Market segments must be profitable – otherwise, they do not deserve the firm’s attention. What are the requirements for profitable segments? Learn how to select attractive market segments!
Segments should meet the requirements of the M.A.S.A. rule – being measurable, accessible, substantial, and actionable. Only if these requirements for profitable segments are fulfilled, the market segments are worth of being targeted by the firm.
What do these requirements for profitable segments mean in particular? Let’s take a look at each of these.
Requirements for profitable Segments
Measurable means that some form of data should be available about the market segment, so that its size can be measured. You need to know how large the segment will be – in order to assess its importance for you. Measurements are highly important to be able to judge the overall attractiveness of the segment.
Accessible means that the market segment should be reachable. This refers to distribution and communication: can you reach the market and communicate with your target customers? If the only potential customers of your new product live in a village in Siberia, but there is no road to that village, you will find that the segment you want to target is not really accessible easily. Each segment needs to be able to be reached and communicated with on an efficient basis.
Substantial refers to the segment’s size. In order to be attractive for you, the market segment should be large enough in terms of sales and profitability. Only then, it deserves the firm’s attention. Certainly, every company will have minimum requirements for the financial return from the investment in the market. Therefore, it is necessary to only consider market segments that are substantial enough to be of interest. In other words, only substantial segments are profitable.
Actionable is to be understood as doable. Are you actually capable of serving this segment? Does your company have the knowledge and resources to satisfy the segment’s needs? A prerequisite for an actionable segment is of course that the other three requirements for profitable segments are fulfilled. But even if all of those criteria are satisfied, a segment is unsuitable for you unless your company has the resources to cater for the needs of this segment.
The requirements for profitable segments go hand in hand with the selection of the right market segmentation criteria. On basis of what criteria do you target your customers?