STP Model in Marketing: Segmentation, Targeting, and Positioning

This essay explores the use and effectiveness of the STP (Segmentation, Targeting, and Positioning) model in different industries. It analyzes the applicability of the model in the automobile industry (Volkswagen), hospitality industry (Hilton Hotels), and retail sector. The essay discusses the segmentation, targeting, and positioning strategies used by these industries and highlights the challenges and successes they have faced.

Running Head: Strategic Marketing
Segmentation, Targeting, and Positioning
Essay
SEPTEMBER 12, 2019

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SEGMENTATION, TARGETING, AND POSITIONING MODEL
The modern business organisations are using different types of marketing tools and strategies to
stay in the competition and offer better products and services to the customers. STP
(Segmentation, Targeting, and Positioning) is one of the models that give strength to the modern
business organisation to satisfy their customers with the right strategy and planning. STP is a tool
that is used in marketing to compete in the market (Andaleeb, 2016). STP generally referred to
the process of selecting a group of customers and making a choice of the target market and
finally the implementation of positioning. However, this model has some basic drawbacks and
that is why it is criticizing by many researchers and scholars. The present work analyses the use
of STP in different industry and its appropriateness in the marketing field. STP is used almost in
every industry including hospitality, service, manufacturing, tourism etc. However, this model is
still appropriate and retains its validity for most of the industry and organisations to find and
attract more and more customers in a mature or competitive market. This essay helps to test the
appropriateness and viability of this model in almost all key industries with some famous
theories and concepts of management.
STP is a famous and popular marketing model and it is as popular in the current age of global
marketing as it was in few decades ago. STP is used to attract and target a group of potential
customers in a target market with appropriate messaging and information (Steenkamp, 2017).
STP is used to tailored message and personalised customers experience. The modern
organisations are using STP to collect information about a particular area or market, identify the
needs of customers, and personalise the services and products according to the customer's needs
and place the product or services in the market after creating buyer personas. However, to
analyse the importance of STP model, it is essential to know all these three elements of STP
model (Hanlon, 2019).
The first element of STP model is segmentation, which means the division of customer groups or
market. Segmentation is used to divide the customers in a group on the basis of their identical
characters or attributes (Hanlon, 2019). For example, group of female customers, group of male
customers, some small groups such as customers who belong to teenage (13 years to 19 years),
group of old age customer (65 years to 90 years) etc. This approach is generally based on the

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concept of one-size-fit-for-all approach. However, there are several ways in which an
organisation can divide its customers such as based on age, culture, lifestyle, income, location
etc. Each of these aspects plays a crucial role in developing a tailored message for the customers
(Steenkamp, 2017).
(Source: Hanlon, 2019)
The second step in STP model is Targeting. This step is generally done after the segmentation of
customers. The main aim of the marketers is to decide how segmentation can generate huge
profits and revenue for the profit (Hanlon, 2019). For this purpose, the business organisation
targets a relevant and most appropriate market and find which market has to be targeted. This is a
very crucial step in the STP model because this step determines the success of the whole
organisation. Therefore, the business organisation needs to target a particular market or a
particular group of customers as per the size and potential growth in the market. However, it is
also considerable that targeting just one group of customers does not mean that the STP process
estranges another group (Bartikowski and Cleveland, 2017).
The third and last step of the STP model is positioning. At this stage, the business organisation
creates its marketing mix to reach the segmented group of customers. The organisation conveys a
message to its customers that how particular products or services can fulfil their specific needs.

