Criteria for Evaluating the Potential of the Target Market

Business objectives are considered the first direct factor influencing decisions on determining target markets. Businesses can pursue the following objectives: Maximizing profits, reducing risks, exploiting existing potential, and competing... Depending on the potential of each business, people can choose to segment that market to achieve the best business goals.

b. Labor force potential

Assessing and developing the potential of the workforce becomes a strategic priority in business. A productive, analytical and creative workforce: related to the ability to assemble and train a team of workers who are highly capable of meeting the business requirements of the enterprise. A human-strength enterprise is one that has the ability and ability to select the right and sufficient number of workers for each job position and arrange the right people in a unified system according to the needs of the job.

c. Financial potential

Financial potential is a synthetic factor reflecting the strength of the enterprise through the amount (source) of capital that the enterprise can mobilize for business. A well-managed financial resource will give the enterprise the competitiveness, pursuing the chosen target market.

d. Management and organization level

The level of management reflects the perfection of the organizational structure, the effectiveness of the management system and management technology. Each enterprise is a system with close links to each other towards the goal. A business that wants to achieve its goals and operate well in the target market must simultaneously reach a corresponding level of organization and management. The ability to organize and manage a business based on a comprehensive, comprehensive perspective focusing on the interactive relationships of all the parts that make up the whole creates the real strength of the business.

2.2. Criteria for evaluating the potential of the target market

To determine the target market, we can use many different methods. Each method has certain advantages and disadvantages and can be applied in certain conditions. Currently, businesses often use some of the following methods: 2.2.1. Estimating total market demand

Case 1 : The theoretical number of customers for the business's products has been determined, and the average demand of customer groups is homogeneous. We have the formula:

X=Ñ.Χ

(4)

 X: Market demand of each customer for the business's products

 Ñ: theoretical number of customers of the product

 X: Average market demand of each customer

X k NX

=Σ ii

i =1

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Case 2: the theoretical number of customers for the business's products has been determined but the average demand of different structural groups, we have the formula:

(5)

 N i : number of customers in the first structural group (i=1,k)

 X i : average demand of each customer in the i-th structural group 2.2.2. Estimating the number of potential customers of the business

This indicator needs to be estimated based on a representative sample of the population (if it is consumer goods) or of businesses (if it is means of production) of that market.

(4), (5) : Trade Marketing Textbook - Prof. Dr. Nguyen Bach Khoa - University of Commerce - Statistics Publishing House -

2005 13

Recipe:

N i =P i N * i=1.3

(6)

N 1 , N 2 , N 3 : respectively the number of current customers, relatively non-consumer customers, and competitors' customers.

P 1 , P 2 , P 3 : structure of the corresponding customer set

 N * : total population

2.3. Sequence of conducting target market selection activities

Figure 1.1: Diagram of the process of selecting target markets in order

Market Forecast

Market segmentation

Identify target market

Market research

2.3.1. Market research:

Source: author's own synthesis

Because in modern Marketing, all decisions originate from market requirements, it can be said that market research is the first step in the Marketing process. Market research is an extremely important task. If market research is done well, it provides sufficient and accurate information to help marketers develop a suitable strategy and thus bring high efficiency. On the contrary, if market research collects inaccurate information, does not reflect the actual market situation, and because it is not based on solid information, the decision is not close to reality, leading to ineffective marketing activities and waste of human resources.

Many Vietnamese businesses, either due to not properly assessing the importance of market research, or perhaps having awareness but due to budget constraints, have not paid proper attention to market research before launching a new product, as a result they have had to pay a very high price.

(6) : Trade Marketing Textbook - Prof. Dr. Nguyen Bach Khoa - University of Commerce - Statistical Publishing House - 2005

when encountering insurmountable obstacles in the process of market penetration implementation.

The most basic thing that determines the success of a product is the acceptance of the buyer of the product or the satisfaction of the user of the service. How do we know whether the customer likes or dislikes, accepts or does not accept? Along with the development of information technology, market research techniques are increasingly developed more sophisticatedly, people take advantage of every opportunity to collect customer and market information.

Why is market information so important? Because:

 Information is the key to understanding the market,

 Businesses need to understand the market better than their competitors.

 Businesses need to forecast market changes and customer needs.

 Businesses need to know how to cope with those changes.

 Businesses need to have a systematic method for collecting, analyzing and processing market information.

Market research is divided into two types:

Qualitative research

o Understand motivation and driving factors.

o Who? What? When? How? Why?

o Based on small quantities.

