Segmenting, targeting, and positioning (STP) are essential components of effective marketing strategies.
These practices enable businesses to identify and understand their customers, develop tailored marketing messages, and position their products or services in the marketplace.
By employing STP, companies can allocate resources efficiently, reach their target audiences more effectively, and gain a competitive advantage.
We look into the concepts of segmenting, targeting, and positioning, exploring their significance and providing examples to illustrate their application.
Segmenting and Targeting
Segmenting involves dividing a market into distinct groups of consumers who share similar characteristics, needs, or behaviors.
This process enables businesses to better understand their customers and tailor their marketing efforts accordingly.
By segmenting a market, companies can identify specific customer groups and focus their resources on those segments that are most likely to respond positively to their offerings.
Targeting is the subsequent step after segmenting, where businesses select specific market segments to focus on based on their attractiveness and alignment with the company’s objectives.
When selecting target markets, a firm should consider factors such as segment size, growth potential, profitability, competition, and the company’s ability to serve the segment effectively.
By targeting specific segments, businesses can allocate their resources efficiently and create marketing messages that resonate with their intended audiences.
STP Marketing (Segmentation, Targeting, Positioning)
Segmentation, Targeting, and Positioning in Practice: Burger Bistro
To illustrate the application of segmenting, targeting, and positioning, let’s consider a fictional restaurant chain called Burger Bistro.
Burger Bistro decides to segment its market based on demographic factors such as age, income, and lifestyle.
They identify three segments: young professionals seeking convenience, families looking for affordable meals, and health-conscious individuals seeking nutritious options.
After segmenting the market, Burger Bistro evaluates each segment’s attractiveness and selects the young professionals segment as their primary target market.
They find that this segment aligns with their business goals, as it represents a sizable and profitable group with a preference for quick, convenient meals.
To position themselves effectively, Burger Bistro develops a marketing message that emphasizes their restaurant’s speed, quality ingredients, and trendy atmosphere.
By positioning themselves as the go-to choice for busy young professionals seeking a satisfying meal, Burger Bistro creates a distinct brand image and differentiates itself from competitors.
The Process of Segmenting and Targeting
The process of segmenting and targeting can be summarized into several key steps:
- Identify the purpose: Determine the objectives of segmentation and targeting, such as reaching new customers, increasing market share, or expanding into new markets.
- Segment the market: Analyze the market and divide it into distinct segments based on relevant characteristics such as demographics, psychographics, behavior, or geographic location.
- Evaluate segment attractiveness: Assess each segment’s potential by considering factors such as size, growth rate, profitability, competition, and compatibility with the company’s resources and capabilities.
- Select target market(s): Choose the most appealing segment(s) that align with the company’s objectives and possess the potential for success.
- Develop marketing mix: Customize the marketing mix (product, price, promotion, and place) to meet the needs and preferences of the chosen target market(s).
Positioning: Differentiating and Communicating Value
Positioning involves creating a distinct place for a product or service in the minds of consumers.
It is about differentiating a company’s offerings from competitors and communicating the unique value it provides.
Effective positioning enables companies to occupy a favorable and distinctive position in the marketplace.
Companies can employ various positioning strategies, such as offering the lowest price, focusing on product attributes or benefits, catering to specific customer needs, or targeting a particular market segment.
The choice of positioning strategy depends on factors such as the competitive landscape, target audience, and the company’s unique strengths.
STP Marketing Explained (Segmentation, Targeting & Positioning Examples)
Segmenting, targeting, and positioning are integral components of successful marketing strategies.
By segmenting a market, businesses gain insights into customer groups, allowing them to focus their efforts and resources effectively.
Targeting specific segments enables companies to tailor their marketing messages and allocate resources efficiently.
Lastly, effective positioning differentiates a company’s offerings and communicates the unique value it provides to customers.
By applying STP practices, businesses can enhance their marketing effectiveness, build customer loyalty, and drive business growth in today’s competitive marketplace.
Related: Forecasting Frameworks
FAQs – Segmentation, targeting, and positioning (STP)
1. What is segmentation, targeting, and positioning?
Segmentation, targeting, and positioning (STP) is a strategic marketing process that involves dividing a broad market into smaller segments, selecting one or more target segments to focus on, and developing a distinct positioning strategy for each target segment.
Segmentation involves identifying homogeneous groups of customers with similar needs and characteristics.
Targeting is the process of selecting specific segments that a company wants to serve based on their attractiveness and compatibility with the company’s resources and objectives.
Positioning refers to the development of a unique and compelling brand image in the minds of the target customers, which differentiates the company’s offering from competitors.
2. Why are segmentation, targeting, and positioning important in marketing?
Segmentation, targeting, and positioning are crucial in marketing for several reasons:
- Efficient resource allocation: By segmenting the market and targeting specific customer groups, companies can allocate their resources more efficiently by focusing on the most profitable segments. This helps avoid wasting resources on irrelevant markets and increases the return on investment.
- Customized marketing strategies: Different segments have different needs, preferences, and behaviors. By targeting specific segments, companies can tailor their marketing strategies, product offerings, and communication to meet the unique requirements of each segment. This increases the effectiveness of marketing efforts and enhances customer satisfaction.
