STP Model: Segmentation, Targeting, Positioning Analysis

This report provides a comprehensive overview of the STP (Segmentation, Targeting, and Positioning) marketing model. It begins with an introduction to the STP model, emphasizing its importance in developing effective marketing strategies. The report then delves into the marketing planning process, highlighting the analysis, strategy, tactical, and measurement phases. The core of the report focuses on the three key components of the STP model: segmentation, which explores demographic, geographic, behavioristic, and psychographic segmentation methods; targeting, which discusses various targeting approaches; and positioning, which examines the product positioning process and the use of advertising slogans. The report also discusses the advantages and limitations of the STP model and provides real-world examples, such as the STP strategies of Pizza Hut vs. Domino's and German vs. Korean automobiles. Finally, the report concludes with a summary of the key takeaways from the STP model.

Marketing: Segmentation - Targeting -
Positioning
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Contents
1. Introduction................................................................................................................................................................ 3
2. Marketing Planning Process and STP Model............................................................................................................ 4
3. Segmentation............................................................................................................................................................ 5
3.1 Ways to segment the market............................................................................................................................... 5
3.1.1 Demographic Segmentation........................................................................................................................ 5
3.1.2 Geographic Segmentation.......................................................................................................................... 5
3.1.3 Behavioristic Segmentation......................................................................................................................... 6
3.1.4 Psychographic Segmentation..................................................................................................................... 6
3.2 Requirements of Market Segments..................................................................................................................... 6
3.3 Segmentation and customer’s attitudes.............................................................................................................. 7
4. Targeting................................................................................................................................................................... 7
4.1 Ways of Targeting............................................................................................................................................... 8
5. Positioning................................................................................................................................................................. 8
5.1 Product Positioning process................................................................................................................................ 8
5.2 Advertising slogans and Positioning.................................................................................................................... 9
6. Advantages and limitations of STP Model................................................................................................................. 9
6.1 Advantages of STP model................................................................................................................................. 10
6.1 Limitation of STP model.................................................................................................................................... 10
7. Real world examples............................................................................................................................................... 11
7.1 STP in Pizza business (Pizza hut vs. Dominos)................................................................................................ 11
7.2 STP in Automobile business (German cars vs. Korean cars)............................................................................11
8. Conclusion............................................................................................................................................................... 11
References................................................................................................................................................................... 12
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1. Introduction
The main objective of this study is to introduce an important and widely used model
of marketing strategy called STP which is all about segmentation, targeting and
positioning.
When businesses make decisions to how to develop their marketing strategy and
decide how to try to create value for customers, there are essentially two issues they
have to consider, firstly, Businesses have to choose which customers they want to
target. In other words, which customers they want to sell to. The challenge is to
segment the market, define the different parts of the market that are most attractive
and then to target the segments they want to focus on in order to have the best
chance of success. Segmentation is about is understanding the different types of
consumers look for different things in products and services.
The next question is how best to compete in that market to gain a competitive
advantage by highlighting the unique selling proposition of their products and
services. In order to serve the customers target market segment. This is called the
market positioning. In other words, how companies can identify the right positioning
for their product in terms of the features that the targeted customers want.
Marketing is about identifying consumers' wants and needs. So why should we care
about segmentation, targeting, and positioning? It’s all about increase profitability,
increase market share, target new customers, reach a new market, and retain existing
customers.
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2. Marketing Planning Process and STP Model
The marketing planning process has four phases: analysis phase, strategy phase,
tactical phase and measurement phase.
In the analysis phase, companies focus on knowing their customers in terms of how
and why they buy the product. They will analyze the competition, and how they
compare to the company in terms of strengths and weaknesses. They analyze the
overall market, to understand its potential and where the most attractive segments of
the market are, to earn revenue.
In the strategy phase, companies use what they learned to make decisions around
segmenting the market, targeting specific parts of those segments. And ultimately,
how they will position their products and services to win over customers (Resnick, et
al., 2016).
