MKTM028 - STP: Segmentation, Targeting, and Positioning

This essay provides a comprehensive evaluation and critique of the Segmentation, Targeting, and Positioning (STP) concept within the context of strategic marketing. It references academic literature and uses examples from diverse industries to illustrate how organizations apply STP to satisfy customer needs better than their competitors. The essay details the three stages of the STP model: segmentation, targeting, and positioning, explaining how companies segment markets using various variables such as demographics, geography, psychographics, and behavior. It further discusses how companies target specific segments based on profitability and growth potential, and how positioning is used to communicate a company's message effectively. Examples like Marriott hotels and The Adventure Travel Company are used to demonstrate the practical application of STP. The essay also emphasizes the importance of consistency in positioning and the role of social media in modern STP strategies, highlighting the need for accurate customer information for effective implementation.

SM AS2

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Segmentation, Targeting and Positioning
Modern day marketing has become very much competitive and it has become essential for the
organisations to ensure that they must have an effective plan for specifically targeting people.
The specific targeting helps the organisation to make sure that they maintain a long term
relationship with their clients. In this regards the role of the STP strategy becomes very much
essential. Segmentation in an organisation is done using different types of variables. These
variables are set according to the products and services provided by the company (Khan,
2013). It is always essential that an organisation puts their effort towards shaping the
marketing in such a manner that it affects the purchasing behaviour of the individual.
Marking an individual based on different types of requirements and then making different
types of advertisements accordingly is very much essential. STP strategy is only not used as a
precise marketing tool but is also used as a way of understanding the requirements of the
people. STP helps them in reacting towards challenges that are facing at the local and
national levels. The whole focus of the STP strategy is to target the needs of the customers,
which are very much essential in the modern day competitive environment.
Different companies have been practicing the STP strategy as their prime strategy. It is the
role of the strategy maker to design STP in such a manner that it covers larger part of the
population they selected. Since modern day marketing has to be precise and based on data
collected from different sources, hence companies should also target people accordingly. STP
model has three stages. In the first stage segmentation of the market is done (Jun, 2011).
Companies apply different types of variables so as to segment their market. Variables must
be decided in such as a manner that confined area gets created. This confinement of variables
helps company to specify which customer they actually want to target. This can be
understood by the example that if there are 100 people in the room, company needs to select
one so that it can make best of marketing strategies accordingly. Since people are from
different sections of the society, hence marketing will also need to be done by checking the
profile of all the people that are present in an area.
In the second stage of this strategy, targeting is done on the basis of segmentation that is done
by the company. This is done for ensuring that company do not use false or universal data for
making the marketing plan (Isbell and Jolivette, 2011). STP strategy is always used within
the firm based on the product’s specification. This is because every product or service may
not be able to satisfy the needs of all the consumers hence a specific targets need to be made

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so that it can attract them in an appropriate manner. Best customers need to be selected from
the pool so that company’s marketing can be done in a best possible manner.
Third and essential element of this strategy is positioning. This is used within the firm to
maintain the position the offerings of the firm. Positioning has a larger impact on both
customers’ perception about the product and the image of the company. If the positioning
statement goes wrong then the chances of people not the offerings of the firm gets more
obvious. Positioning of the offering is often made as per the segmentation and targeting done
by the company (Nauwelaers, Kleibrink and Stancova, 2014). The selected and targeted
customers must be able to feel attached with the type of positioning done by the company.
Marketing message must be able to identify the most important types of customers that can
actually get converted into their buyers. This positioning has to be based on the specific
customer group’s demand. In the longer run this is the only thing that increases the loyalty of
the consumers.
For illustration of the strategy so as to how the companies are using this strategy take an
example of Marriott hotel. There are large numbers of hotel chains owned by Marriott
International. It helps in targeting specific group of customers that is most valuable for the
company. Courtyard one of the venture of the Marriot hotels emphasize on tourists on the
road especially the customers that are demanding for the clean and nice stay during their
journey. On the other hand another venture Ritz-Carlton focuses on targeting those people
who are capable of paying for the world class luxury facilities. Its segmented market
comprises of the group of people that are higher salaried or comes from rich section of the
society. Along with this Marriot ExecuStay, one of its ventures is focused towards aiming the
professionals who need a longer-term peaceful and comfortable place to stay. There is not
very much difference in the type of customers that is selected by each of its offerings when
the variable selected is psychographic but it is different in the case of demographic or
behavioural terms. This is the major reason why it is essential that company has to select all
the variables in such a manner that specific customers can be selected.
Segments are done on the variables that divide people into a group that is having common
needs and characteristics. This approach helps the company to target the customers on the
variables such as:
Demographics: There are people segmented on the basis of personal attributes like marital
status, ethnicity, gender, age, sexuality, occupation or education.

