Segmentation, Targeting, and Positioning (STP) and its Application
The modern market is rapidly changing and becoming highly competitive, necessitating proper strategic planning to improve performance. However, Weinstein (2013) reveals challenges for businesses in expanding their markets due to shortcomings in target marketing. The author cites various potential factors for the challenge, including lack of time, poor focus, and bad planning. Weinstein (2013) proposes the importance of defining, segmenting, and targeting, and positioning (STP) in getting the right market for the organization to enhance its competitiveness. Furthermore, Hassan and Craft (2012) reveal a consensus on the need for marketing managers to ensure effective targeting to improve their position in the market to enjoy productivity and profitability. Recent research provides insight for companies to optimize their market and meet customer needs to remain relevant and enhance their revenue. Hence, although segmentation, targeting, and positioning (STP) suggest different processes in marketing, managers should understand how to use the approaches in practice to gain a competitive advantage and improve productivity in their sectors. The model applies to different products to target the right market and expand their business.
Segmentation, Targeting, and Positioning (STP)
Segmentation, targeting, and positioning (STP) are critical concepts in marketing as they define the success of introducing a product in the market and its success in appealing to the target customers. Kotler and Keller (2010) suggested that the STP formula is the beginning point of value creation in companies. The argument explains the application of the model in the successful strategic marketing and the basis for success in selling products and services. Weinstein (2014) supports the hypothesis by revealing the significance of the value-added analysis, including efforts to understand the market and create customized solutions depending on customer needs. Evidently, marketers cannot target the entire market, but instead should sub-divide their target market into parts that they can serve efficiently. Whatever the product or service a company markets, it should focus on a manageable part to reach the right customers and gaining a competitive advantage over their rivals (Weinstein 2013). In addition, such organizations become more profitable even in remanufacturing end-of-life products.
Segmentation is among essential concepts in marketing to target products or services to the right market. According to Kotler and Keller (2010), markets comprise niches and segments that companies serve with different goods. From the perspective, business success is informed by its capacity to target the right segments. Darwinian Theory is rightfully applicable to understanding the rationale behind segmentation based on competition between biological organisms. The theoretical model posits the impossibility of species to survive in the same environment if they live identically. The same theory applies to organizations that provide similar products to the same consumers, in the same territory, and under the identical conditions are unlikely to coexist. Although the scenario is possible, one of the companies will dominate the environment depending on the ability to target the market (Weinstein 2014). The evidence is critical in comprehending the available channels for the marketers to dominate the market and counter competition to become highly productive. Companies become effective in their particular segments by recognizing the importance of sub-dividing the market.
Segmentation recognizes the possibility of companies selling similar products to target the same clients. Hence, Lyon, Ball, and Haggerty (2012) suggest a critical definition of the concept of segmentation as the reclassification of objects into different groups (segments), depending on particular characteristics or relationships regarding benefits, costs, and risks. Although other studies have revealed different definition of the concept, Lyon, Ball, and Haggerty (2012) reveal the idea of categorizing the market depending on various features of the customers to ensure maximum focus on their different needs. Marketers in different companies and sector use various characteristics in segmenting the market, including demographic, psychographic, geographic, behavioral and product-related variables. From the segmentation perspective, marketers recognize differences in the market regarding needs, tastes, preferences, and decision-making tendencies (Lyon, Ball & Haggerty 2012). The information correctly points to the importance of the marketers to understand their market and effectively sub-divide it to improve performance.
Moving a step further from understanding the need for segmenting, marketers use various formulas to segment the industry and effectively target customers. However, Dolnicar, Kaiser, Lazarevski, and Leisch (2012) propose the use of data-driven market segmentation as an effective method of pursuing the clients. The modern information age is driven by vast data and companies can only succeed if they understand the importance of technological applications in targeted marketing. The findings support Lyon, Ball, and Haggerty (2012) evidence on the importance of learning the different characteristics of the various segments to focus on the right customers. Dolnicar et al. (2012) highlight the significance of learning about the similar traits of the customers to enable development of the targeted marketing mix. The evidence is obtained through properly designed market research using technology to collect and analyze data from real and potential customers. Hence, marketers have access to large data and analytical tools to understand and segment their markets. The studies, hence, provide a clear definition of the concept and move a step further to suggest its application in practice.
