Since there are many ways to form market niches, how does the manager
makes choice? We need a basis for evaluating the worth of a particular
scheme. There are five criteria that are useful for this purpose. The first
concerns the responsiveness of people in the market to marketing program
efforts. Suppose that we have somehow divided the people in a product
market into four groups, each a potential segment. If little or no variation
exists between the four groups, then the way they respond (e.g., amount,
frequency of purchase) to any given marketing program strategy will be
the same. If four (or any) segments actually exist in this illustration, a
different marketing program strategy will work best for each group.
Management may simply feel, based on experience and judgement, that
response differences exist and that the basis used for dividing the market
“( e.g., age, income, etc.) will separate people or organizations into similar
response categories. To substantiate the existence of real niches requires
supporting evidence of actual response differences. After meeting the first
condition, the other requirements come into play. Second, it must be
feasible to identify two or more different customer groups and, third, a
firm must be able to aim an appropriate marketing program strategy at
each target segment. Fourth, in terms of revenues generated and costs
incurred, segmentation must be worth doing. Finally, the segments must
exhibit adequate stability over time so that the firm’s efforts via
segmentation will have enough time to reach desired levels of
performance.