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Geographic: This type of segment is done on the basis of state, region, neighbourhood, city
or country.
Psychographic: This is a variable that is comprised of group of people that is divided on the
basis of risk aversion, lifestyle, value or personality.
Behavioural: These are also the segmentation variables that depend on the way in which
people uses the products or the how much is their loyalty towards the product. It also checks
the benefits that any customer group seeks from the products (Pyo, 2015).
In order to understand this segmentation, example of The Adventure Travel Company has to
be taken. This is an online travel agency that conducts adventure vacations at the global
levels. It has divided its customers in the three segments, as the services are too much costly.
The first segment is the Segment A, which comprises of people that are young and married.
These segments are mostly interested in the eco-friendly and affordable vacations in the
exotic locations. Along with this, there is Segment B that comprises of families from the
middle-class who demand for family-friendly, safe packages for vacations. In such vacations
families can travel and have fun with the children. Last is the Segment C that consists of
upscale retirees who wants to travel on luxurious and stylish vacations in the world famous
locations like Rome and Paris.
Targeting is more specific to the product specification hence company plans to find the most
attractive group for the specific product. There are certain kinds of factors on which a
company can look into. First is the higher profitability of each segment i.e. which of the
segmented group will add more to the profit making of the company (Kumar, et al. 2012). An
analysis needs to be done on the size and the potential growth chances of each group of
consumers. Company thinks of whether it is large enough to be worth addressing or not.
Question also arises of how it is going to be when compared with other segments in the
market. The focus should be shifted towards the niche market as it will be too small to
address. At last, a company must also think about the ways in which it can service this
market. For example the things such as whether any legal, social or technological barriers can
have impact on it. In order to understand the opportunities and threats company needs to have
an environmental audit. The example can be illustrated through the same company where The
Adventure Travel Company analyses the revenue, profits and market size of each of the
segment. Segment A profit is estimated to be $8,220,000 while segmented B will have a
profit of $4,360,000 and at last segment C is going to have the profit of $3,430,000. Hence in

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all three segments company decides to target segment A as the size of profits in its case is
large enough.
It is often said that today’s marketing is over communicated hence positioning is required by
the company so as to successfully communicate the exact message that company aims to
deliver. Positioning should always be oversimplified. This era is known to be as the
positioning era where more than being first to invent, first to reach to the minds of the people
becomes more essential. Positioning is about saying right things to right people at right time.
It is an organised system for searching windows in the people’s mind. Positioning is done in
the organisation by checking the goals they want to achieve from the product based on the
products quality (Weinstein, 2013).
Positioning is also helpful as it allows companies to select appropriate marketing mix for
each of the most valuable consumers selected. In this positioning, company must focus on the
point like why consumers shall purchase a product offered by the company then compared
with their competitions. By identifying Unique selling proposition and drawing a positioning
map for understanding the each segments perceives the services, brand or product. This will
be helpful in finding out the best option for positioning of the offering (Hassan and Craft,
2012).
After the identification, needs and demands of each segment or the issues that each product
solves for these people have to be looked out. By doing this, value preposition needs to be
created that appropriately explains the way in which the offerings is able to solve the
problems identified when compared with competitor’s products. Based on this firm has to
develop a marketing campaign that presents this value preposition in a way that audience will
appreciate. For better understanding again take the above example where The Adventure
Travel Company markets itself as the “best eco-vacation service provider for young married
couples”. In order to do this, company needs to host a competition on the social media sites
such as Pinterest and Instagram for reaching its desired market as these are the channels are
widely accessed by so many people. On such sites company asks for sending all the exciting
pictures of the past eco-vacations taken by their previous customers and the ones that are best
wins a trip to any place (Gbadamosi, 2013). This will help the company in making a
campaign as per the way in which they want to position themselves.
Positioning requires consistency when you are into the minds of people. According to
researchers, many companies forget what made the successful and hence change their