Market-oriented firms have unique marketing approaches to reach their real and potential customers. Guido, Prete, Miraglia, and De Mare (2011) explored their effective use of direct marketing approaches, focusing on particular prospects based on their unique characteristics. To support the observation made by Guido et al. (2011), Lyon, Ball, and Haggerty (2012) reveal that the direct marketing approach involves the aspect of targeting to ensure that the marketers selectively communicate with a particular group. Hence, the findings made by Lyon, Ball, and Haggerty (2012) capture the actual definition of targeting as delivery of a specific message to an opposite group using the right communication channels. From the two studies, it is clear that targeting moves a step further from segmentation to relay a marketing message to the customers in the relevant segment. Hence, the same techniques that are used in segmenting the market are applied to designing promotional messages customized to achieve the desired objectives.
From previous findings, it is evident that marketers desire appropriate responses from the target market, explaining the emphasis on direct marketing. Guido et al. (2011) back the statement by defining the concept by the Direct Marketing Association as “interactive system of marketing which uses one or more advertising media to effect a measurable response and or transaction at any location” (p. 127). The study further reveals that targeting enables the use of direct promotional initiatives by aiming at a selected segment of consumers. The analysis provides a correct picture of targeting, allowing firms to concentrate their marketing efforts to a particular segment to achieve the marketing and organizational objectives (Taken 2012). The process entails identification of the customers whose need perfectly matches the product or service offered by the firm. Companies that use the process achieve cost-effectiveness in their use of the integrated communication strategy.
From the definition and analysis of the concept, targeting relates to market segmentation since the process allows identification of the most suitable customer groups to focus the message. Weinstein and Cahill (2014) support the relationship by revealing that market segmentation as examining the various demographic and psychographic factors that allow effective targeting in the actual and potential markets. The findings challenge the marketing team to understand suitable strategies to collect and use the right information from the market. Furthermore, the process is useful in attracting new business to increase sales and achieve business success (Guido et al. 2011). The decision on which and how many segments to target is a critical part of the marketing process for companies.
Positioning is another critical process in the STP approach and an essential part of the marketing, branding, and strategy. From research evidence, the first two concepts are essential, but positioning completes the model as it goes a step further from segmentation and targeting in the market to create a place for the product in the minds of the consumers within the target segment. Urde and Koch (2014) discuss brand management from the perspective of the brand platform used by marketers to position a product or service in the appropriate market segment. The evidence shows the need for marketers to establish a position in the market for the brand to appeal to the real and potential customers. Furthermore, positioning includes the brand values and promises it represents within the market (Urde and Koch 2014). From a thorough analysis of research evidence, it is clear that brand positioning involves the creation of the consumer’s perception of the brand or product concerning the competitors.
Market positioning involves working directly with the customers to establish an image or brand such that they experience it appropriately. Different authors have considered the concept from different perspectives. For instance, Aaker and Shansby (2009, p. 56) defines the term positioning as “strategic decision related to the customer’s perception and choice decisions,” while Keller and Lehman (2006, p. 740) considers it as setting “the direction of marketing activities and programs – what the brand should and should not do with its marketing”. Regardless of the differences in the definition of the concept, positioning is considered from the perspective of brand or product position to appeal to the target customers. Research further proves that positioning creates a lasting perception in the minds of the consumers to influence their decision-making in the highly competitive market.
The analysis of research findings reveals a lack of agreement on the appropriate definition of market positioning. However, some scholars have provided marketers with critical insight into the concept, including an idea of the aspects to consider when performing market positioning for the products or brands (Urde and Koch 2014). On the other hand, Kapferer (2012) suggests the need to answer four critical questions to develop a comprehensive understanding of the positioning concept: “1) For whom? (segmentation) (2) In which market? (target market) (3) Promising what? (key elements of the brand core) (4) Proven by what? (evidence supporting the value proposition)” (cited in Urde & Koch 2014, p. 479). Regardless of the lack of a generally agreed definition of the concept, marketers agree that brand positioning is critical in marketing activities.