Quantitative research

o Measurement

o Segmentation and comparison

o Based on large numbers and deliberately structured interview content

Market research is a useful tool in understanding the market, widely used, serving a variety of purposes. In the process of selecting target markets, market research presents the following undeniable benefits:

 Collect market information

 Collect information about newly developed products that can be used as substitutes for the company's products. Through this, the company can proactively propose measures to deal with unexpected fluctuations in the market.

 Collect information on government policies such as expected government budget allocations (if the government budget affects your market), import and export taxes, quotas and government-level agreements related to the market, supply of raw materials and supplies for your business's products. This will help you predict the market and develop a business plan.

 Collect information about the activities of partners and potential customers.

 Market demand research

Collect information about customer needs and consumer trends to establish distribution channels for new products or improve existing products to better meet market needs and strengthen your position in the market.

 Distribution channel research

Collect information about consumer habits and behaviors to establish distribution channels for new products about to be launched on the market. Or develop new distribution channels for existing products when detecting changes in consumer behavior of a segment of customers.

 Research the competitive situation

 Research the level of competition

 Research competitive products

 Research competitors and their key competitive tools.

 Market price research

 Research wholesale and retail prices, import prices, influencing factors and price fluctuation trends

2.3.2. Market forecast

After market research, market forecasting is the next important step for marketing activities. It has been proven that the more accurate the market forecasting is, the more likely the company will make the right decisions.

In order to make various decisions regarding marketing mix policies, the company needs to forecast very different factors of the market. Therefore, the subject of forecasting is very diverse and changes according to each specific case. Normally, the company's forecasting focuses on the following topics: Forecasting changes in attitudes, needs, motivations of customers, changes in consumption habits, purchases and information of customers, the development of the distribution system, changes in marketing policies of major competitors.

One of the most important and basic objectives of market forecasting is to forecast the company's market demand prospects, also known as sales forecasting. This is the most frequently used and general type of forecasting because most marketing decisions depend on the results of such forecasting. Market forecasting contributes significantly to the company in:

 Evaluate the benefits and losses when deciding to penetrate a new market, evaluate the ability and level of market exploitation.

 Analyze and decide whether to maintain or change the company's current marketing policy.

Currently, businesses often conduct forecasting from two perspectives: forecasting the market's autonomous movement and forecasting the market's reactions to hypothetical company activities. Accordingly, there are also two general and effective approaches to forecasting demand and sales.

The first is forecasting fluctuations with 3 steps:

 Forecast market potential

 Forecasting prospective market share

 Forecast of company sales for a specified prospective period

The second is the direct sales forecast of the company which includes precessional factors and other factors as parameters to directly forecast sales.

According to the process, the next issue is forecasting the scope, forecast period, and the accuracy of the forecasts are very important. According to the forecast period, there are the following types of forecasts:

 Short term forecast: less than 1 year

 Medium term forecast: from 1 to 2 years

 Long-term forecast: 3 years or more

However, the forecasting periods are only relative and do not coincide with each other in different fields. Therefore, when determining the forecasting scope, especially when choosing the forecasting type, it is necessary to base on the laws of motion of the forecasting targets.

2.3.3. Market segmentation

2.3.3.1. Concept of market segmentation

Because the needs of consumers in the market are very diverse, it is difficult for a company to satisfy the needs of consumers. Therefore, it is necessary to divide consumers into groups, consumers in each group

that group shares similar requirements in one way or another. Each such group is called a market segment. In other words, market segmentation is dividing consumers into groups that share similar requirements. (7)

2.3.3.2. Market segmentation criteria .

The factors used to segment the market can be considered as different variables in the market, there is no unified method of segmenting the market. There are two market segments considered, which are consumer market segment and industrial market segment. But in the framework of this thesis, the target customers are direct consumers, so consumers of goods belonging to the means of production of the industrial market segment are not mentioned.

Segmenting the consumer market is relatively complex, taking into account many different factors: age, gender, size and stages in family life, occupation, cultural level... Among those variables, we will consider 4 main groups according to the following principles:

a. According to geographical principles

This method requires dividing the market into different geographical units, such as countries, regions, cities or neighborhoods.

b. According to demographic principles

This method divides the market into groups based on demographic variables such as age, gender, family life cycle, income, occupation, education, race, and ethnicity.

c. According to psychological principles

According to this method, customers will be divided into different groups based on social class, lifestyle and personality.

d. According to behavioral principles

(7) : Theoretical Marketing Textbook - Collective Authors of Foreign Trade University - Education Publishing House - 2000

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