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positioning (Foster, West and Francescucci, 2011). For example, once Avis used slogan
“Avis is only No.2 in renting a car, so why go with us? We try harder”. This was a successful
slogan but it changed itself to a bit poor slogan i.e. “Avis is going to be No.1”. The lead to
success is that your positioning must touch the base with reality.
These days STP is also used in the marking the customers on the social media sites. Segments
are made based on the preferences of the consumers that are found out on the social media
sites. Based on these segments people can be easily targeted and hence companies can use
these platforms for the purpose such as positioning by doing effective marketing
(Epetimehin, 2011). In the process of implementation of STP, a company must be able to
have a huge amount of information related to the customers so that precise and most suitable
consumers can be picked up.
There are nine steps for effective implementation of the STP model within a firm. All the
firms must adhere to these so as to make an effective marketing plan (Khan, 2013). First step
is to define the market for the firm. This is essential for knowing exactly what kind of market
does a firm aims to target. For example if Coca-cola looks at the market segmentation then
they would unlikely to look at the overall beverage market. A more detailed and precise
definition would be a diet cola soft drink in South Asian region. This is called more effective
definition of the market as it does not counts overall beverage market. It helps the company
to make strategies according to the demands of the people and the company. Step two
suggests that when a particular market gets defined, a company must be able to segment these
market segments into smaller groups. This sub-segment is made based on the segmentation
variables. Consumers present in the defined market must be allocated to similar groups. This
must be done based on the behaviour and market needs or characteristics (Awad, 2011).
The third step in the process is evaluating the segments for viability. In this the segmented
market is evaluated using the set criteria so as to make sure that they are logical and useable.
It needs the segments to be assessed against the checklist of factors like are the segments
reachable, do they have different groups of need or are they large enough and so on as
discussed earlier.
Step four suggests making construct segment profiles. Once viable market segment get
described, profile of segments has to be created. Segment profiles are detailed elaboration of
the customers in the segment. It helps in describing their behaviour, demographics, needs,
style of shopping, preferences and so on. It is seen that big companies gives the nick names to

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the smaller market segments. Some of the famous and widely used nicknames are Generation
Y, Generation X and Baby Boomers. This helps the company to make the internal
communication effective which is very essential in the marketing process. Step five suggests
evaluating the attractiveness of each segment. Based on the data available about the market
and the findings about the consumers based on the research are then to be added to the
defined segments like growth rate, brand loyalty, segment size, price sensitivity or so on (Li
and Green, 2011). Taking this information, the organisation must be able to analyse each
segment based on its overall attractiveness. There are certain kinds of scoring models that can
be used for this task, resulting in qualitative and numerical scores for each segment in the
market.
Step six states to select the target market. Based on the detailed information of each segment
available with the firm, they must decide which segment is the most appropriate for selecting
as a target market. There are several factors to be considered while choosing a target market.
These factors involve attractiveness of the segment, organisation’s ability to compete
successfully, strategies used by the firm, their competitive rivalry and others. After this
process, step seven arises where companies need to develop positioning strategies (Ulaga,
2011). In this step, company must be able to know the most effective way in which company
can best compete with the selected target market. Firm must be able to find out the manner in
which products must be positioned in front of their target market. It is essential as there are
already competitive products and services available in the market, and hence company needs
to plan out strategies that could help them gain market share from the players that are already
established. This is done in most cases when consumer perceives their product being unique,
superior, and different or says it provides customers with greater value.
Step eight suggests developing and implementing marketing mix on the basis of
segmentation, targeting and positioning done by the company. The marketing mix should also
be designed as per the positioning it has created for itself so that both the marketing tools
support each other so as to make the marketing more effective. Hence company needs to
develop or design offerings at suitable prices, with suitable channels of distribution as well as
promoting it with effective promotional campaign (Yudelson, 2012). In the ninth step
company needs to review the performance of the STP strategy. This must be done on various
parameters that help in calculating the success of the firm. Performance review has to be done
on regular basis so as to reassess their view of the market and hence look for opportunities.

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This will help the firm to re-construct their marketing campaign based on the performance
review of the last applied STP strategy.
It is recommended that companies use STP as their primary set of strategy so that it
empowers them to rebuild their whole business operations in that direction only. No company
can win its competition in the battle of giants unless it does not bifurcates itself from the
others. Firms should always showcase it as different from others and so is the case with STP
model where company must reflect the big ideas in mind (Erragcha and Romdhane, 2014).
The products such as PC’s needs a different kind of positioning as their technology keeps on
changing at much faster speed and hence any company can overpass others. In order to
understand how big companies have used positioning, case of McDonalds can be crucial.
STP model for McDonalds
Types of Segmentation Segmentation Criteria McDonalds target segment
Geographic Region International/Domestic
Density Rural/Urban
Demographic Age 9-50
Gender Male and female
Life-cycle Stage Newly married couples as
well as young bachelors
Income Middle and Low
Occupation Workers, students and
employees
Behavioural Benefits sought Time efficient and cost
efficient people
Degree of loyalty Switchers and Hard core
loyal
User Status Regular fast food eaters and
potential
Personality Careless & Easygoing
Lifestyle People from all sections of
the society which includes
Mainstreamer individuals
and Strugglers.

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Social Class Working and middle classes
as well as people from lower
class of the society.
In the concluding suggestion it can be stated that companies must represent their products in
such a manner that all the needs of the people whom they are targeting must be addressed.
Since the offerings of the company are able to resolve the issues of certain group of people
only hence in the implementation of STP strategy this must be given proper attention
(Proctor, 2014).

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