In the tactical phase, companies create marketing programs to execute their
strategy. They will make decisions around their products and services, and how they
have to perform in delivering benefits to their customers. They will set prices. They will
create sales support material. And they will develop a marketing communications
campaign.
And finally, the measurement phase. As the name implies, this is the part of the
process where companies will find out if they are achieving what they expected to
achieve.
STP model starts with the analysis phase but when companies want to create a
marketing strategy, they have to perform three steps. First is segmentation, where
you break your customers into homogeneous groups. Next is targeting, where they
decide which of these segments to go after. And finally is positioning, where they
determine how they want their customers to think about the company products versus
the competition (DeSarbo, et al., 2017).
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3. Segmentation
Breaking customers into groups helps the company to be efficient with its
marketing resources. It helps the company focus only on the most relevant customers
and avoid wasting time and money on the less relevant (Parikh, 2016).
3.1 Ways to segment the market
There are four ways to segment a market: Demographic, Geographic, Behavioral
and psychographic.
3.1.1 Demographic Segmentation
This is where company groups its customers by their characteristics. It's useful for
certain products or services that deliver a benefit specifically tied to that characteristic
(Bhasin , 2018). For example, if you're marketing a shampoo for loss hair, then you
would want to group customers by hair density.
Some demographic segmentation variables include:
• Age
• Gender
• Family size
• Family lifecycle
• Generation: baby-boomers, Generation X, etc.
• Income
• Occupation
• Education
• Ethnicity
• Nationality
• Religion
• Social class
3.1.2 Geographic Segmentation
Geographic segmentation groups customers by where they are physically. Knowing
where your customers are helps you know where to place stores, for example, and
where to communicate or sell to them (Kotler, et al., 2015).
The following are some examples of geographic variables often used in
segmentation.
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• Region: by continent, country, state, or even neighborhood
• Size of metropolitan area: segmented according to size of population
• Population density: often classified as urban, suburban, or rural
• Climate: according to weather patterns common to certain geographic regions
3.1.3 Behavioristic Segmentation
Behavioral segmentation is grouping customers by the things they do. It can be
customer-related behavior such as how much they purchase, how frequently they
purchase, or their price sensitivity. It can also be behavior such as hobbies or habits
(Hellwig, et al., 2015).
Behavioral segmentation is based on actual customer behavior toward products.
Some behavioristic variables include:
• Benefits sought
• Usage rate
• Brand loyalty
• User status: potential, first-time, regular, etc.
• Readiness to buy
• Occasions: holidays and events that stimulate purchases
3.1.4
This is grouping people by how they think their attitudes and aspirations. An
example of psychographic benefit would be need for prestige or need for convenience.
Segmenting this way tends to be very powerful. Activities, interests, and opinions (AIO)
surveys are one tool for measuring lifestyle (Cross, et al., 2015).
Some psychographic variables include:
• Activities
• Interests
• Opinions
• Attitudes
• Values
3.2 Requirements of Market Segments
• Identifiable: the differentiating attributes of the segments must be measurable
so that they can be identified.
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• Accessible: the segments must be reachable through communication and
distribution channels.
• Substantial: the segments should be sufficiently large to justify the resources
required to target them (GREEN & WARREN, 2019).
• Unique needs: to justify separate offerings, the segments must respond
differently to the different marketing mixes.
• Durable: the segments should be relatively stable to minimize the cost of
frequent changes.
3.3 Segmentation and customer’s attitudes
Segmentation has a tight relation customer’s attitude.
When company segment based on attitudes, they are looking for a benefit that
meets three questions:
1) Is the product actually deliver the benefit better than the competition?
2) Does customer perceive that product delivers better than the competition?
3) Is the benefit rate as highest in importance based on customer analysis?
If company finds a benefit that meets these questions, then the segmentation is
viable and it’s going to base the whole strategy on this benefit and the features that
deliver it (Sultan, et al., 2018).
