Steps in Segmentation, Targeting, and Positioning

Introduction to STP

Segmentation, Targeting, and Positioning (STP) is a three-stage marketing model that focuses on delivering specific messages to selectively targeted consumer groups. The STP model helps marketers identify their most valuable customer segments and create products and marketing messages that resonate with these groups.

The STP model consists of three distinct phases:

• Segmentation: Dividing the market into distinct groups with similar needs or characteristics
• Targeting: Evaluating the attractiveness of each segment and selecting one or more segments to serve
• Positioning: Developing a distinctive offering that creates superior customer value

Market Segmentation

Market segmentation is the process of dividing a heterogeneous market into smaller, more homogeneous groups of customers with similar needs, preferences, or behaviors. This allows businesses to focus their resources and tailor their marketing efforts to specific segments rather than attempting to serve the entire market.

Types of Market Segmentation

1. Demographic Segmentation

Demographic segmentation divides markets based on factors such as age, gender, income, education, occupation, family size, and ethnicity. These are among the most commonly used segmentation variables because they are easy to identify, measure, and understand.

2. Geographic Segmentation

Geographic segmentation divides markets based on location, such as country, region, state, city, or neighborhood. This type of segmentation is particularly important for businesses whose products or services vary based on location-specific needs or preferences.

3. Psychographic Segmentation

Psychographic segmentation divides markets based on social class, lifestyle, personality, or values. This approach goes beyond simple demographics to understand why consumers behave the way they do and what motivates their purchase decisions.

4. Behavioral Segmentation

Behavioral segmentation divides markets based on purchase behavior, usage rate, brand loyalty, benefits sought, or readiness to purchase. This approach focuses on actual consumer behavior rather than perceptions or attitudes.

The Market Segmentation Process

1. Define the market and identify potential customer groups
2. Collect and analyze data on consumer characteristics and behaviors
3. Identify meaningful segmentation bases and develop segment profiles
4. Evaluate segment attractiveness based on size, growth potential, profitability, and competitive intensity
5. Select target segments based on company objectives, resources, and capabilities

Targeting

After identifying market segments, the next step in the STP process is targetingor selecting which segments to focus on. Not all segments are equally attractive or suitable for a company to pursue, and resources are typically limited, making strategic selection essential.

Evaluating Market Segments

Before selecting target segments, marketers must evaluate them based on several criteria:

• Segment size and growth potential
• Segment structural attractiveness
• Company objectives and resources

Targeting Approaches

Companies typically use one of four targeting strategies:

1. Undifferentiated (Mass) Marketing

This approach ignores segment differences and targets the whole market with one offer. The company focuses on what is common in the needs of consumers rather than on what is different. This strategy was historically more common but is less prevalent today as markets have become more diverse.

2. Differentiated (Segmented) Marketing

In this approach, a firm decides to target several market segments and designs separate offers for each. Examples include automobile companies producing different car models for different customer segments and clothing retailers offering different lines for different age groups.

3. Concentrated (Niche) Marketing

This strategy involves targeting a large share of one or a few segments or niches. The company aims to achieve a strong market position rather than going after a small share of a large market. This approach can be particularly attractive for small companies with limited resources.

4. Micromarketing

Micromarketing is the practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups. It includes local marketing and individual marketing approaches.

Positioning

Positioning is the third step in the STP model. After segmentation and targeting, positioning involves creating a distinct image and identity for the product or brand in the minds of target customers relative to competing products.

Developing a Positioning Strategy

Effective positioning typically follows these steps:

1. Identify possible competitive advantages upon which to build the position
2. Select the right competitive advantages
3. Develop a positioning statement
4. Communicate and deliver the chosen position to the market

Differentiating Strategies

Companies can differentiate along five main dimensions:

1. Product Differentiation

Companies can differentiate their products based on features, performance, style, quality, consistency, design, durability, reliability, repairability, or other product attributes.

2. Services Differentiation

Companies can differentiate their services through delivery, installation, customer training, consulting services, repair services, and other services that add value for customers.

3. Channel Differentiation

Companies can differentiate themselves through the design, coverage, expertise, and performance of their distribution channels.

4. People Differentiation

Companies can differentiate themselves by hiring and training better people than their competitors do. This is particularly important in services where the interaction between employees and customers is a key part of the value proposition.

5. Image Differentiation

Companies can differentiate through symbols, media, atmosphere, and events that create a distinctive brand identity and image.

Common Positioning Errors

Companies must avoid several common positioning pitfalls:

• Underpositioning: Failing to position the brand clearly in consumers' minds
• Overpositioning: Narrowing the brand's image too much
• Confused positioning: Leaving consumers with a confused image
• Doubtful positioning: Making claims that consumers find difficult to believe

Conclusion

Segmentation, Targeting, and Positioning is a fundamental marketing framework that helps businesses identify and serve their most valuable customer segments effectively. By dividing the market into distinct segments, selecting the most attractive segments to target, and developing a clear, compelling positioning strategy, companies can focus their resources more efficiently and create stronger value propositions that resonate with their chosen customer groups.

The STP model provides a systematic approach to market analysis and strategy development that can be applied across industries and market conditions. While the specific implementation may vary based on company size, resources, and competitive environment, the fundamental principles remain the same: understand your customers, focus on the most promising segments, and differentiate your offerings in ways that matter to those segments.

In today's increasingly competitive and diverse marketplace, effective segmentation, targeting, and positioning has become more critical than ever. Companies that excel at these fundamental marketing activities are better positioned to achieve sustainable competitive advantage and long-term success.