STP Marketing - Segmentation, Targeting, and Positioning

Reaching the right people with your business's message is key. That's where the STP marketing model comes in handy. STP stands for Segmentation, Targeting, and Positioning. It's a strategy that helps businesses figure out who their most important customers are, focus their marketing efforts on these groups, and make sure their brand stands out from the competition.

Here, we'll break down the STP model into easy-to-understand parts and show you how to use it to improve your marketing.

What is STP?

Modern marketing covers various steps of selling goods and services to customers. There are various techniques and models that the business analyses and opts for best to sell goods and services in the market. One very effective marketing strategy is the STP (Segmentation, Targeting, and Positioning) model. In STP, S means Segmentation, T means Targeting, and P means Positioning. STP marketing example:

Financial Services: A bank (S) segments (STP) by demographics and behavior, targeting (T) young professionals with a good income, who are new to investing. They position (P) themselves as a friendly and educational resource for first-time investors.

Key Takeaways:

• Segmentation means dividing the whole customer base into different subgroups based on their similar characteristics.
• Targeting means deciding which subgroup the company should target to sell its products and services.
• Positioning means placing a good image in the minds of customers about the product.

What is Segmentation?

Segmentation is the first step of the STP strategy. Segmentation is the process of dividing the whole market into small subgroups based on shared characteristics like age, gender, taste, preferences, etc. Customers having similar needs and behaviours are to be put together. A market segment is a portion of the whole market that is expected to respond similarly to a given situation. Segmentation helps the business identify what type of customers they should target to sell their product/service. For these reasons, a company should properly do the segmentation process. Market segmentation can be done based on:

• Psychographic Attributes (lifestyle preferences)
• Geographic Attributes (location)
• Behavioural attributes (habits)
• Demographics (age, gender, etc.)

Once the company is done with the market segmentation process, it can focus on choosing the best segment for its products and/or services. When the segmentation is done correctly, a company can entirely focus on one or more segments, without wasting any time and resources.

For example

Volkswagen Group is responsible for producing brands like Audi, Porsche, Lamborghini, and Ducati. Even after being so expensive, brands still generate a handsome revenue. Volkswagen depicts the importance of perfect market segmentation.

What is Targeting?

The process of evaluating market segments and choosing the best to target comes under Market Targeting. Market Targeting undertakes the decision of choosing the best target audience and the degree to which the target market should be targeted. In simple terms, it is a process of choosing the best target audience for the product/service and declaring the other segments to be useless for a particular kind of product/service.

A business must determine the target audience after thorough research; otherwise, the business is going to end up wasting time and resources with no return on investment. Generally, a new product/service is first made available to a single target, and if it remains optimal, the business takes up other segments as well. Market targeting also depends on the size of the company. Besides, the more the target markets, the more will the cost of targeting.

For example

Nike's target market includes those people who are interested in getting fitter.

What is Positioning?

The activity of positioning involves placing the product/service in the minds of the target customers and making the image of the product/service superior as compared to other similar products. Various factors affect the process of positioning such as:

• The larger the size of the target market, the more it will be difficult to position the product/service.
• If there is no competition in the market, then the business can create a completely different and new market positioning strategy.
• If the product has already a good brand value, then it will be of advantage to the business to position any new product/service.
• If the company decides to offer fewer prices for its product/service than the rival firms, then the business can have an advantage in market positioning.

For example

Starbucks wanted to make itself 'The Third Home' between home and work so that people can come and relax whenever they are tired. They decided to target customers with medium and high-level income. Starbucks uses the following taglines to strengthen its positioning in the market:

• 100% Recycled Paper Use
• The Finest Milk Use
• The Best Coffee
• Rich & Smooth Flavours
• Natural & Clean

Importance of STP Marketing

STP is one of the most important concepts of marketing which helps in developing a suitable marketing mix. STP is necessary to understand the behaviour of customers and choose the right target market for products. It tells the business about the target market so that they can focus on the right audience and not waste time on other segments.

