The meaning and stages of STP

STP (segmentation, targeting, positioning) is a marketing framework that helps businesses direct their efforts towards the most promising parts of a market. It involves breaking down the market, selecting specific groups to focus on, and creating a distinct image for products in those groups' minds.

The three stages of STP

• Segmentation - Dividing the overall market into smaller groups based on shared traits or requirements.
• Targeting - Choosing which of these groups to prioritise based on factors like size and competition.
• Positioning - Building a unique perception of the brand or product in the chosen groups' minds to highlight its advantages over rivals.

The types of market segmentation

Market segmentation splits a broad market into distinct groups that share similar characteristics, needs, or behaviours. This enables businesses to customise their products and marketing efforts for each group, as different segments may have varying preferences, buying patterns, and ways of accessing information.

Demographic segmentation

This approach groups customers based on personal attributes.

Examples of demographic segmentation:

• Age - Products like holidays tailored for older people, such as relaxed tours for pensioners.
• Gender - Items like grooming products aimed specifically at males.
• Socio-economic class - Services like banking options divided by job types, such as premium accounts for executives.
• Family size - Goods like large-pack groceries targeted at bigger households.

Geographic segmentation

Markets are divided according to location, which is especially useful for companies operating across diverse areas.

Key features of geographic segmentation:

• Groups can be based on areas like local districts, towns, regions, nations, or global zones.
• It accounts for cultural and lifestyle differences, requiring adjusted marketing strategies for each area.
• Multinational firms often use this to adapt to varying customer habits in different countries.

Income segmentation

This focuses on customers' earnings levels to match products to their spending power.

Examples of income segmentation:

• High-end brands appeal to wealthier groups with luxury items.
• Budget options, like own-brand supermarket goods, target those with lower incomes.
• Premium products are typically directed at higher earners who can afford them.

Behavioural segmentation

This categorises customers by their actions and habits related to the product.

Examples of behavioural segmentation:

• Usage frequency - Services like online video platforms marketed differently to frequent users compared to casual ones.
• Lifestyle - Products like ready meals aimed at time-poor workers who prioritise convenience.

Benefits of segmentation

• Supports discovering new customer groups, untapped markets, and product ideas.
• Guides the most suitable ways to promote and sell to each group.

Limitations of segmentation

• Risks missing out on potential buyers outside the defined groups.
• Can be hard to accurately identify and reach specific segments effectively.
• Dividing markets into clear categories is often complex.

The approaches to targeting market segments

After segmentation, businesses select which groups to target by evaluating factors like group size, growth prospects, and levels of rivalry. The chosen segments should be large enough to be profitable and offer room for expansion with minimal competition.

Concentrated marketing (niche marketing)

• Focuses on just one or a few segments.
• Ideal for smaller firms with restricted budgets.
• The segment needs to offer good returns and future growth.
• Often targets unmet needs that competitors ignore.
• Example: A small company making bespoke chairs for compact homes.

Differentiated marketing

• Aims at multiple segments.
• Adjusts the product and marketing approach for each one.
• Typically used by bigger organisations with ample resources.
• Example: An app for organisation sold as a learning tool to pupils and as a productivity aid to office workers.

Undifferentiated marketing

• Treats the whole market as one, without segment divisions.
• Uses a single product and marketing strategy for everyone.
• Suited to everyday items with broad appeal.
• Advantages include large-scale sales and reduced promotion expenses.

Differences between niche and mass markets

• Niche markets allow small businesses to specialise in specific areas, making marketing simpler and more direct.
• Mass markets involve products designed for widespread appeal, which can be harder for small producers to supply due to high volume demands.

The concept of positioning and market mapping

Positioning involves shaping how target customers view a brand or product, emphasising its unique benefits and differences from competitors. For instance, a nutrition company might highlight the superior health advantages of its snacks to appeal to active individuals who prioritise balanced diets.

Factors influencing positioning

• Market conditions - In tough economic times, focus on affordability; in good times, stress superior features or eco-friendliness.
• Company's current reputation - New items are often positioned to fit with established products.
• Company strengths - Firms highlight their expertise, such as tech businesses promoting advanced and innovative elements.

Market mapping

Market mapping uses a grid to plot products based on two key customer criteria, like cost and standard. It helps visualise competitor positions and customer views.

Benefits of market mapping

• Reveals gaps in the market for potential new offerings.
• Checks if demand exists in those gaps.
• Aids in refreshing products that are losing popularity.
• Highlights what makes top brands successful.
• Clarifies unusual market successes, such as a high-cost shop thriving due to its prime spot.

Limitations of market mapping

• May oversimplify intricate markets.
• Positions can be subjective and influenced by bias.
• Views on aspects like quality differ among customers.
• Accuracy improves with more input from the target audience.