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This step always considers the self-esteem of customers and promotes the message through
logos, symbols, exclusivity, and lifestyle. The marketers generally want to place the products
with emotional attachment with the customers because it helps to create a strong attachment of
customers with the brand and products of the organisation (Schlegelmilch, 2016).
STP in the Automobile Industry (Volkswagen)
Almost every large organisation is using the STP model for market growth and organisational
development. However, the use of STP in automobile industry is so crucial because in this
industry the vehicle manufacturing company has to target a specific group of customers based on
their age, income, and lifestyle. Here the STP can play amazing role to positing the products into
the specific market and attracts the customers toward the products (Wang, Chen, and Chen,
2012). One of the best examples of STP use has been shown by the ‘Volkswagen’, which is a
popular car manufacturing company. Volkswagen started its business in 1937 and now it is one
of the biggest automobile companies of the world (Buiga, 2012). The company used the STP
model to place its cars in the market based on customer’s demand and their income.
(Source: Volkswagen, 2018)

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Volkswagen divides its customers on demographic, geographic, and behaviours, and
psychological basis. This helped the company to find and name its customers on different basis
and then produce the products according to their need and requirements (Clayton, Charles,
Ferrell, and Wilcher, 2011). The ‘Volkswagen Golf’ model is more famous in Europe and Asia.
This is one of the highest selling cars in the world of this company because it price is in budget
of the people and it targets only those upper middle-class segments having money to spend on
luxury items. It means company determines that which type of customers are existing in
particular market and then Volkswagen designs its car within the budget of people and give them
all the features that customers want in that specific budget (Bang, Joshi, and Singh, 2016).
Volkswagen uses the STP model to analyse the needs of customers and their budget. However,
the company used the various type of segment strategy such as single segment strategy and
multi-segments strategy etc.
(Source: Volkswagen, 2018)

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In such a situation, a company needs to analyse the needs of customers and situation of market
that how many competitors are already targeting same customer groups. However, it has been
found that in the fiscal year 2017-18, the number of customers of Fleet cars of Volkswagen in
Germany was stable at 14.1%. However, the company’s growth rate in this segment was
decreased by 2.1% and it was a major worry for the company. However, the company target the
middle-income group of customers with its low budget cars in Asian and African market, where
the company recorded 25.2% growth rate which was earlier 24.5%. The market share of the
company in Asian has been increased from last two or three years but its market share in
European market still stable at 28.9% because of its marketing strategies because the company
target the middle-income class of people by its low budget cars. However, it also targets the
higher and premium budget customers with its advanced and modern luxury cars like Audi etc.
(Source: Volkswagen, 2018).
This is really essential before executing the STP model to attract customers and positioning the
product in the market. The one exception of this model is that Volkswagen almost present in
every large country including Asian, Europe, Middle East, and American countries. The

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deliveries of its product in 2018 increased in South America, Europe and the Asia Pacific while
in North America, the sales of Volkswagen cars were almost decreased by 2.0%. Overall the
company's deliveries in worldwide increased by 0.9% where the company sold 10,834,000 units
of its products (Volkswagen, 2018). However, one of the major issues with the company is that it
is still fighting with many competitors in the Asian market where its strategy of STP cannot be
successful as there are already so many competitors using the same strategy in the Asian market.
It means, the number of competitors can influence the effectiveness of STP model and it is
required to analyse the situation of the market before entry. This s the reason that company had
to change its marketing strategies for middle-income class people and company launches budget
cars for the people who cannot afford the costly luxury cars of Volkswagen. The Volkswagen
Golf car fulfils the needs of upper and middle-income class of people and it was designed by the
company for those people who lives in the developing country. In Asian market, there are large
numbers of automobile companies that are providing low budget cars that is the requirement of
customers such as in China and India (Gupta, 2017). These two are more populated country of
the world so they are also the emerging markets for the companies.
Volkswagen is known for its value delivery programs that provide some king of customer values
and that helps the company to attract the customers towards the products of Volkswagen (Chen,
Wang, and Chu, 2011). The popularity of the company can also affect the effectiveness of other
company's STP model. It is really a challenge for automobile companies to ensure the success
only with the help of STP model. There are many other factors including number of competitors
and their market practices, changing customer needs, and numbers of alternatives in the market
that can bring failure for the STP strategy of the company (Penghui, 2011).
STP in Hospitality Industry (Hilton Hotel)
The second example of the successful use of STP model is ‘Hilton Hotels’ which is more famous
in the service and hospitality sector. Hilton believes to use more than one segment of customers
at the same time with different brands within its portfolio. As the most hospitable company of
the world, Hilton is known for its service differentiation and focuses on the quality and standards
of its services. The Hilton hotel always focuses on customer satisfaction and fulfils the needs and
requirement of customers. The Company is well known for its excellent hotel services and a
wide range of product portfolio (Alon, Ni, and Wang, 2012). The company has 13 brands in its