4. Targeting
It is the second stage of the SEGMENT "Target" POSITION (STP) process. After the
market has been separated into its segments, the marketer will select a segment or
series of segments and 'target' it/them.
Segmentation tells us how we are going to appeal to customers. In targeting, we
make decisions on whom to go after. It's a process of narrowing down your audience
to a selected group.
Although the company aims to get its product to all available customers, which
seems against the idea of targeting (narrowing down your audience) but company
should be aware that its marketing message will not appeal to everyone (Yoon &
Chung, 2018).
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For company it more effective and efficient to target most receptive groups than
blasting its marketing message to everyone, hoping that a few stick as that would be
wasting a lot of money with no guarantee on success.
Targeting starts with the attitudinal benefit that company selected during
segmentation. Then it tests to see if there are any demographic characteristics of
people that might be more inclined than others to want that benefit. If there are, then
company shall want to identify them, and market to them (Bloch, 2016).
Next, to do the same thing with geographic data, or certain cities or countries,
more likely to avail that benefit. Next, considering the behavioral data. It’s
recommended to look for two out of the four. Company should look which of the four
groups is large in size and might be most receptive to the marketing message.
4.1 Ways of Targeting
Company can do Targeting of the segments in different ways; one way is the single
segment with a single product. In other word, the company targets a single product
offering at a single segment in a market with many segments. Other way, the
company could ignore the differences in the segments, and choose to aim a single
product at all segments i.e. the whole market (Chernev, 2018). Finally use a multi-
segment approach, where the company targets a variety of different segments with a
series of differentiated products. This is typical in the motor industry. Here there are a
variety of products such as diesel, four-wheel-drive, sports saloons, and so on.
5. Positioning
Positioning is the process by which companies try to create an image or identity in
the minds of their target market for their product, brand, or organization. It can be
applied by identifying a market segment or niche for a brand, Product or service
utilizing traditional marketing strategies (ie Price, Promotion, Placement, Packaging
and competition).
Positioning is all about finding a window in the mind. It is based on the concept that
communication can only take place at the right time and under the right
circumstances which can be achieved by segmenting the market and target the right
group (Lei & Moon, 2015).
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5.1 Product positioning process
Generally, the Product Positioning process involves:
 Define the market in which the Product or brand will compete (ie who are the
relevant customers).
 Identify the attributes that define the Product ‘space’.
 Collect information from a sample of customers about their Perceptions of each
Product on the relevant attributes.
 Determine each Product’s share of mind.
 Determine each Product’s current location in the Product space.
 Determine the target market’s preferred combination of attributes.
 Examine the fit between the Position of your Product and the preferred
combination of attributes (Wang, 2015).
 Position.
The process of Positioning is trying to answer with one work the golden question:
what does come to customer mind when he/she thinks of your business?
Is it Price, size, service, variety, convenience, quality or something else? Does the
offering (company, product, service) really ‘owns’ that definition or word in the
customer’s mind?
Professor Mark Ritson wrote in an article in Marketing Magazine in October 2009:
“A great marketer can create Perceptual maps and uses them to derive a clear, tight,
three-word positioning for their brand. No wheels or triangles here, just a clear
articulation of what the brands stands for. If ever there was a question that sorts the
wheat from the chaff, it’s: ‘What is your Positioning?’ Too often this is met with a
stream of generic crap about integrity and innovation or a ridiculously over-complex,
six-slide presentation that attempts to capture the ‘essence’ of the brand. A good
marketer answers with a confident smile and few words.”
5.2 Advertising slogans and Positioning
Although advertising slogans are different from positioning but if crafted carefully it
can easily express a Positioning statement or at least some of it.
For example, "Go to work on an egg" was an advertising slogan in the 1950s used
by the United Kingdom's Egg Marketing Board as part of more than £12 million it spent
on advertising. It was very effective and memorable advertising slogan but although it
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doesn’t express the whole Positioning of an egg. It was intended to keep people
engaged with an egg as an integral part of breakfast, when the trend was more
towards convenient cold cereals (Hackley & Hackley, 2017).
