unit 8: STP framework (segmentation, targeting & positioning)

what is strategic thinking?

select & focus

• customers are different

• firms have limited unique resources

• differentiation from competitors

why do we need the STP framework?

create value for target customers

• select customers to serve → segmentation + targeting

• decide on value proposition → differentiation + positioning

what is market segmentation?

• companies divide large diverse markets into small segments based on different needs, characteristics, or behavior

• as similar as possible within a group, as different as possible between groups

what factors affect consumer judgements & behaviors?

• cultural

• social

• personal

• psychological

what are the requirements for effective segmentation?

• measurability (identifiable)

• accessibility (reachable)

• responsiveness (actionable)

• differentiability

• substantiality

effective segmentation: measurability

can you actually measure the group?

effective segmentation: accessibility

can your business actually reach them?

effective segmentation: responsiveness

can you create a special marketing campaign or product that will make them want to buy?

effective segmentation: differentiability

if you change up your marketing mix (price, advertising), does this group respond differently compared to other groups?

effective segmentation: sustainability

is the group big & profitable enough

what are the common segmentation criteria in consumer markets?

• geographic

• demographic

• benefit

• usage rate

• etc.

geographic segmentation

divides a market by physical location, such as countries, regions, states, counties, or cities

demographic segmentation

divides a market into groups based on variables such as age, gender, family size, household type, income, occupation, education, religion, race, generation, nationally

gender segmentation

divided the market based on gender

age & household type segmentation

tailoring products or marketing to target people based on their age & life-cycle groups

income segmentation

dividing the market into wealthy or low-income consumers

psychographic segmentation

divides buyers into different groups based on social class, lifestyle, personality traits

behavioral segmentation

divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product

• occasions

• benefits sought

• user status

• usage rate

• loyalty status

what are the benefits of segmentation?

• identify smaller, homogenous, better-defined target groups

• identify & understand key customer segments (target customers)

• tailoring market offerings/messages to customers’ specific needs

what do segmentation systems help marketers do?

group people & locations into marketable groups of like-minded consumers

what is market targeting?

evaluating market segments and choosing best one(s) to sell to

what are 3 factors to consider when choosing a target market?

• segment size & growth

• segment structural attractiveness

• company objectives & resources

what is segment size & growth?

how large the segment is & how fast it is growing. larger segments = more potential customers

what is segment structural attractiveness?

competition; how many competitors in a chosen segment

what are company objectives & resources?

if segment fits company’s goals & company has resources to sell to it

what is a target market?

set of buyers who share common needs/characteristics that the company decides to serve

measurability

can the company measure how big the group is & understand its characteristics

accessibility

can the company reach the customers?

substantiality

is the group large/profitable enough to target?

differentiability

are the groups different enough to need different marketing strategies?

accessibility

can the company create marketing strategies to serve the group?

what are the market coverage approaches?

• undifferentiated marketing (mass marketing)

• differentiated marketing (multi-segment targeting)

• concentrated marketing (niche strategy)

• micro-marketing

undifferentiated marketing

• targets whole market with one offer

  • mass marketing

  • focuses on common needs

differentiated marketing

• targets different market segments & designs separate offers for each

  • goal: higher sales & stronger position

  • more expensive

  • separate 4 Ps for each identified target market

concentrated marketing

• targets one segment of a large market

  • limited company resources

  • knowledge of the market

  • more efficent & effective

  • so many companies introduce low-quality low-price products

micromarketing

• tailoring products/marketing programs suit tastes of specific individuals & locations

  • local marketing (local customer groups)

  • individual marketing (individual customers)

what do you need to consider when choosing a right targeting strategy?

• company resources

• product variability

• product variability

• product life-cycle stage

• market variability (similar/different buyers’ taste, income, purchasing habits)

• competitor’s marketing strategies

differentiated & positioning

business strategy of making a product distinct from competitors & establishing unique space for it in the market

competitive positioning

overall strategy used to set a product apart from rivals in the market

product position

• way product is defined by consumers on important attributes

• place a product occupies in the minds of consumers compared to competing products

what are 3 key attributes of product position?

• perception

• feelings

• impression

what is positioning commonly based on

• product attributes (price, quality, design, etc.)

• benefits

• usage occasions (times, events, situations can be used)

• users (group of consumers)

• vis-a-vis competitors (against competitors)

• product classes (a product against an entire category of products rather than single competitor)

• combinations (multiple strategies)

competitive advantage

advantage over competitors gained by offering consumers greater value

what are the steps of differentiation & positioning

1. identify a set of possible competitive advantages

2. choosing the right competitive advantage

3. selecting an overall positioning strategy

4. developing a positioning statement

step one: identifying a set of possible competitive advantages

• product differentiation

• service differentiation

• channel differentiation: how easy can customer’s access/buy

• people differentiation: better staff than employees

• image differentiation: brand identity

step two choosing the right competitive advantage

difference to promote should be

• important

• distinctive

• superior

• communicable

• preemptive: be first from chosen attribute

• affordable

• profitable

step three: selecting an overall positioning strategy

• benefit - cost = value

• value proposition: benefits brand offers that make customers choose them instead of competitors

step four: developing a positioning statement

• brief declaration defining how a brand fits into the market

• concept in terms of benefit and cost, clarify difference of your product vs competitors

what part of strategic positioning is generally harder: choosing the position or implementing the positioning?

implementing the position

what must all of a company’s marketing mix efforts do in relation to it's positioning strategy

they must fully support the positioning strategy

how is an established market position maintained?

consistent performance & communication

what should happen to a product’s position overtime?

be monitored and adapted; market, consumers, competition constantly changing