- Competitive advantage: Through effective positioning, companies can create a distinct brand image and value proposition that sets them apart from competitors. This differentiation helps build a competitive advantage by establishing a unique position in the market that is difficult for competitors to replicate.
- Market understanding: The segmentation, targeting, and positioning process requires companies to conduct thorough market research and analysis. This deep understanding of the market helps companies identify emerging trends, customer needs, and market opportunities, enabling them to make informed business decisions.
3. What are the steps of the segmentation and targeting process?
The segmentation and targeting process typically involves the following steps:
- Market analysis: Conduct research to identify the overall market size, growth rate, trends, and competitive landscape. Gather data on customer demographics, psychographics, behavior, and needs.
- Segmentation: Divide the market into distinct segments based on similar characteristics, such as age, income, lifestyle, interests, or buying behavior. Use segmentation variables that are relevant to the industry and align with the company’s objectives.
- Targeting: Evaluate the attractiveness of each segment and select one or more target segments that align with the company’s goals and resources. Assess segment size, growth potential, competition, and fit with the company’s capabilities.
- Positioning: Develop a unique value proposition and positioning strategy for each target segment. Determine how the company’s offering will fulfill the needs and desires of the target customers and differentiate from competitors. Create a compelling brand image and communicate it effectively.
- Implementation: Implement the marketing strategies and tactics tailored to each target segment. Develop marketing mix elements, such as product features, pricing, distribution channels, and promotional activities, that align with the chosen segments.
- Evaluation and adjustment: Continuously monitor and evaluate the performance of the chosen segments and marketing strategies. Make adjustments based on market feedback, changing customer needs, and competitive dynamics to optimize the effectiveness of segmentation and targeting efforts.
4. How many market segments are there?
The number of market segments can vary depending on the industry, market dynamics, and the level of detail in the segmentation process.
There is no fixed number of market segments, as it depends on the specific characteristics and diversity within the market being analyzed.
In practice, the number of market segments can range from just a few to several dozen or more, depending on the complexity and diversity of the market.
5. What is the difference between segmentation, targeting, and positioning?
Segmentation, targeting, and positioning are distinct but interconnected concepts in marketing:
- Segmentation: Segmentation involves dividing a market into distinct groups of customers who share similar characteristics, needs, or behaviors. It is the process of identifying homogeneous customer segments within a larger market.
- Targeting: Targeting is the selection of specific segments that a company wants to focus on and serve. It involves evaluating the attractiveness of different segments and choosing one or more segments that align with the company’s objectives and resources.
- Positioning: Positioning refers to the development of a unique brand image and value proposition for each target segment. It involves creating a distinct and desirable position in the minds of customers, which differentiates the company’s offering from competitors.
In summary, segmentation is about identifying groups, targeting is about selecting which groups to serve, and positioning is about creating a unique position for the company within the chosen target segments.
6. What are some examples of segmentation, targeting, and positioning?
Here are a few examples of segmentation, targeting, and positioning in different industries:
- Automobile Industry: A luxury car manufacturer segments the market based on income and lifestyle, targets high-income individuals who value prestige and performance, and positions its vehicles as symbols of status and luxury.
- Fast Food Industry: A burger bistro segments the market based on age and preferences, targets health-conscious millennials who seek organic and locally sourced ingredients, and positions itself as a provider of gourmet, sustainable burgers.
- Technology Industry: A software company segments the market based on company size and industry, targets small and medium-sized businesses in the healthcare sector, and positions its software as a cost-effective solution for managing patient records and appointments.
These examples illustrate how companies identify distinct customer segments, select target segments that align with their offerings, and develop unique positioning strategies to cater to the needs and preferences of those segments.
7. Why is differentiation an important aspect of positioning?
Differentiation is a critical aspect of positioning because it helps a company create a unique and favorable brand image in the minds of customers.
By differentiating its offerings from competitors, a company can highlight the unique features, benefits, or attributes that set it apart.
This differentiation can be based on various factors, such as product quality, innovation, price, customer service, design, or brand reputation.
Differentiation is important for several reasons:
- Reduced competition: When a company effectively differentiates its offering, it becomes less susceptible to direct competition. Customers perceive the company’s product or service as distinct and are willing to pay a premium for it, reducing the price sensitivity and intensity of competition.
- Increased customer loyalty: Differentiation creates customer loyalty by offering unique value that competitors cannot easily replicate. When customers recognize and appreciate the differentiated aspects of a company’s offering, they are more likely to become loyal, repeat customers.
- Higher perceived value: Differentiation enhances the perceived value of a company’s offering in the eyes of customers. By emphasizing unique features or benefits, the company can command a higher price, leading to improved profitability and market positioning.
- Market entry barriers: Effective differentiation can create barriers to entry for new competitors. If a company has successfully established a unique position and built strong customer loyalty, it becomes challenging for new entrants to convince customers to switch from the differentiated offering.
In summary, differentiation helps companies create a competitive advantage, build customer loyalty, enhance perceived value, and establish barriers to entry, making it a crucial aspect of positioning.