Segmentation is necessary to divide the whole customer base based on their similarities. Segmentation tells us how a particular segment of customers tends to behave similarly. Targeting is also a most important activity, as it tells us which customer group the business should focus on?, and Which customer base is most appropriate for one's products/services? Positioning helps the business in placing a positive image of their products/services in the minds of target customers so that customers will remember the product and keep buying it.

Benefits of STP Marketing

• Sharpened Customer Focus: The STP marketing makes it necessary for you to get into the minds of your customers. Segmenting your market by their demographics, needs and behavior will help you clearly understand who your best clients are. When you know this, you will be able to concentrate your efforts towards meeting their needs directly thereby making what you communicate about resonate with their wants and pains.
• Increasing Marketing Efficiency: There is no more general approach in marketing. It’s time to channel your resources to the areas that have potential under STP marketing strategies. This means that you don’t spend money where there is no possibility of conversion henceforth leading into more cost-effective expenditure on advertisements which will yield better results.
• Boosted Customer Engagement: Picture creating marketing materials that seem as if they were intended for individual clients. This is what STP helps you achieve. Knowing what each of your target groups requires or likes enables you to make unique messages for them. As a result, you will have more loyal customers who are deeply engaged with the brand.
• Distinct Brand Positioning: STP marketing allows for a different kind of branding in the face of stiff competition. By deliberately taking a position in relation to the market, businesses communicate their exclusive selling points to particular segments. Accordingly, this makes them unique thereby attracting the right audience while at the same time keeping off wrong ones.
• Data-Driven Decision Making: To be successful with STP marketing, you need customer data. You have to divide your market using this information and then use it to choose who to sell to and where to sell it. You therefore make judgments based on facts which minimizes uncertainty because you only do what your buyers want.

Relationship between Segmentation, Targeting, and Positioning

Marketing mix undertakes activities like segmentation, targeting, and positioning, namely STP. These activities are interlinked and sequenced to form an optimal marketing mix. The very first step is segmentation. Segmentation involves dividing the whole customer base according to their needs, preferences, age, gender, etc. Segmentation tells us how a particular segment of customers tends to behave similarly.

After dividing the whole customer base into segments, businesses choose the optimal segment(s) for their products. This process is known as Targeting. Targeting involves choosing the right customer segment(s) for the product. After targeting, there comes Positioning. Positioning involves activities of creating an image in the minds of the customer base, the base that gets chosen in the targeting process.

STP Marketing Example

1. McDonald's

Segmentation - McDonald's segments its market based on several factors:

• Demographics: They consider age, gender, income, and family size. For instance, they have offerings like Happy Meals for children and Value Meals for budget-conscious consumers.
• Psychographics: McDonald's taps into consumers' lifestyles and personalities. For example, they offer healthy options for health-conscious individuals and late-night hours for those seeking convenience.
• Behavioural: They target customers' buying behaviour, through the frequency of visits and order preferences. They have tailored options for regular customers and promotions to attract occasional visitors.

Targeting - McDonald's primary target audience includes:

• Families: They provide a family-friendly atmosphere with play areas and offerings like Happy Meals, targeting parents and children.
• Young Adults: The menu offers a range of products that are appealing to young adults, from classic burgers to trendy items like wraps and salads.
• Teens: They attract teenagers with affordable items, quick service, and a place to hang out.
• Children: Through Happy Meals, toys, and colourful packaging, they create an appealing environment for kids.

Positioning: McDonald's positions itself using the following strategies:

• Convenience: They emphasize fast service, drive-through options, and extended hours, positioning themselves as a quick and convenient dining option.
• Affordability: McDonald's offers value menus and combo meals at reasonable prices, targeting budget-conscious consumers.
• Variety: Their diverse menu caters to different tastes, from classic burgers to salads and healthier options, appealing to a broad range of preferences.
• Consistency: McDonald's maintains a consistent quality and taste across its global locations, creating a sense of familiarity and reliability.

