complete. As a result, the bottom-up method is a more valid estimate because it is less likely to
include non-addressable revenue or units.

[Link] SOURCES

Your selected approach will dictate the necessary sources to estimate market size. Secondary
research or desk research searches for existing data and is the most commonly used form of
research in this type of exercise because it is quicker to obtain and therefore usually more cost
effective. Through general web searching, a wealth of information can be found at little or no
cost.
Subscription-based or syndicated research is a great place to start, but there are also free
sources that contain valuable information. Articles about companies or products in the target
market will often quote data from these sources. You might also check whitepapers and product
announcements for similar information. Publicly held companies are required to share
information in analyst and investor reports. Quarterly and annual reports are typically available
on these company websites as well as through the SEC filings. Also, trade associations will often
conduct market research and aggregate industry data.

Primary research, also called field research, is often used in addition to secondary research. The
primary research can take on many forms and can strengthen your understanding of the market,
allowing you to make better informed assumptions

4. DATA STRUCTURING—TYPOLOGY

To further develop your understanding of the market, it is important to gather trend information,
which is typically in the form of qualitative data. This information can come through secondary
research or comments from primary research Typology is the strategy for qualitative data
analysis to group findings into distinct categories in order to identify data themes.

5. DATA ANALYSIS

As mentioned above, it is often necessary to develop multiple estimates using different

approaches or sources. This is called triangulation. When multiple sources or estimations
triangulate, the confidence in a market estimate increases. If the approaches widely differ,
additional research is required to reduce risk and is recommended to narrow the range of market
sizing estimates.

Common pitfalls or mistakes often start early on by not properly defining the market or gathering
data from non-reputable sources. The market definition should remain consistent throughout the
data collection process and methodology should be based on market knowledge—not just
demographics. Where possible, attempt to verify each significant finding through multiple
published source materials or primary research. By confirming findings, you are able to leverage
the value of various information sources and thus increase confidence in the final results.

REFERENCE:

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