# Estimate the size of each customer segment, looking only at the immediate Kansas City metro area.

One day, your bosses — the company co-founders Anna and Rachel — call you into a meeting room.
Rachel: “We looked over the JTBD analyses you prepared for us, and we like what you’ve done. We think you’ve done a great job of understanding the psychology of our customers, and why they would want to “hire” our products for their kids.
We want you to continue investigating these customers so that we understand them well before designing our new product to fit their needs.
We want you to work on better understanding our market segments. Since we’re based in KC, we’re going to focus our product launch just on the KC metro area first, but eventually we’ll go national with the product. We have a small budget for prototyping and for marketing this new product, which means we can only pick one target market to start with — you’re going to tell us which target market we should focus on first. This will be our beachhead market for the new product.
I’ll send you an email with more detail about what we want you to prepare for us to help us pick out beachhead market.”
As soon as you get back to your desk from meeting with Anna and Rachel, you get an email from Rachel with the details about what they want you to prepare related to customer segments.
To do for this assignment
Step 1:
Complete the Market Segmentation worksheet (see here for a template (Links to an external site.)) for the three market segments that have already been defined by the founders of HighSpeed Games (parents of children who are high achievers; parents of children with special educational needs; and parents looking for a better way to entertain their kids).
In the template, you only need to focus on the rows that are highlighted yellow (don’t worry about the other rows).
Step 2:
Estimate the size of each customer segment, looking only at the immediate Kansas City metro area. This includes the following counties:
Jackson County, MO
Clay County, MO
Platte County, MO
Johnson County, KS
Wyandotte County, KS
Remember from Monday’s lecture: one way to estimate customer segment size is the following equation: Q = N*A*P , where P = (Fdefinitely * Cdefinitely) + (Fprobably * Cprobably).
Q is the number (or quantity) of product sold in a given time period, A is the percent of the target customer segment that is aware of your product, and P is the probability that your target customers will actually buy your product.
For this assignment, you can use the following numbers:
A = 40% (0.4)
Fdefinitely = 15% (0.15) — this is the percent of customers who, in surveys, say they will definitely buy your product
Fprobably = 30% (0.3) — this is the percent of customers who, in surveys, say they would probably buy your product
Cdefinitely = 40% (0.4) — this is the percent of customers who said they would definitely buy your product who actually buy your product
Cprobably = 20% (0.2) — this is the percent of customers who said they would probably buy your product who actually buy your product
To estimate N in the above equation, first estimate the number of households in each county that have children in HSG’s target age range, which is 4-8 years old. How?
In Jackson County, MO 28% of households have children under 18. See this link for information all five counties: https://data.census.gov/cedsci/table?q=DP02&g=0500000US20091,20209,29047,29095,29165&tid=ACSDP1Y2019.DP02 (Links to an external site.)
We don’t know the exact ages of these kids, but you can make the simplifying assumption that the population is distributed evenly across all ages.
This means that the likelihood that a child is 1 year old is (1/18) = 5.5%, and also that the likelihood that a child is 10 years old is also (1/18) = 5.5%.
Recall that HSG’s target users are children aged 4-8. Taking this plus the simplifying assumption mentioned above, the likelihood that a child under 18 is within HSG’s target user range is (5/18) = 28%.
So, if 28% of households in Jackson County, MO have children under 18, then using our simplifying assumption above, 28% of those households would have children in the target age range.
28% x 28% = 8%, so we can say that approximately 8% of households in Jackson County, MO have children in the target age range (4-8) of HSG.
Use this same method for the other four counties.
Next, using the demographic characteristics that you defined as part of Step 1, use the Census Bureau to gather data for the five counties above.
Link to economic Census data for all five counties. NOTE: you will have to scroll to the right to see each county: https://data.census.gov/cedsci/table?q=DP03&g=0500000US20091,20209,29047,29095,29165&tid=ACSDP1Y2019.DP03 (Links to an external site.)
As an example, if you said that a demographic characteristic of one of your customer segments is household income between \$25,000 and \$49,999, then you would add up the number of households with that level of income in each of the five counties to estimate the market size of that customer segment.
Below is a screenshot of what that would look like just for Jackson County; you would arrive at a total of 63,785 households in that income range (25,778 + 38,007). There are 292,571 total households in Jackson County, MO, so this means that 21.8% of households in the county fall within your target income range.
census screenshot 1.png
If 8% of all Jackson County households have children in your target age range, and 21.8% have income in your target range, then we can multiply the two together to find households that have children and our target income range = 8% x 21.8% = 1.74%. There are 292,571 total households in Jackson County, MO. 1.74% of this = 5,090 households. For the example given above, this would be our potential market size for Jackson County, MO: 5,090 households.
Now let’s say we’re looking at the segment of parents of children with special educational needs. This link tells us that about 14% of all public school children (Links to an external site.) in the United States have some form of special educational need (which may be autism, intellectual disability, emotional disability, and others). For the purposes of this assignment, you can make the simplifying assumption that the percent of children with special educational needs is the same in all parts of the country.
So, if 5,090 households in Jackson County, MO fit our income range and have children in the ages that would use HSG’s product, then we can estimate that 14% of those will have children with special educational needs. That means the size of this segment in Jackson County, MO is approximately 713 households (5090 * 14%).
You should do this exercise for all five metro counties, for each of the three market segments. Once you have a market size estimate for each segment, enter your estimate (in number of households) in the “Size of Market” row in the template mentioned above.
You will find it helpful (especially for later assignments in the semester to save your work in a separate spreadsheet so that you know how you got your answers.
You can use the same method as was described above for gifted children, using this data: https://umkc.box.com/s/knoj00nkmuu1gf52j6olr91hadcfwstl (Links to an external site.)
To turn in:
Your completed Customer Segments template (10 points)
A spreadsheet showing your work for how you estimated the size of your customer segments (10 points)
A short written justification for which of the three customer segments you recommend selecting as your beachhead market segment, and why. This should be approximately 150-300 words, or one to two paragraphs. You can give any reason you wish for selecting a particular market segment, but your reasons should all be directly related to the analyses you did in the Customer Segments template. For example, you might choose a segment because it’s the largest, or you might choose a segment because the customers in it have high incomes (and so would be more likely to be able to afford high-priced products), etc. (5 points)

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