Market Segmentation, Targeting and Positioning (STP)

Market Segmentation, Targeting and Positioning (STP) is a core concept in marketing that helps businesses identify and serve their most valuable customer groups effectively. This model enables companies to divide a broad market into smaller segments, target specific groups and position their products or services to meet the unique needs of these segments. Below, we discuss STP comprehensively with relevant examples, covering its concepts, types and importance.

Market Segmentation

Market segmentation involves dividing a heterogeneous market into smaller, more homogeneous groups based on shared characteristics. It helps businesses better understand customer needs and tailor their products, pricing, promotion and distribution strategies. The key segmentation bases are:

Demographic Segmentation

Divides the market based on variables such as:

• Age: Toys for children, anti-aging creams for older adults.
• Gender: Men’s grooming products vs. women’s cosmetics.
• Income: Budget-friendly products for lower-income groups vs. luxury items for affluent customers.
• Education: Educational courses tailored for school students vs. working professionals.
• Occupation: Products for office workers (formal wear) vs. industrial workers (safety gear).

Geographic Segmentation

Markets are segmented based on geographical factors:

• Regions: North vs. South India preferences (e.g., coconut oil in South India).
• Climate: Woolens for colder regions, sunscreen for tropical areas.
• Urban vs. Rural: Packaged goods in urban markets vs. bulk products for rural markets.

Psychographic Segmentation

Focuses on lifestyle, personality traits, values and social class:

• Lifestyle: Fitness enthusiasts prefer protein bars and gym equipment.
• Values: Eco-conscious consumers opt for sustainable products.
• Social Class: Premium cars for the upper class, compact cars for the middle class.

Behavioral Segmentation

Based on customer behavior towards a product or service:

• Usage Rate: Light, moderate, or heavy users (e.g., mobile data plans for heavy users).
• Occasions: Diwali gift packs vs. everyday use products.
• Benefits Sought: Whitening toothpaste for brighter teeth, fluoride toothpaste for cavity protection.
• Loyalty: Reward programs for loyal customers.

Targeting

Once a market is segmented, the next step is selecting one or more segments to target. Targeting involves evaluating the attractiveness of each segment and choosing the best fit based on the company’s goals and resources. There are three main strategies:

Undifferentiated Targeting (Mass Marketing)

• Treats the entire market as a single segment.
• Focuses on common needs, offering standardized products.
• Example: Coca-Cola’s original mass-marketing strategy of one product for all.

Differentiated Targeting (Segmented Marketing)

• Targets multiple segments with different offerings tailored to each.
• Example: Maruti Suzuki offering budget cars (Alto) and premium models (Ciaz) for different segments.

Concentrated Targeting (Niche Marketing)

• Focuses on a single, well-defined market segment.
• Example: Rolex targeting the luxury watch segment.

Micromarketing (Added Insight)

• Tailors marketing efforts to individual customers or small groups.
• Example: Personalized product recommendations on e-commerce sites.

Positioning

Positioning is the process of establishing a distinct image and identity for a product in the minds of target customers. It involves crafting a unique value proposition to differentiate the product from competitors.

Types of Positioning

1. Functional Positioning: Highlights product functionality.
   • Example: Colgate's positioning for cavity protection.
2. Emotional Positioning: Connects on an emotional level.
   • Example: Dove promoting self-esteem and natural beauty.
3. Value-Based Positioning: Emphasizes value for money.
   • Example: Walmart’s slogan, “Save Money. Live Better.”

Errors in Positioning

• Under-Positioning: Failing to convey a clear brand identity.
  • Example: A new brand not communicating its unique features.
• Over-Positioning: Creating a very narrow perception of the product.
  • Example: A luxury brand perceived as too expensive.
• Confused Positioning: Sending mixed signals to the market.
  • Example: A product trying to cater to multiple, conflicting segments.
• Doubtful Positioning: Claims that customers do not believe.
  • Example: An unknown brand promising unrealistic benefits.

Points of Parity (POP) and Points of Difference (POD)

These are critical elements in positioning:

Points of Parity (POP)

Attributes or benefits that a brand shares with competitors.

• Purpose: Meet the baseline expectations of customers.
• Example: All toothpaste brands offering cavity protection.

Points of Difference (POD)

Unique attributes or benefits that set a brand apart.

• Purpose: Create a distinctive identity and competitive advantage.
• Example: Sensodyne targeting sensitivity relief as its unique benefit.

Relevance and Importance of STP

Why STP Matters in Marketing

• Enhanced Customer Satisfaction: By offering tailored products.
• Efficient Resource Allocation: Focus on the most profitable segments.
• Competitive Advantage: Through unique positioning strategies.

For example, Apple’s segmentation (high-income tech enthusiasts), targeting (premium segment) and positioning (innovation and elegance) showcase the flawless execution of STP in creating a loyal customer base and a powerful brand.