Chapter 4
Market Segmentation, Targeting, and Positioning (STP)
Z. A. PATEL NLCCM, Navsari
Lesson Objectives
When you have completed this lesson you will be able to;
Summarise the relationship between market segmentation, targeting and positioning
Identify and describe the major variables for consumer
segmentation Outline how companies select target markets and implement segmentation strategies
Show how market segmentation and the marketing mix are
interlinked in the positioning strategy
The STP Process
Segmentation is the process of classifying customers into groups which share some common characteristic Targeting involves the process of evaluating each segments attractiveness and selecting one or more segments to enter Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of the consumer
Step 1. Market Segmentation
Levels of Market Segmentation
Mass Marketing
Same product to all consumers (no segmentation)
Segment Marketing
Different products to one or more segments (some segmentation)
Niche Marketing
Different products to subgroups within segments (more segmentation)
Micromarketing
Products to suit the tastes of individuals and locations (complete segmentation)
Local Marketing
Tailoring brands/ promotions to local customer groups
Individual Marketing
Tailoring products/ programs to individual customers
Advantages of Segmentation
1. 2. 3. 4. 5. 6. UNDERSTANDING NEEDS BETTER BETTER UNDERSTANDING OF COMPETITORS BETTER UTILISATION OF RESOURCES LOYAL CUSTOMERS MORE PROFIT POTENTIAL BETTER COMMUNICATION WITH CUSTOMERS
Requirements for Effective Segmentation
Measurable
Size, purchasing power, profiles of segments can be measured. Segments can be effectively reached and served.
Accessible
Substantial
Segments are large or profitable enough to serve.
Differential
Segments must respond differently to different marketing mix elements & programs.
Actionable
Effective programs can be designed to attract and serve the segments.
Steps in Segmentation, Targeting, and Positioning
6. Develop Marketing Mix for Each Target Segment 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) 3. Develop Selection Criteria 2. Develop Profiles of Resulting Segments 1. Identify Bases for Segmenting the Market
Market Positioning
Market Targeting
Market Segmentation
Step 1. Market Segmentation
Bases for Segmenting Consumer Markets
Geographic
Nations, states, regions or cities
Demographic
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioural
Occasions, benefits sought, user status, usage rate, loyalty
Segmenting Business Markets
Segmentation by customer size or geographic location
Four segments of business customers
Programmed buyers Relationship buyers Transaction buyers
Bargain hunters
Step 1. Market Segmentation
Bases for Segmenting Business Markets
Personal Characteristics
Demographics
Situational Factors
Bases for Segmenting Business Markets
Operating Characteristics
Purchasing Approaches
Step 1. Market Segmentation
Bases for Segmenting International Markets
Industrial Markets
Geographic
Economic
Political/ Legal
Cultural
Intermarket
Target Market
A market is a set of all actual and potential buyers A target market is a group of people toward whom a firm markets its goods, services, or ideas with a strategy designed to satisfy their specific needs and preferences. Any marketing strategy must include a detailed (specific) description of this.
Step 2. Market Targeting
Evaluating Market Segments (developing selection criteria) Segment Size and Growth
Analyze sales, growth rates and expected profitability for various segments.
Segment Structural Attractiveness
Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.
Company Objectives and Resources
Company skills & resources relative to the segment(s). Look for Competitive Advantages.
Step 2. Market Targeting
Market Coverage Strategies
Company Marketing Mix
A. Undifferentiated Marketing
Market
Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3
B. Differentiated Marketing
Segment 1
Segment 2
Segment 3
Company Marketing Mix
Segment 1 Segment 2
Segment 3
C. Concentrated Marketing
Linking the Concepts
At the last linking the concepts, you segmented the Irish clothing market.
> Now, pick two companies that serve this market and describe their segmentation and targeting strategies. > Can you come up with one that targets many different segments versus another that focuses on only one or a few segments?
How does each company you choose differentiate its marketing offer and image? How has each done a good job of establishing this differentiation in the minds of targeted consumers?
Step 3. Positioning for Competitive Advantage
Products Position - - the place the product occupies in consumers minds relative to competing products.
Marketers must:
Plan positions to give their products the greatest advantage in selected target markets, Design marketing mixes to create these planned positions.
Step 3. Positioning for Competitive Advantage: Strategies
Product Class
Away from Competitors
Product Attributes
Benefits Offered
C
G H
Against a Competitor
D E B F
Usage Occasions
User Class
Steps to Choosing and Implementing a Positioning Strategy
Step 1. Identifying Possible Competitive Advantages: Competitive Differentiation. Step 2. Selecting the Right Competitive Advantage: Unique Selling Proposition (USP). Step 3. Communicating and Delivering the Chosen Position.
Step 4. Support the positioning strategy with a unique marketing mix
Developing Competitive Differentiation
Product Service
Areas for Competitive Differentiation
Image
People
Selecting the Right Competitive Advantages
Important
Profitable
Affordable
Criteria for Determining Which Differences to Promote
Distinctive
Superior
Preemptive
Communicable
Step 4 Supporting the positioning strategy
At this stage the company has decided on its
positioning strategy and must now design a marketing mix to support this strategy. The next part of the course looks at Developing the Marketing Mix
Reviewing the Concepts
Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major levels of market segmentation and bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a market coverage strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace.
