What Is an Attractive Marketing Segment?

An attractive marketing segment offers a small business the best return on its investment in marketing resources, according to the Center for Simplified Strategic Planning. Businesses carry out market research to identify segments that offer the potential for long-term revenue and profit growth. For a small business, a niche sector may prove more attractive than a large sector where it would face greater competition.

Businesses take into account a number of factors when they are evaluating market attractiveness, according to Net MBA.. The strongest indicators are the size of the segment in terms of numbers of customers or sales volume, the growth rate and the level of competition. Businesses must then calculate the market share they could expect to gain for a given level of marketing expenditure.

Attractive market segments include several aspects, according to Durham Associates. The segment should be easy to identify and measure in terms of the type and number of customers involved. It should be accessible so that marketing teams can communicate easily with the target market. There should be meaningful gaps in the market that a company’s products meet, and the segment should provide a substantial return for the marketing effort required.

Competitive strength is an important factor influencing marketing attractiveness. Large, high-growth segments may look attractive, but small businesses may find it difficult to compete with the large number of existing suppliers. New market entrants would have to make a major investment in marketing, particularly if customer loyalty was also high. In smaller niche segments, competitors are likely to be fewer because the costs and rewards for specialization are less attractive.

An attractive market segment provides a good fit between a company’s capabilities and product range and customers’ needs. Companies with a good fit succeed by offering superior value to customers in the segment. Small businesses may only find the optimum fit in a limited number of market segments. They should therefore focus their marketing resources on a single segment, according to Net MBA.

Small businesses can grow in their chosen market segments by increasing the range of specialized products they offer to existing customers in the segment or customizing their products further to meet the specific needs of new prospects in the same segment.