Smart marketers try always link the advertising slogan created for company and
marketing campaigns with the company positioning just like what Coca-Cola did with
their slogan, ‘ It’s the Real Thing ’, this was a great example of a successful global
adverting campaign for a truly global brand. Right on the money for the right
Positioning.
6. Advantages and limitations of STP Model
In general company can’t introduce an effective marketing strategy without include
the STP model and without market segmentation.
6.1 Advantages of STP model
Some of the advantages for STP model:
1) Increase focus on the Company: STP model is an effective practice to increase
the focus of a firm on market segments and targeting right group of customer.
2) Increase in competitiveness: once focus increases on company, its
competitiveness in that market segment will increase. If you are focusing on
youngsters, your brand recall and equity with youngsters will be very high. Your
market share might increase and the chances of a new competitor entering
might be low. The brand loyalty will definitely increase. Thus market
segmentation also increases competitiveness of a firm from a holistic view
(DeSarbo, et al., 2017).
3) Increase of market share and expansion to new market: Segmentation plays a
crucial role in expansion. Companies cannot expand in a territory when they
have no idea of which segment of customers they will be meeting.
4) Retention of customers: when company use STP model, Customer retention can
be encouraged through the life cycle of a customer. One example of this is
mobile phone segment.
5) Better communication: One of the factors of marketing mix which is absolutely
dependent on STP is Promotions or communications. The communications of a
company need to be spot on for its TARGET market. Thus, if company needs a
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target market, they need segmentation. Communication cannot be possible
without knowing your target market (Kurniawan, et al., 2018).
6) Increases profitability: Segmentation increases competitiveness, brand recall,
brand equity, customer retention, and communications. Thus, if it is affecting so
many factors of your business, then definitely it affects the profitability of the
firm. You will not find people negotiating in a Ralph Lauren, Swatch or Mercedes
showrooms! Never.
6.1 Limitation of STP model
Although STP model has enormous advantages for the company, based on size and
type of the company, the company can face limitation when implement the model,
such as:
1) Research and development and production costs might be high as a result of
marketing several different product variations.
2) Promotional costs - high as different advertisements and promotions might be
needed for different segments- marketing economies of scale may not be fully
exploited.
3) Production and stock-holding costs- high than for the option of just producing
and stocking one differentiated product (Thoeni, et al., 2016).
4) By focusing on one or two limited market segments there is a danger that
excessive specialization could lead to problems if consumers in those segments
change their purchasing habits significantly.
5) Extensive market research needed.
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7. Real world examples
7.1 STP in Pizza business (Pizza hut vs. Dominos)
The food industry in the market is all associated majorly with pizzas and burgers.
The real world experiences in pizza industry examine the two top grossing and
successful companies in the market. The two companies are Pizza-hut and Dominos
which are giving tough competition to each other in the food industry. The two
stated companies are overwhelmed with the customer response in the global
market. The brief examined study related to the selected companies are been
mentioned below.
Pizza-hut market share is working on the basis of the following aspects like get
more revenue out of sales of the pizza in the market share. It also cares of the
employees and their families’ career and growth in the industry. The market
segment of Pizza-hut is more focused on the group of the age 12-30 years of age to
sell their number of required pizza in the market. Pizza-hut focuses on the families
who move out for dining once in 07 days, with the teenagers love for the pizza. This
company also targets the early college students to spend the savings on the pizza
hut for their hunger with the enriched home delivery services (ibisworld, 2019).
The impact of the brand positioning is placed on the advertisement launched in the
market on various platforms like newspaper, billboards, radio, television and other
online sources. The other factors also include the varieties and option to customize,
the clubbing of unique taste with the customer loyalty makes Pizza-hut more
valuable and reliable. This company also performs all its corporate social
responsibility to fulfil the requirements and hold a positive image in the market and
lead in the industry. Pizza-hut is highly competitive in nature and giving a cut-throat
competition to its competitors (Littman, 2018).
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