Segmentation, Targeting and Positioning – STP Model

The STP process is a very important process in a marketing strategy as it helps the organisation in creating personalized marketing mix packages which target specific group of the market segment with similar characteristics and needs. The STP process consists of three main activities: market segmentation, market targeting and market positioning. The level and category of segmentation process employed varies significantly depending factors like

  • Dimension of the organisation.
  • Point at which it is carried in the marketing planning process.
  • Financial position of the organisation.
  • Current market position.

STP Model – Different Stages

STP Model often used before marketing programs is planned. STP Model is related with market research and marketing research. STP Model uses information about current market size, market shares, concentration of customer base for particular products, potential customers, customer’s purchase decision process that gathered from market and marketing research to find out kinds of consumers with different needs, different characteristics, and etc (this is known as Segmentation). For example in the auto market there are consumers that need speed and performance, there are consumers that need safety and luxurious, there are consumers that need an economical auto, there are consumers that need the combination of some needs that have been described, there are consumers that want to have their own imagination car or modified car special for themselves, and etc. In the auto market there are consumers with high, medium, and low purchasing power too. There are some variables that often used to segment various consumers. Demographic segmentation is consumers segmentation based on: income, gender, marital status, education, etc while psychographic or behavioral segmentation is consumers segmentation based on lifestyles, opinions and attitudes, degree of loyalty, consumption occasions, usage consumption, and benefits sought.

After finding out kinds of consumers the next thing to do is deciding to target a kind or some kinds of consumers a segment or few segments of consumers (this is known as Targeting). There are 3 considerations in choosing target segment:

  1. How well existing segment treated by competitors,
  2. How large the market size of the segment is, how good it’s potential, and how easy and how big it will grow in the future ?,
  3. Do the company have enough strength to appeal one or more group of segment?

The next step in STP is positioning the product or the company to appeal target segment. There are 3 strategies for it: undifferentiated, concentrated, and differentiated strategy. In the undifferentiated strategy all consumers is treated the same or a product for all customers, for example is a company supply same aluminum commodity to various household tools producers. In the concentrated strategy a product is positioned to serve customers’ specific needs, for example Volvo is positioned as safety and luxurious car to serve a high-class target segment that has high consideration on safety, or Southwest Airlines is positioned as an airways that makes people fly to serve price sensitive passengers that needs to fly in a low price. In the differentiated strategy a product is positioned differently for each target segment, for example nowadays many airlines provide economy and business class for their customers.

STP Process

Segmenting targeting positioning (STP) consist of different steps namely, definition of segmentation criteria, definition of segment profiles, assessment of the attractiveness of segments, selection of target groups, definition of the desired unique position in the mind of targeted consumers.

The STP implementation begins with defining potential factors based on which segmentation of the market can be carried. The market segments created should further be divided in to generalized subgroups, in which the members of one group should respond identically to marketing stimuli and be different in their reaction to such stimuli from members of other segments. For example, the furniture market can be disturbed into different groups such as home and business market. Further division of these segments can be carried out such as, home market can include segments like student home furniture, classic furniture, design furniture etc.; likewise business segment can be divided into office furniture, hotel furniture etc.

In the next stage, Points in each segment can be combined to form segmentation profiles. On the basis of identified segmentation profiles, their attractiveness can be assessed. The attractiveness of the segments depends on many factors like the size and forecasted progression of sales, buying power and competition amount targeted for the segment.

Considering the analysis of segment attractiveness, a number of target groups will be selected which will be focused upon, keeping in mind the company’s strengths. This process is called targeting. Further objectives, strategies and tactics created will circle around these particular groups.

In the end, the organisation has to create a unique and appropriate position for its product in the mind of the target group. Positioning can be defined as how a product is perceived by the target group based on its important attributes. Positioning is one of the fundamental element of marketing strategy and of marketing communications.

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