Segmentation, Targeting and Positioning of Market

Nowadays, it is a pretty common fact that STP (Segmentation, Targeting, and Positioning) strategy is an essential part of any successful marketing. The purpose of this strategy is assisting marketers in prioritizing their propositions and engaging with different audiences.

Segmenting existing markets can be founded on many variables, with the goal of achieving maximum commercial effectiveness. If a company intends to sell its products in the most beneficial way, it is necessary to know what customers of each segment need and value.

Market segmentation involves organizing your marketing into small groups of customers who share the same needs or who lean towards similar products. There are many ways to segment the audience, including demographics, geography, people’s beliefs, and values, lifestyles, etc1.

The number of segments is determined by the company’s strategy and approach to the customer base. Not all segments can be regarded as substantial enough to be included in the marketing strategy, though. In order for a segment to be practical, it is required to have certain necessary characteristics. For instance, a segment should be identifiable2, measurable, substantial, accessible, durable, responsive, and, last but not the least, corresponding to the firm’s goals and objectives.

A perfect historical example of market segmentation was displayed by Alfred P. Sloan, the head of General Motors, who started a differentiation of cars by price and models. He intended to provide the market with cars suited for different income levels, resulting in a huge success that allowed General Motors to become the number one automaker in the US.

This example shows that despite the fact that market segmentation is often viewed as the limitation of the consumer base, it may actually help companies to increase the number of clients because of the information gathered about what should be adjusted in the company’s strategy.

Choosing the right segments to concentrate on is extremely important, as the company’s resources are not unlimited. Targeting of the identified groups is the second step of the STP strategy. It involves comparison and evaluation of the chosen market segments and the prioritization of those that deem as the most beneficial for the company3.

The data needed for the evaluation of segments includes segment sales, its size, its growth potential, and attractiveness. It is also important for a segment to actually correspond to the company’s objectives because otherwise, it can be quickly dismissed even if it meets the other requirements.

When Coca-Cola decided to enter the Russian cola market, who at that time fully belonged to Pepsi, it was hard to believe that Coca-Cola would succeed in promoting its product.

However, because of Coca Cola’s wise investment decisions, its shares on the Russian market reached 50% by 1996. Lots of companies are trying to avoid competition from others by doing multi-segment marketing, which revolves around meeting the needs of multiple segments of the market4. As much as it can be advantageous to the company, multi-segment marketing still has its downsides.

Differentiated marketing may lead to an increase in sales, but the costs of business are also increased in the process due to separate market plans for each segment5. Many companies also resort to concentrated marketing, which is also very profitable but risky.

The risk obviously comes from possible low gains from the concentrated segment. Naturally, the decision to choose a certain type of targeting is determined by the market, product, and competitive factors.

Positioning is the final step in the STP strategy, which is essentially the process of creating an image of a product in people’s minds so that they recognize it. It is a complicated task of delivering a good image to the customers that will be both interesting and relevant to them. Brand perception is one of the main aspects of positioning6.

One important factor of positioning is to know how to differentiate a product from its competitors on the market. For instance, the famous drink 7-UP was widely advertised as Un-Cola and, subsequently, that made people think of it as something different than Cola.

The purpose of the positioning is to make a product stand out among other product, i.e., the same way Apple makes their products stand out in elegance and user-friendliness department, or how Volvo positions its vehicles in terms of durability and safety7.

Therefore, the process of positioning consists of three steps: identification of the product’s competitive advantages, choosing the right ones, and selecting a positioning strategy. A firm that has a reputation for providing an excellent quality will go for this position if the demand for quality in a segment is high enough8.

There are multiple positioning strategies like “more-for-more,” “more for the same,” “the same for less,” and “less for much less” positioning. Each of them differs from each by the quality standards of a product and the corresponding price of it. Implementing these positioning strategies is often a hard task, as once the strategy is established, it must be maintained through consistent performance.

I would like to note that despite the STP strategy being one of the most advantageous in marketing, there are still things that should be considered while choosing to implement said strategy. Certain flaws and limitations can be discovered in the segmentation procedure of the STP strategy.

For example, geographic segmentation is a common approach for international companies, but the downside to it is the false assumption of sharing similar needs among people in the area. The same thing can be said about the demographic segmentation. Not all people of the same age have similar needs, so it cannot be used as a definite assessment tool for people’s demands. The amount of costs required for segmentation is often pretty high and should be wisely considered beforehand.

Segmentation may also come with a risk of misinterpretation of consumers or getting them confused. However, the number of benefits received from a successfully implemented segmentation is still greater, as it would not be one of the most efficient and popular marketing strategies otherwise.

It allows to improve the competitiveness of your company, promotes further market expansion, allows your brand to be more recognizable and, as a result, achieve the loyalty of consumers, and also increase the overall profitability of the company. STP strategy is also a powerful tool for discovering the needs of your potential client base, and thus, increasing your sales because of the knowledge acquired.

Works Cited

Armstrong, Gary, Stewart Adam, Sarah Denize, and Philip Kotler. Principles of Marketing. 6th ed. Melbourne: Pearson Australia, 2014. Print.

Khan, Tahsina. “STP strategy for New Product Launch – a Work in Progress.” International Journal of Business and Management Invention 2.3 (2013): 55-65. Print.

Larsen, Nynne 2010, Market Segmentation. PDF file. Web.

Lynn, Michael. “Segmenting and Targeting Your Market: Strategies and Limitations.” Cutting Edge Thinking and Practice The Cornell School of Hotel Administration on Hospitality (2012): 351-69. Print.

“Market Segmentation, Targeting and Positioning.” Principles of Marketing. 2nd ed. Shah Alam, Malaysia: Oxford Fajar, 2013. Print.

Marketer’s Toolkit: The 10 Strategies You Need to Succeed. Boston, Mass.: Harvard Business School, 2006. Print.

Footnotes

  1. Lynn, Michael. “Segmenting and Targeting Your Market: Strategies and Limitations.” Cutting Edge Thinking and Practice The Cornell School of Hotel Administration on Hospitality (2012): 351-69. Print.
  2. Meaning that the consumers of a segment should share common traits.
  3. “Market Segmentation, Targeting, and Positioning.” Principles of Marketing. 2nd ed. Shah Alam, Malaysia: Oxford Fajar, 2013. Print.
  4. Tanner, John F., and Mary Anne Raymond. Principles of Marketing. Irvington, N.Y.: Flat World Knowledge, 2011. Print.
  5. Larsen, Nynne 2010, Market Segmentation. PDF file. Web.
  6. Khan, Tahsina. “STP strategy for New Product Launch –a Work in Progress.” International Journal of Business and Management Invention 2.3 (2013): 55-65. Print.
  7. Marketer’s Toolkit: The 10 Strategies You Need to Succeed. Boston, Mass.: Harvard Business School, 2006. Print.
  8. Armstrong, Gary, Stewart Adam, Sarah Denize, and Philip Kotler. Principles of Marketing. 6th ed. Melbourne: Pearson Australia, 2014. Print.