Marketing Segmentation, Targeting and Positioning (STP Analysis)

The Value Proposition

A VALUE PROPOSITION REFERS TO CONSUMERS’ PERCEPTION OF THE BUNDLE OF BENEFITS OFFERED BY A SUPPLIER TO SATISFY THE CONSUMERS’ NEEDS AND/OR WANTS.

TO OFFER AN EFFECTIVE VALUE PROPOSITION, A SUPPLIER NEEDS TO:

1. Understand what constitutes value for customers
2. Create better value than its competitors
3. Convince its customers that this is true

IF A VALUE PROPOSITION IS EFFECTIVE, IT WILL BE PERCEIVED AS SUPERIOR BY THE CONSUMERS BEING TARGETED.

THE VALUE PROPOSITION AND CONSUMER DIVERSITY

NOT EVERY CONSUMER WILL PERCEIVE A VALUE PROPOSITION IN THE SAME WAY. VALUE IS IN THE EYE OF THE BEHOLDER AND BEHOLDERS CANNOT BE EXPECTED TO SEE THE SAME VALUE IN A VALUE PROPOSITION.

IT IS THE VARIATION IN CONSUMERS’ VALUATION OF VALUE PROPOSITIONS IN A MARKET  THAT SUPPORTS COMPETITION IN THAT MARKET. 

A BUSINESS CAN USE STP ANALYSIS TO MAKE INFORMED DECISIONS ABOUT THE MARKETS WHERE THEY CAN OPERATE EFFECTIVELY AND HOW.

Target Marketing Strategy: Selecting and Entering a Market

• Divide the total market into different segments based on customer characteristics (Segmenting)
• Select one or more segments (Targeting)
• Develop products to meet the needs of those segments and communicate  the benefits (Positioning)

 Step 1: Segmentation

Divide a larger market into smaller pieces based on one or more meaningful shared characteristics

The segments need to be similar within the group but different to other groups

What is a market?

A group of people who, as individuals or organisations, have needs for products in a product class and have the ability, willingness and authority to purchase such products.

Ø  Must need or desire a particular product

Ø  Must have the ability to purchase the product

Ø  Must be willing to use their buying power  to purchase the product

Ø  Must have the authority to buy the product

Can marketing be standardized?

•       Global Advertising Effectiveness – e.g. Nestle

Ø  The communications message is based on similar lifestyles

Ø  The appeal of the ad is to basic human needs and emotions

Ø  The product satisfied universal needs and desires.

Mass Marketing

•       Mass Marketing

Ø  Offering the same product and marketing mix to all consumers, also known as undifferentiated marketing.

•       Mass Marketing Issues

Ø  Appropriate if all consumers were alike, had the same needs, wants, and desires, the same background, education, and experience.

Ø  Benefits are that it is a low cost marketing strategy - one advertising and promotional strategy targeted to a single market for a generic product.

Why Segment the Market?

•          Allows producers to avoid head on confrontation in the marketplace by differentiating by price, styling, packaging, promotional appeal, usage, and distribution.

•          Increased costs of segmentation ie shorter production runs, different promotional campaigns, consumer research etc is more than offset by increased sales.

•          Follows the principles of the “marketing concept”.

•       Virtually all product categories in the consumer market are highly segmented.

•       Segmentation provides a marketer the opportunity to expand the market by better satisfying the specific needs and wishes of particular customers.

A market segment…

consists of individuals, groups, or organisations with one or more similar characteristics that cause them to have relatively similar product needs

Segmenting b2b markets

Segmentation helps B2B firms understand the needs and characteristics of potential customers.

Many of the same bases used to segment consumer markets are used to segment B2B markets. However, there are generally fewer behavioural-based segments in B2B markets.

•       Segmentation bases are criteria used to classify buyers.

•       The main types of buyer characteristics used to segment consumer markets are behavioural, demographic, geographic, and psychographic.

•       Behavioural segmentation divides people and organization into groups according to how they behave with or toward products.

•       Demographic segmentation segments buyers by tangible, personal characteristics such as their age, income, ethnicity, family size, and so forth.

•       Geographic segmentation involves segmenting buyers based on where they live.

•       Psychographic segmentation seeks to differentiate buyers based on their activities, interests, opinions, attitudes, values, and lifestyles.

•       Often businesses use multiple bases.  No one base is always better than another.

•       Marketers develop consumer insight by gather both quantitative and qualitative information about their customers.

•       Many of the same bases used in B2C markets are used to segment B2B markets. However, there are generally fewer behavioral-based segments in B2B .

Step 2: TARGETING

1. Each segment is profiled before it can be assessed
2. A strategy in which marketers evaluate the attractiveness of each potential segment and decide in which segment they will invest resources to try to turn them into customers
3. The customer group(s) selected are referred to as the target market

Phases of Targeting

Evaluate Market Segments

 Developing Segment Profiles

After segments are identified, profiles or descriptions of the “typical” customer in a segment are developed

–      Segment profiles might include demographics, location, lifestyle, and product-usage characteristics

Choosing a Targeting Strategy

Undifferentiated

–      Appealing to a broad spectrum of people

Differentiated

–      Developing one or more products for each of several customer groups

Concentrated targeting (niche) strategy

–      Offering one or more products to a single segment

Custom marketing strategy

–      Tailoring specific products to individual customers

–      Common in personal and professional services, and in industrial marketing

Mass customization

–      Modifying a basic good or service to meet the needs of an individual

Customized marketing strategy

• Tailoring specific products to individual customers
• Common in personal and professional services, and in industrial marketing
• Mass customization
  Modifying a basic good or service to meet the needs of an individual

Step 3: Positioning

Developing a marketing strategy to influence how a particular market segment perceives a good/service in comparison to the competition

–      The ad at right positions Colgate Total as a toothpaste that fights germs for 12 hours

Positioning is what exists in consumers’ minds about a product or supplier!

Stages in a Positioning Decision

 Modifying Positioning Strategies

•       Repositioning is commonly used to change the brand image

Ø  Requires redoing a product’s position in response to marketplace changes

•       Repositioning by finding new users  for existing products

The Brand Personality

•       Brand personality:
A distinctive image that captures the brand’s character and benefits

•       Personality dimensions:

–      Sincerity                               Example?

–      Excitement         Example?

–      Competence      Example?

–      Sophistication    Example?

–      Ruggedness       Example?

Customer Relationship Management (CRM): Toward a Segment of One

•       Customer relationship management:

–      A systematic tracking of consumers’ preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individual’s unique wants and needs

CRM: A New Perspective on an Old Problem

•       CRM systems capture information

•       CRM systems include:

Ø  Order and delivery tracking websites

Ø  Call centers

Ø  Automatic reminder systems

Sales contact management software