A Critique of Segmentation, Targeting, and Positioning
Although the approach of STP has been effective in expanding and creating new markets, the current economic trends are limiting the applicability of the model. Firstly, the world markets are accessible both locally and internationally, hence the competition has increased. Therefore, customers can access and purchase from any industry in the world, regardless of geographical aspect that was a challenge in a decade ago. The accessibility of products through online channels has created a challenge in marketing strategies that would like to develop effective strategic positioning and segmentation (Lynn 2011). In addition, the free trade agreements and economic systems initiated by governments have increased competition based on various products and services available in global markets and local industries.
On the other hand, the liberal markets will enhance the creation of significant segments in the market and other segmentation concepts initiated by firms, which might not differentiate the market regarding demand. However, if firms were able to create segments, it would be hard to benefit from them because the drivers of demand might be small to enjoy considerable profits. In addition, new segmentation would not profit much from new industries since e-commerce has emerged, exposing customers to convenient markets that can be accessed through new purchasing channels (Lynn 2011). Although the customer might benefit from positioning and targeting strategies, the aspect of convenience, delivery services, and pricing would encourage a customer to buy products through an online platform regardless of supplier location.
Although STP would appear to work well in theory, in practice the trend might be different. First, those aspects depend on the market a product is operating in. If the market is new and the competition is not aggressive, then the industry can be segmented. However, if the target market is competitive, stable, and mature, especially in developed nations, then targeting and segmentation approaches might not yield competitive advantage (Lynn, 2011). In this kind of market, the success is not based on attracting different customers than the business rivals but innovating new approaches to attract the same customers that enjoy services from the competitors.
Application of Segmentation, Targeting, and Positioning
Segmentation, Targeting, and Positioning (STP) model is commonly used in contemporary marketing efforts. It is one of the most popular models among marketers who realize the real benefits of being market-oriented. However, the popularity of the approach is relatively recent since many of the previous models focused more on the product as opposed to the customer (Khan, 2013). Camilleri (2017) adds that in the 1950s, the primary strategy in marketing was “product differentiation.”’ Although the differentiation still plays a role in marketing, the STP model has proven effective in designing communication plans, allowing marketers to prioritize prepositions and create personalized messages to the target audience. Companies strive to engage the customers to understand and target the right segments and position their brand to become successful. Companies in various sectors have realized the importance of the STP strategy to target the right customers.
Companies are gaining a competitive advantage by using the segmentation, targeting and positioning model. One such firm is Tesla, which has built a brand name in the manufacturing and marketing of electric cars to counter the climate change challenge. Tesla has designed an appealing brand and identified a target market, positioning it effectively to expand its market. The company’s electric vehicle model appeals to consumers seeking luxury cars that are fuel efficient and less damaging to the environment (Pahurkar & Metha 2018). The company builds on brand loyalty to use a driver friendly marketing strategy as the selling point for its highly priced cars.
Tesla has achieved a market niche targeting various generations that are keen on innovation, including those who are above 40 years, those in their 20s and the generation Y as well as the middle class, which are gaining ground in the economy. Therefore, more innovative cars that meet the needs of each group have enabled the company to target its prospective clients (Tansel, 2015). Besides the customers seeking efficient and eco-friendly cars, Tesla targets those desiring quality by manufacturing cars with a sophisticated interior, which will fascinate the tech-savvy segment. The segment in this category includes the young professional who aspires to drive high-end vehicles (Pahurkar & Metha 2018). Consequently, Tesla has positioned its brand in the global market, targeting customers who are most likely to pay the price for luxury and class.
Huawei is one of the leading technology firms internationally. The company has a presence in 170 countries and serves over a third of the global population with its various consumer products including smartphones, A.C, telecommunication solutions, Enterprise solutions, and end-to-end network related solutions (Fu & Fu 2012). Segmentation, targeting, positioning is evident in the company’s marketing mix helping in profiling/grouping the population characteristics and using targeted marketing to position the brand in the global market (Wei, Samiee & Lee, 2014). Besides using different components in its market, the company applies value based and user benefit positioning method based on the particular product offering.
Huawei has been able to position its brand through business to business in many countries across the world. The aspect has enabled it to be among the biggest brands in smartphone manufacturing in the world. Although Huawei produces standardized products and the market demand is the same, the company has segmented its market based on culture, economy, and geography of its target market (Wei, Samiee & Lee 2014). The entire market is then subdivided into sub-markets with the same environment. For instance, Huawei has taken advantage of the Russian market where the economy is characterized by low market growth yet the demand is high.
