Many organizations are utilizing target marketing to compete more effectively. Companies focus on the customers which they can most likely satisfy, instead of scattering their marketing effort. Effective target marketing requires identifying distinct groups who have different needs and preferences which is called market segmentation and select one or more market segments to enter which is called market targeting. In addition, for each target segment, marketers must establish and communicate the distinctive benefits of the company’s market offering which is called market positioning (Kotler, 2006, p. 240).
Market segmentation is the process of grouping a market into smaller subgroups. This is derived from the recognition that the total market is made up of segments. These segments are homogeneous within (ex: people in the segment are similar to each other in their attitudes about certain variables). Because of these similarities, they are likely to respond similarly to a given marketing strategy (Zikmund, 1996, p. 258). Successful segmenting can greatly improve marketing effectiveness. Companies can purchase the right list, improving advertising results and increased consumer satisfaction.
The requirements for successful segmentation are:
1. Homogeneity with in the segment
2. Heterogeneity between segments
3. Segments are measurable and identifiable
4. Segments are accessible and actionable
5. Segment is large enough to be profitable (Zikmund, 1996, p. 255).
These criteria can be summarized by the word SADAM:
1. S Substantial: the segment has to be large and profitable enough
2. A Accessible: it must be possible to reach it efficiently
3. D Differential : it must respond differently to a different marketing mix
4. A Actionable: you must have a product for this segment
5. M Measurable: size and purchasing power can be measured (Zikmund, 1996, p. 257).
The variables used for segmentation include:
1. Geographic variables
a. Region
References: Kotler, Philip. (2006). Marketing Management (12 ed.). Upper Saddle River, NJ: Pearson Prentice Hall. UniSdirect. (2003). Retrieved July 3, 2008 from the World Wide Web: http://www.surrey.ac.uk/BixSkills/accelerate/pages/unit2/2-6.htm Zikmund, William. (1996). Marketing (5 ed.). West Publishing Company.