As marketers, to satisfy customers we tailor our marketing activities to meet their needs. This sounds a simple concept until we consider that our market consists of all people or businesses potentially interested in our products and services. It stands to reason there will be a range of different needs across just one market – so which of those customer needs do we focus on?
With the STP model (Segmentation, Targeting and Positioning) we can take a large and diverse market, make sense of it, decide on the best customers to serve and then create a clear position in the market to stand out from competitors.
Segmentation: Make Sense of The Market
The first step is to make sense of the different needs within the market with segmentation. This is simply dividing the market up into clearly identifiable and distinct groups with similar needs.
You need a variable to create the groups which result in segments that have distinct needs, which all require a different marketing approach.
There are different variables for consumer markets and organisational markets. You might group consumers by variables such as who they are (demographics), where they are (geographics), their attitudes and aspirations (psychographics), or how they purchase (behaviouristic).
Organisations can also be grouped by demographics (such as company age and location) as well as other variables such as the current business situation (situational), how the company buys (purchasing approach), who buys on their behalf (personal characteristics of buying centre) and how they operate (operating variables).
Targeting – Decide On The Best Customers To Serve
The next stage in the STP model is targeting. Now the market is split into segments of similar customers, the second step is to decide on the best segment(s) to serve and tailor our offering to which is targeting. So which customers do we choose?
To help us decide, we must consider the needs of each, which we are best equipped to serve and which represent the biggest opportunity for us in terms of sales, profitability or awareness.
By developing an understanding of the different segments and their needs, as well as understanding our own resources to serve them, we can decide which segment(s) are most attractive.
There are four approaches to targeting:
- Undifferentiated: We choose the entire market for a particular product as the target market and use the same marketing mix for all customers.
- Differentiated: We direct marketing efforts towards two or more marketing segments and create a different marketing mix for each.
- Concentrated/Niche: We direct marketing effort towards a single market segment through ONE marketing mix.
- Customised: We target each customer individually.
Positioning – stand out from competitors
The target market is now clear – we understand their needs. Now we must ensure these customers can find us by making it clear the value that we can offer to them and how we are different from competitors.
Positioning is the space that we want to occupy in the minds of the customer, relative to our competitors. In order to create this position, we need to be clear on how we will compete, based on an understanding of what our target customers want, so that our positioning is appealing to them.
We tailor our marketing activities to support this position – so for example, if we are competing on superior quality, our marketing mix should reflect this offering with a premium product at higher prices, available in an exclusive place and promotion focusing on personal selling and advertising rather than sales promotion such as discounting.
The route to focusing our marketing efforts on the right customers, in order to satisfy them profitably is to find these customers using the STP model. Or the three-step process of Segmentation, Targeting and Positioning.
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The post was written by Alicia Allen. She is a lecturer, tutor and apprenticeship trainer for the Oxford College of Marketing. Alicia teaches and supports marketing professionals who are studying for CIM qualifications. She has 10 years experience in Marketing and Sales for large businesses in luxury retail, gaming and media, specialising in Customer Relationship Management.