In his seminal book Christensen (1997) highlighted the fact that existing providers are typically trapped into focusing on the high-value existing customers and ignore the non-customers, providing a gap that disruptive innovators can use to enter the market and erode the share of existing providers.

Calculating demand estimates typically involves multiplying the total number of customers (existing and potential customers) by their potential purchases for different scenarios. Naturally this requires accurate information on population sizes and spreads, rates of purchasing across various sub-groups and segments and comparative data on the rates of acceptance and usage in similar markets elsewhere (where business models may be different).

These complicated methods for estimating future demand typically require reasonably sophisticated research into issues like existing expenditure preferences and habits, future intentions to purchase, likely purchase behaviour under different conditions, business and consumer confidence, sales force and other expert opinions, past sales in this and similar markets, market testing, etc.

Market segmentation is the way in which we use this grouping to aggregate and characterise customers in terms that make it possible for marketers to develop discrete value propositions and make the segment an offer. The objective of market segmentation is to help marketers to identify appropriate value propositions and the marketing mixes and strategies that flow from these through understanding of the different customer segments' trends and buying behaviours. The process of market segmentation helps to improve marketing decision making by prompting people to consider in depth the options available, and help determine realistic and obtainable marketing objectives.

The methods can be reduced to four ways of segmenting: Demographics, Geographic, Psychographic, Behavioural

The process of market segmentation can reveal a number of segments that might be appropriate for the organisation's marketers to target. However, to be suited for marketing action a segment should be: sufficiently differentiated, accessible and actionable, sizeable and substantial.

When done well, market segmentation reveals those market segments where opportunities exist for the organisation to create a value proposition. The next step is the evaluation of the market segments and the identification of those most desirable. The process of selecting market segments and developing strategies to cater to them is called market targeting. Effective targeting requires you to identify those segments where you can make an offer that
is a better outcome (or better value) for the customer or audience than any alternative. In a competitive market this is also often referred to as having a competitive advantage

The other tool commonly used for targeting is known as perceptual mapping. It works by plotting the existing perceptions of customers and non-customers about the existing value propositions in a market. The axes of the map are based on identifying customers' key buying criteria in the market, using the criteria to form the map, plotting existing value propositions (or brands) and identifying where gaps may exist.

Having identified a 'perceptual gap' or attractive segment with matching business strength, the organisation's marketers must now position (or reposition) a product or brand to exploit this opportunity. As mentioned previously they can do so by:

- pursuing the segment with an offer based on a current product
- developing a new product offer that meets the needs of the segment.

It is important to understand that positioning refers to creating a value proposition in the minds of the targeted segment. The value proposition might look something like: Product X is worth (*) to this segment because (#)

The statement of worth (where the * symbol appears) would set out the price which comprises:

- the monetary price in actual $ terms
- the relationship to competing products (e.g. 10% more than any other product or 2% more than major competitor A's product)
- the amount of time and effort involved in acquiring the product (two hours reading detailed brochures and contracts and a one hour interview).

The concept of 'the market' is central to all marketing theory and practice. This topic has sought to look beyond the market as an abstract concept by considering the way in which it is composed of individuals and groups of consumers referred to as segments. Effective marketing requires that we:

- understand something of the individual wants and needs of customers, and what it is that drives their behaviour
- are able to get some feel for the past and likely future nature of the demand, and the wants and needs that drive it
- can describe the market in terms of the sub-groups (or segments) that meaningfully help us to make offers (targets) based on the common wants and needs of these segments and the capacity of the organisation.
- are then able to position the products and offers that we want to make so that in the minds of the targeted segments we make an appropriate and attractive value proposition.