SEGMENTATION, POSITIONING AND TARGETING
STP MODEL
• The goal of the STP process is to guide the organization to the development and implementation of an appropriate marketing mix.
MARKET SEGMENTATION
WHAT IS MARKET SEGMENTATION
• Market segmentation is the process of dividing an overall market into sets of consumers that have similar needs or similar characteristics.
• Each of these groups of consumers is then referred to as a market segment.
• At this stage, the firm has not evaluated nor selected which market segments that they will target (or market to).
Step 01 – Define the market
• Clearly define the market that the firm is interested in.
• A market can be effectively defined in a number of ways, the most common ones are:
– By industry classification
– By product category (for example, cars, food, retailing, publishing, professional services)
– By country (or other major geographic area)
Step 02 – Create market segments
• Once the market has been defined, the next step is to segment the market, using a variety of different segmentation bases/variables in order to construct groups of consumer.
• In other words, allocate the consumers in the defined market to similar groups (based on market needs, behaviour or other characteristics).
SEGMENTATION BASES/VARIABLES
Some of the major bases for market segmentation are as follows:
1. Geographic Segmentation
2. Demographic Segmentation
3. Psychographic Segmentation
4. Behaviouristic Segmentation
1. Geographic Segmentation
• Geographic segmentation refers to dividing a market into different geographical units such as:
– Nations
– States
– Regions
– Cities
– Countries
– Neighbourhoods
• Geographic variables such as climate, landscape, natural resources and population density also influence consumer product needs.
• Ex: National newspapers are published and distributed to different cities in different languages to cater to the needs of the consumers.
2. Demographic Segmentation
• Demographic segmentation divides the markets into groups based on variables such as:
• Demographic factors are the most popular bases for segmenting the consumer group.
• One reason is that consumer needs, wants, and usage rates often vary closely with the demographic variables.
• Moreover, demographic factors are easier to measure than most other type of variables.
3. Psychographic Segmentation
• Psychographic segmentation refer to lifestyle and personality traits. In the case of certain products, buying behaviour predominantly depends on lifestyle and personality characteristics.
3.1 Personality characteristics
– It refers to a person’s individual character traits, attitudes and habits.
– Here markets are segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc.
3.2 Lifestyle
– It is the manner in which people live and spend their time and money.
– Lifestyle analysis provides marketers with a broad view of consumers because it segments the markets into groups on the basis of activities, interests, beliefs and opinions.
4. Behavioristic Segmentation
• In behavioral segmentation, buyers are divided into groups on the basis of their knowledge, attitude, usage or response towards a product.
1. Occasion:
• Buyers can be distinguished according to the occasions when they purchase a product, use a product, or develop a need to use a product. Ex: Christmas, valentine’s day
2. User status:
• Sometimes the markets are segmented on the basis of user status, Ex: on the basis of nonuser, ex-user, potential user, first-time user and regular user of the product.
3. Usage rate:
• Markets can be distinguished on the basis of usage rate.
• Ex: on the basis of light, medium and heavy users
• Heavy users are often a small percentage of the market, but account for a high percentage of the total consumption.
4. Loyalty status:
• Buyers can be divided on the basis of their loyalty status.
Ex: – hard-core loyal (consumer who buy one brand all the time)
– split loyal (consumers who are loyal to two or three brands)
– shifting loyal (consumers who shift from one brand to another)
– switchers (consumers who show no loyalty to any brand)
5. Buyer readiness stage:
• The six psychological stages through which a person passes when deciding to purchase a product.
• The six stages are;
– awareness of the product
– knowledge of what it does
– interest in the product
– preference over competing products
– belief of the product’s suitability
– Purchase
Step 03 – Evaluate the segments for viability
• After market segments have been developed they are then evaluated using a set of criteria to ensure that they are useable and logical.
Step 04 – Construct segment profiles
• Once the market segments have been determined, segment profiles are then developed.
• Segment profiles are detailed descriptions of the consumers in the segments ;
– describing their needs, behaviors, preferences, demographics, shopping styles, etc..
Step 05 – Evaluate the attractiveness of each segment
• Available market data and consumer research findings are then are added to the description of the segments (the profiles), such as segment size, growth rates, price sensitivity, brand loyalty, and so on.
• Using this combined information, the firm will then evaluate each market segment on its overall attractiveness.
Step 06 – Select target market/s
• With detailed information on each of the segments now available, the firm then decides which ones are the most appropriate ones to be selected as target markets.
• There are many factors to consider when choosing a target market.
• These factors include:
– firms strategy
– the attractiveness of the segment
– the competitive rivalry of the segment
– the firm’s ability to successfully compete and so on..
Step 07 – Develop positioning strategy
• The next step is to work out how to compete best in the selected target market.
• Firms need to identify how to position their products/brands in the target market.
• As it is likely that there are already competitive offerings in the market, the firm needs to work out how they can win market share from established players (how to gain a competitive advantage over rivals).
Step 08 – Develop and implement the marketing mix
• Once a positioning strategy has been developed, the firm moves to implementation.
• This is the development of a marketing mix that will support the positioning in the marketplace.
Step 09 – Review performance
• After a period of time, and on a regular basis, the firm needs to reexamine the performance of various products and may review their segmentation process in order to reassess their view of the market and to look for new opportunities.
MARKET TARGETING
WHAT IS A TARGET MARKET?
• A target market is a market segment that has been deliberately selected by an organization, in order to focus their marketing efforts.
• Organizations may have several target markets and will typically have distinct market offerings each of them.
TARGET MARKETING STRATEGIES
• Undifferentiated Marketing
• Does not focus on a particular market
• Design products that satisfy largest number of buyers
• Mass distribution, mass production, mass communication
• Differentiated Marketing
• When a business has identified a range of customers or B2B segments they might use a differentiated marketing mix strategy.
• Focused Marketing
• The identification of several segments in a market does not imply that a company should serve them all, Some may be unattractive or out of line with business strengths.
Perhaps the most sensible route would be to serve just one of the selected market segments.
• Firm identifies several segments but only cater one segment. – E.g. Rolex Watches, Volkswagen
• Customised Marketing
• In some markets the requirements of individual customers are unique and their purchasing power is sufficient to design a separate marketing mix for each of the customer needs.
MARKET POSITIONING
UNIQUE VALUE PROPOSITION
• The company must also decide how it will serve targeted customers, how it will differentiate and position itself in the marketplace.
• A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.
• Such value propositions differentiate one brand from another.
• They answer the customer’s question, “Why should I buy your brand rather than a competitor’s?”
• Companies must design strong value propositions that give them the greatest advantage in their target markets.
KEYS TO SUCCESSFUL POSITIONING
POSITIONING METHODS
• Position by
– specific product features
– benefits or solutions
– usage for specific occasions
– user category
– uncommon product class
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