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portfolio and the aim of all the products and brand to satisfy the customers. Hilton segments its
market in various groups based on a geographic, psychographic, and demographic basis. For this
company prepare its infrastructure of hotels in those areas where it can easily target those
customers who can pay the premium amount of its services.
(Source: Ting, 2016)
The Hilton hotel is known for its target customers because it operates its business only those
areas where people are arriving frequently, the number of tourists is so high, and people stay in
night. For example, in London the Hilton operates its business in Canary Wharf, Trafalgar
Square, Aldwych etc. (O'Neill and Mattila, 2010). These places are known for tourism where
people spend few days to stay and explore the places. It means Hilton divide its services
according to the need of customers and target those areas (markets) where many of tourists and
people are visiting every day. This will lead to a high revenue generation in the organisation.
This is the success mantras of Hilton hotels. Sometimes it has been seen that large organisation
cannot be able to fulfil the different type of needs and demands; in such a scenario, STP helps

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the company to fulfil a particular demand of customers or demand of a particular group of
customers having some common needs, preferences, and requirements. However, it is crucial to
know that Hilton is normally focuses on those areas where it sees the growth in the market share
and where the organisation can generate revenue and profit.
(Source: Gupta, 2019)
The company has created more than 28000 new hotels and more than 166 million guests served
every year in this brand. However, the major focus of the company is to provide better services
to its customer by segmenting the services according to the customer needs and preferences. The
major issue with the STP model of the company that it is difficult for the company to care for
personal preferences and requirements in the hotels. As the company has its different type of
services for the customers, but it considerable that numbers of customers in a segment is limited.
In such a scenario, providing unique services to all groups of customers is not easy for Hilton, as

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it has limited resources and limited number of brands in its portfolios. Apart from this, it is also
considerable that this segmentation increases the marketing cost of the company because a
company needs to consider all type of segments that have different needs, habits, interests, and
preference of services in hotel industry.
STP in Retail Sector
The use of STP in the retail sector is also common. There are large numbers of retail
organisations that are operating their business in different segments such as cloths, fashionable
wear, groceries, household products etc. (Leeflang, Verhoef, Dahlström, and Freundt, 2014). In
the hospitality industry, STP plays an important role because a retail store segmented their
product or services as per lifestyle or need of peoples, and the stored is positioned in such a place
or area where the retail organisation can target the appropriate audience. It can be easily seen that
most of the retail organisations are operating their business operation in large metropolitan cities
where they can target the upper-income class of customers (Yu, Ramanathan, and Nath, 2014).
Almost every retail organisation divides their services in various verticals and these verticals are
further divided into many subsections and departments. However, this shows the segmentation
strategy of the retail stores where the organisation creates the hierarchy for customers to target
them and positioned the products according to their requirements (Coombes and Nicholson,
2013). The stores have wide product lines and every line has different types of products that
target particular customers and fulfil their needs. However, the major issues the retail
organisation face when the number of customers increased, or the storage capacity of the
organisation is limited. It means when an organisation segments and target a particular group of
customers and a limited number of customers, increase in demand may lead to some serious
problem for the stores to fulfil the increasing demand of customers (Morgan, 2012). A wrong
estimate or analysis of the market may lead to customer dissatisfaction and damage the image of
the organisation. However, it can be said that a STP model is can be dangerous for the retail
organisation when the organisations do not have proper information about customer needs and
requirements. Apart from this, the STP model also increases the cost of expenditure on the
products and need heavy investment in the market to position the product and services. In retail