Panadol is a pain and fever reliever and also fights the symptoms of cold and flu. The marketing team has presented it as an on-the-go health product that provides instant relief to pain and illness. The Panadol brand has dominated the retail market because GSK has used effective marketing strategies for the product. The company has effectively segmented and targeted the market by ensuring that various formulas are used for different client groups. For example, the company has designed Panadol for infants, children, and adults. It has drugs for different kinds and severity of the pain and illness (Stros & Lee 2015). Hence, each market segment is taken into consideration when manufacturing the drug.
The company has also targeted the right clients by ensuring that the drug is an over-the-counter medicine that does not require a prescription from a physician. As a result, it has attracted an increasing number of customers (Stros & Lee 2015). Panadol has an appealing positioning statement, indicating “gentle to the stomach.” The statement acts as an assurance that whoever is taking the product, no side effect would be experienced. Panadol has been positioned in all the outlets, including supermarkets as the best pain and fever reliever. The product is readily available, has high efficiency, no side effects, and can be purchased without a prescription. These factors have positioned this brand in the pharmaceutical industry, making it the leading over the counter drug.
Vaseline is a skincare product patented in the United States but marketed globally. The marketer targets families by manufacturing the product for different ages and preferences. Vaseline Petroleum Jelly’s targeting strategy focuses on various family needs for skin care, starting right from the infants to the adults. The brand’s demographics include 18-60 years old female consumers, particularly those with children. They also have products for single females with career-driven goals and always on the go (Abdullah, Nasreen, & Ravichandran 2012). Hence, the company is strategic in targeting the right segments of consumers for profit maximization.
Vaseline’s targeting strategy further targets families with skin concerns, especially during different seasons such as winters to provide healing for the skin. The product is positioned as a skincare product that can be used by anyone from children to professionals to homemakers (Abdullah, Nasreen, & Ravichandran 2012). Thus, the Vaseline brand has become one of the strongest in skincare across the world.
Companies operating in various sectors are facing numerous challenges, including competition and a growing need for profitability. Kwak and Kim (2013) propose an effective means of improving performance and profitability in industries facing growing rivalry, through the application of segmentation, targeting, and positioning of end-of-life products. The proposal includes the aspect of integrating technology to ensure that companies reuse their products through end-of-life recovery. As a result, the firms that manage them face a reduction in the market share even as more companies rise to create more appealing locations. However, effective use of technology could restore end-of-life products to functionality and appeal to customers through effective targeted marketing.
Segmentation is the beginning place in achieving the objective of achieving profitability. While traditional communication channels could prove ineffective in targeting customers with information about such products, mobile and technological applications can be useful in achieving the objective (Camilleri 2017). For instance, when using the digital communication platforms, companies can post information and collect feedback about the segments of customers that would be interested in visiting such sites or purchasing the products. The data plays a critical role in segmentation and targeting as marketers will analyze the customers and create customized communications targeting the specific customer segment based on their needs, wants, and preferences. Communication enables the companies to position their brands in the market in a way that creates a lasting impression in the mind of the customers.
Effective use of segmentation, targeting, and positioning (STP) model will allow companies in various sectors to remanufacture profitable products and market them using digital communication capabilities. However, marketers should understand the importance of effective decision-making in the application of the model in the digital environment. For instance, marketers are facing an increase in big data, necessitating useful analysis to generate the most accommodating approach in making marketing decisions. Thus, Kwak and Kim (2013) propose the use of valid analysis tools to create the essential information from the raw data and apply it in segmentation, targeting, and positioning. Firms in all sectors can gain a competitive edge in the fast-paced market by using technology in STP.
As it is evident from the analysis, marketers should understand that it is entirely impossible to satisfy all customers, explaining the need to select particular parts of the market that they can serve effectively. Organization can target the most profitable segments and position their brand effectively to achieve their business objectives. Targeted marketing involves the development of a marketing mix using the STP model (market segmentation, targeting, and product/brand positioning). Segmentation entails identification of consumer groups that share characteristics of interest to the marketer. Companies sub-divide their markets using demographic, psychographic, geographic, behavioral and product-related factors. Hence, they effectively target the different segments with a customized message about their products or brands. As a result, the companies have managed to appeal to the smaller groups of consumers, and hence expanding their markets locally and globally.