STP Model – Segmentation, Targeting and Positioning Model

stp

The STP Model consists of three steps that help you analyze your offering and the way you communicate its benefits and value to specific groups.

STP stands for:

  • Step 1: Segment your market.
  • Step 2: Target your best customers.
  • Step 3: Position your offering.

 

This model is useful because it helps you identify your most valuable types of customer, and then develop products and marketing messages that ideally suit them. This allows you to engage with each group better, personalize your messages, and sell much more of your product.

Market Segmentation:

Market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics. In dividing or segmenting markets, researchers typically look for shared characteristics such as common needs, common interests, similar lifestyles or even similar demographic profiles. The overall aim of segmentation is to identify high yield segments – that is, those segments that are likely to be the most profitable or that have growth potential – so that these can be selected for special attention (i.e. become target markets).

  1. Demographics – Breakdown by any combination: age, gender, income, education, ethnicity, marital status, education, household (or business), size, length of residence, type of residence or even  profession/Occupation. An example is Firefox who sell ‘coolest things’, aimed at younger male audience. Though, Moshi Monsters, however, is targeted to parents with fun, safe and educational space for younger audience.
  2. Psychographics – This refers to ‘personality and emotions’ based on behaviour, linked to purchase choices, including attitudes, lifestyle, hobbies, risk aversion, personality and leadership traits. magazines read and TV. While demographics explain ‘who’ your buyer is, psychographics inform you ‘why’ your customer buys. There are a few different ways you can gather data to help form psychographic profiles for your typical customers. (A)Interviews: Talk to a few people who are broadly representative of your target audience. In-depth interviews let you gather useful qualitative data to really understand what makes your customers tick. The problem is they can  be expensive and difficult to conduct, and the small sample size means they may not always be representative of the people you are trying to target. (B) Surveys: Surveys let you reach more people than interviews, but it can be harder to get as insightful answers. (C) Customer data: You may have data on what your customers tend to purchase from you, such as data coming from loyalty cards if a FMCG brand or from online purchase history if you are an e-commerce business. You can use this data to generate insights into what kind of products your customers are interested in and what is likely to make them purchase. For example, does discounting vastly increase their propensity to purchase? In which case they might be quite spontaneous.
  3. Lifestyle – This refers to Hobbies, recreational pursuits, entertainment, vacations, and other non-work time pursuits. Companies such as on and off-line magazine will target those with specific hobbies. Some hobbies are large and well established, and thus relatively easy to target, such as the football fan example. However, some businesses have found great success targeting very small niches very effectively. A great example is the explosion in ‘prepping’ related businesses, which has gone from a little heard of fringe activity to a billion dollar industry in recent years.
  4. Belief and Values – Refers to Religious, political, nationalistic and cultural beliefs and values. The Islamic Bank of Britain offers Sharia-compliant banking which meets specific religious requirements.
  5. Life Stages – Life Stages is the Chronological benchmarking of people’s lives at different stages. An example is Saga holidays which are only available for people aged 50+. They claim a large enough segment to focus on this life stage.
  6. Geography – Drill down by Country, region, area, metropolitan or rural location, population density or even climate. An example is Amazon; the e-commerce giant in the US is now very successful in India.
  7. Behaviour – Refers to the nature of the purchase, brand loyalty, usage level, benefits sought, distribution channels used, and reaction to marketing factors.

Targeting

A target market is a group of customers a business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element of a marketing strategyProductpricepromotion, and place are the four elements of a marketing mix strategy that determine the success of a product or service in the marketplace. It is proven that businesses must have a clear definition of their target market as this can help reach its target consumers and analyze what their needs and suitability are.

How to set Target Market?

Following are 5 criteria that indicate whether the organisation has selected a viable target market: size, expected growth, competitive position, cost to reach, and compatibility.

  1. Size – how large is this target market? Worth pursuing?
  2. Expected Growth – even if the market is small, it may be profitable if there are indications that it will grow.
  3. Competitive Position – low competition equals attractive market.
  4. Cost to Reach – is this market accessible with our tactics?
  5. Compatibility – how aligned is this market to our goals?

 

Positioning:

The final stage in developing a strategic marketing plan is to analyze the target market to identify where competitors are positioned, and which attributes are most important when customers are making a purchase. Use Demand Metric’s Competitive Product Positioning Map for help on this exercise.

Product positioning refers to the place an offering occupies in the customer’s mind on important attributes, relative to competitive offerings. To understand your current market position, conduct a simple market research project to identify which product-class attributes are most important, which brands are perceived to best deliver each attribute, and where product improvements need to be made to improve customer satisfaction.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s