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sector, every organisation has to manage multiple of segments and has to support a variety of
product lines and product items that increase the cost of procurement and inventory management
(Bhardwaj and Fairhurst, 2010). The retail organisation needs to focus on use of advance
technologies to protect and procure those products, which have heavy demand in the market.
STP in FMCG Industry (HUL)
STP is an effective tool that is used by many organisations, but FMCG organisations use this tool
as their key strategy for the product and organisational success. The Unilever limited (HUL)
which is famous for healthcare products like soap, Shampoo etc. in the FMCG is known for its
effective use of STP model. Although the company has wide variety of products and it has large
customer base in all over the world. The USP (unique selling preposition) is deep moisturizer for
skin. One of its famous products ‘Dove’ that is manufactured in various countries like Australia,
Ireland, India, Canada, etc. is a popular product of Unilever (Murray, 2013). For Dove product,
Unilever mainly focuses on the women and girls of all age group above 18 years.
The product is designed for the women who belong to the upper middle class or high-income
group of women (Kaur, 2013). However, this higher income group of women are the main target
customer of the company but there are other people who are also using the same product in Asia
and African market who do not belong to the high-income group of people (McCleary, 2014).
This will lead to high demand of products in both upper- and lower-income class of people.

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The emotional attachment of brand with the customers is the key reason of success behind many
brands. It really needs to understand that STP is an effective tool that focuses on attracting the
customers towards the product. Dove is the best example that shows the effectiveness of STP
model in the market and the act related to positioning if included emotional touch, then it will
turn the mass number of customers into loyal customers (Scott, 2013). However, the use of STP
by Unilever encouraged many FMCG organisations to use the same emotional campaign in their
STP strategy and increase their market share with loyal customers. In such a scenario, the
company needs to develop another segment of people who do not belong to higher income
group, but the demand of products is more among them than the upper-income group women.
Few years back the Dove launched a beauty campaign through that campaign Dove positioned
itself in the market with the emotional message "you are beautiful the way you are" and this
campaign increased the sales of Dove by 40%. The beauty of campaign of Unilever connects its
brand emotionally with the customers (Heiss, 2011).
(Source: McCleary, 2014)

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The number of competitors and their business practices is really crucial before thinking about
STP model. Apart from this, positioning the product in the targeted market is a crucial step in
STP because it determines the market in which the company needs to focus and launch the
product. Before this process, the company should clear POP (point of parity) and POD (point of
difference) with the competitor’s business practices. However, it can be said that the major
intention of STP is to satisfy the needs of customers, but it is perilous for the organisation to
ignore the competition in the market and only focuses on the increasing number of customers
and sales of a particular product. Company must consider the competitive factors before
executing the STP model to accelerate the growth of the company.
STP is a powerful tool in the hand of management to attract and position the product in the
market. It is really useful management tool for the organisation to attract customers and deliver
the products in the market according to the needs of customers. It is really helpful for the
company. However, there are certain points that a company should consider to execute STP
model in their business practices. The first thing is analysing the market that how many
competitors are already practicing same business strategy in the market. This strategy determines
the success or growth of the company and also ensures the success of STP model.
In conclusion, STP is a powerful tool in the hand of management or organisation to attract the
customers and positioned the product in the market according to the need of customers.
However, STP generally focuses on the customer satisfaction and increasing the sales of a
particular product but it has not included the analysis of competitive factors like the number of
competitors, number of alternative or substitute products, and strategy used by the competitors in
the market. This is the major drawback of STP model. However, the model encourages the mass
production of products according to the need and requirement of customer, but it is really risky
and unsafe if any organisation ignores the competitive factors in the market.

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