Applying the STP Model
Follow the steps below to apply the STP Model in your organization. For each step,
we've also provided a worked example using the fictitious travel firm, the
Adventure Travel Company.
Step 1: Segment Your Market
Your organization, product or brand can't be all things to all people. So, use market
segmentation to divide your customers into groups of people with common
characteristics and needs. This allows you to tailor your approach to meet each
group's needs effectively, and gives you a huge advantage over competitors who
use a "one size fits all" approach.
There are many different ways to segment your target markets:
Demographic – by personal attributes such as age, marital status, gender,
ethnicity, sexuality, education, or occupation.
Geographic – by country, region, state, city, or neighborhood.
Psychographic – by personality, risk aversion, values, or lifestyle.
Behavioral – by how people use the product, how loyal they are, or the
benefits that they are looking for.
Example:
The Adventure Travel Company is an online travel agency that organizes
worldwide adventure vacations. It has split its customers into three segments,
because it's too costly to create different packages for more groups than this:
Segment A is made up of young married couples, who are primarily
interested in affordable, eco-friendly vacations in exotic locations.
Segment B consists of middle-class families, who want safe, family-friendly
vacation packages that make it easy and fun to travel with children.
Segment C comprises upscale retirees, who are looking for stylish and
luxurious vacations in popular locations, such as Paris and Rome.
Step 2: Target Your Best Customers
Next, you need to decide which segments to target by identifying the group that
will offer the largest return and will be the most profitable. There are several
factors to consider here:
1. The profitability of each segment. Which customer groups contribute most
to your bottom line?
2. The size and potential growth of each customer group. Is it large enough to
be worth addressing? Is steady growth possible? How does it compare with
other segments? (Make sure that you won't be reducing revenue by shifting
your focus to a niche market that's too small.)
3. How well your organization can service this market. For example, are
there any legal, technological or social barriers that could have an impact?
Conduct a PEST Analysis to understand the opportunities and threats that
might affect each segment.
Example:
The Adventure Travel Company analyzes the profits, revenue and market size of
each of its segments. These are its findings:
Segment A has profits of $8,220,000.
Segment B has profits of $4,360,000.
Segment C has profits of $3,430,000.
So, it decides to focus on Segment A, after confirming that the segment size is big
enough (it's estimated to be worth $220,000,000/year.)
Step 3: Position Your Offering
Finally, you need to identify how you should position your product to target the
most valuable customer segments. Then, select the marketing mix that will be most
effective for each of them.
Consider why customers should purchase your product rather than those of your
competitors. Do this by identifying your unique selling proposition , and draw
a positioning map to understand how each segment perceives your product, brand
or service. This will help you determine how best to position your offering.
Also, look at the wants and needs of each segment. A good way to do this is by
pinpointing the problem that your product solves for these people. Create a value
proposition that clearly explains how your offering will meet this requirement
better than any of your competitors' products, and then develop a marketing
campaign that presents this value proposition in a way that your audience will
appreciate.
Example:
The Adventure Travel Company markets itself as the "best eco-vacation service for
young married couples" (Segment A).
It hosts a competition on Instagram® and Pinterest® to reach its desired market,
because these are the channels that these target consumers tend to favor. It asks its
followers on these channels to send in interesting pictures of past eco-vacations,
and the best one wins an all-inclusive trip.
The campaign goes viral and thousands of people send in their photos, which helps
build the Adventure Travel Company mailing list. The company then creates a
monthly e-newsletter full of eco-vacation destination profiles.