2. Nvidia's

Segmentation - Nvidia segments its market based on several factors:

• Industry Needs: Different industries like gaming, professional visualization, data centers, and automotive have unique requirements that Nvidia addresses with specialized products.
• Usage: They consider how consumers use their products, from casual gaming to professional graphic designing and AI research.
• Technological Proficiency: Nvidia also segments its customers by their level of technological proficiency, offering cutting-edge products for tech enthusiasts and simpler solutions for less tech-savvy users.

Targeting - Nvidia's primary target audiences include:

• Gamers: Offering high-performance GPUs that deliver a superior gaming experience, targeting both casual and hardcore gamers.
• Professional Designers and Creators: Targeting professionals in 3D modeling, video editing, and graphic design with their Quadro series.
• Data Centers and Enterprises: Providing GPUs that accelerate computing for AI, deep learning, and high-performance computing applications.
• Automotive Industry: Targeting manufacturers with SoCs for in-vehicle infotainment systems and autonomous driving technology.

Positioning - Nvidia positions itself using the following strategies:

• Innovation Leader: Positioning itself at the forefront of technological innovation, especially in AI and gaming graphics.
• High Performance: Emphasizing the superior performance and reliability of their products for both gaming and professional applications.
• Ecosystem Developer: Building a comprehensive ecosystem around its products, including software (like GeForce Experience, Nvidia SDKs) and partnerships with game developers and other tech companies.
• Sustainability and Corporate Responsibility: Nvidia also positions itself as committed to sustainability and ethical practices, appealing to environmentally and socially conscious consumers and businesses.

How to Build an STP Marketing Strategy

Step 1: Define Your Market:

The global market is vast. To aim at your audience efficiently, you have to come up with a niche. Think of factors like Total Available Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) which will help you know the size of the overall market, the part of it that is right for your product or service and what section can realistically be reached out to.

Step 2: Create Audience Segments:

Now that you've defined your market, divide it further based on demographics (age, income), geographics (location), psychographics (interests, lifestyle) as well as behavioral patterns (purchase history, website visits). The more levels deep this goes; more accurate will be different segments within your audience.

Step 3: Develop Segment Profiles:

You should develop detailed profiles for each of your viable market segments. These should include descriptions of their needs, behaviors, demographics, brand preferences and how they shop. This will enable you to compare them and select the ones most suitable for targeting with your marketing efforts.

Step 4: Evaluate Segment Attractiveness:

Collate findings from market data and client studies against each other in order to evaluate the attractiveness of different segments. Important things to think about are the size of each segment, its growth rate, price sensitivity as well as brand loyalty levels shown by members of these segments towards certain products or services. Identify the segments with the highest potential return on investment (ROI).

Step 5: Select Target Audience(s):

From your research and segment attractiveness, select the target audience(s) which best fit into your business strategy as well as overall objectives. Consider aspects such as segment size, competition levels and potential growth among others

Step 6: Develop a Positioning Strategy:

Devise what sets you apart from other players in your industry that will also be appealing to those you want to reach out to with this message.This can include but is not limited to being better than what is currently available (category-based), meeting specific needs or preferences of consumers (consumer-based), offering something different / unique while also being aware about who else has done it before them(competitor-based) and highlighting the advantages that customers stand gaining if they buy into it(benefit- based )

Step 7: Choose Your Marketing Mix:

The final step is to implement your STP marketing strategy. Develop a “marketing mix” that fits where you have position your brand plus gets the attention of the people you have identified as your consumers. The mixture of marketing stands for Product (features, design, quality); Price (pricing strategies, discounts); Place (distributive channels); and Promotion (marketing communications).

Conclusion

STP marketing model helps businesses understand and reach their customers more effectively. By dividing the market into specific groups (Segmentation), focusing on the most important groups (Targeting), and making sure their products or services appeal to these groups (Positioning), businesses can stand out from their competitors.

This strategy works for all kinds of companies, big or small, from McDonald's with its diverse menu for families and young adults to Nvidia and its high-tech products for gamers and professionals.