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:
a.Region of the world or country
b.Country size – metropolitan cities, small towns
c.Density of Area – urban, rural
d.Climate – hot, cold, humid, rainy
e.Family life cycle
b.Product usage rate
d.Product end use
f.Decision making unit (Zikmund, 1996, p. 255 - 256).
Geographic segmentation includes distinctions based on continents, cultural regions, and climate. Another basis for segmentation is political boundaries, such as state and city lines. However populations are not always adequately described by political boundaries. Marketers are most often concerned with the population map. The company can operate in one or a few areas, or operate in all but pay attention to local variations (Zikmund, 1996, p. 254). Marketers often use zip codes as a basis for market segmentation. People and households in the same zip code area are often similar in demographic characteristics (Zikmund, 1996, p. 254). Some approaches combine geographic data with demographic data to yield even richer descriptions of consumers and neighborhoods. Claritas, Inc. has developed a geoclustering approach called PRIZM that classifies over half a million U.S. residential neighborhoods into 15 distinct groups and 66 distinct lifestyle segments called PRIZM clusters. The groupings take into consideration 39 factors in 5 broad categories: (Kotler, 2006, p. 249) 1.Education and Affluence,
2.Family life cycle,
4.Race and Ethnicity, and
5.Mobility (Kotler, 2006, p. 249).
Individuals within a cluster tend to lead similar lives, drive similar cars, have similar jobs, and read similar...