Mark- Segmentation, Targeting & Positioning (STP)

STP: What does STP stand for?

Segmentation, Targeting, and Positioning.

• Segmentation = Divide the market.

• Targeting = Choose which groups to serve.

• Positioning = Create a distinct place in consumers' minds.

Segmentation: What is market segmentation?

Dividing a larger market into smaller groups of consumers who share similar characteristics, needs, or buying behaviors.

Trigger: Dividing customers into groups → Segmentation.

Segments: What is a market segment?

A group of consumers who are similar to each other in relevant ways but different from consumers in other groups.

STP: What is the correct order?

1. Segmentation

2. Targeting

3. Positioning

Trick: A company must identify its segments before deciding which to target.

Demographic Segmentation: What is it?

Dividing consumers based on measurable population characteristics.

Examples: Age, income, gender, education, occupation.

Trigger: WHO the consumer is.

Geographic Segmentation: What is it?

Dividing consumers based on location.

Examples: Country, state, city, climate, urban vs. rural.

Trigger: WHERE the consumer lives.

Psychographic Segmentation: What is it?

Dividing consumers based on lifestyle, personality, values, interests, or attitudes.

Trigger: HOW consumers think or live.

Behavioral Segmentation: What is it?

Dividing consumers based on their actions and behaviors toward products.

Examples: Brand loyalty, purchase frequency, buying habits.

Trigger: WHAT consumers do.

Usage Segmentation: What is it?

Dividing consumers based on how frequently or heavily they use a product.

Examples: Heavy, medium, and light users.

80/20 Rule: What does it mean?

A common marketing principle suggesting that approximately 80% of sales may come from 20% of customers.

Trigger: Small group of customers generates most sales.

Benefits Sought Segmentation: What is it?

Dividing consumers based on the specific benefits they want from a product.

Example: Buying shampoo for volume, hydration, or dandruff control.

Trigger: WHY consumers want the product.

Occasion Segmentation: What is it?

Dividing consumers based on when or for what occasion they use a product.

Examples: Holidays, birthdays, weddings, everyday use.

Trigger: WHEN consumers use the product.

Combination Segmentation: Can companies use multiple segmentation variables?

Yes. Companies can combine demographic, geographic, psychographic, and behavioral factors to identify more specific consumer groups.

Example: Targeting high-income, fitness-focused young adults in urban areas.

Scenario: A skincare company targets women ages 18–25. What segmentation is used?

Demographic — based on age and gender.

Scenario: A retailer sells winter coats primarily in colder states. What segmentation is used?

Geographic — based on climate or location.

Scenario: A brand targets environmentally conscious consumers. What segmentation is used?

Psychographic — based on values and lifestyle.

Scenario: Starbucks rewards customers who purchase coffee daily. What segmentation is used?

Behavioral segmentation — specifically usage frequency, because customers are grouped based on how often they purchase coffee.

Scenario: A toothpaste company targets customers seeking whitening benefits. What segmentation is used?

Benefits sought — based on the desired product benefit.

Scenario: A chocolate company promotes gift boxes for Valentine's Day. What segmentation is used?

Occasion — based on a specific holiday or purchasing occasion.

Scenario: A business focuses on customers who purchase its products most frequently. What segmentation is used?

Usage segmentation — based on heavy users.

Market Segmentation Process: What are the main steps?

• Identify the basis of segmentation.

• Develop consumer profiles.

• Estimate market potential.

• Forecast probable market share and profits.

• Select segments to target.

Basis of Segmentation: What does identifying the basis mean?

Choosing which characteristics will be used to divide the market.

Example: A premium beer company considers income, age, and geographic region.

Cross-Tabulations: What are they?

Analytical tables used to examine relationships between two or more variables.

Example: Comparing income groups with premium beer preferences.

Trigger: Comparing categories to identify patterns → Cross-tabulations.

Pivot Tables: How are they used in segmentation?

They help summarize and compare consumer data to identify potential market segments.

Consumer Profiles: What are they?

Descriptions of the characteristics, preferences, and buying behaviors of consumers within a segment.

Consumer Profiles: What product-related information should marketers include?

Consumption preferences, buying occasions, brand loyalty, purchase triggers, decision-making process, and shopping preferences.

Market Potential: What is it?

The estimated total sales opportunity available in a market or segment, NOT the amount one company will necessarily sell.

Probable Market Share: What is it?

The percentage of a market's sales a company expects to capture, considering competition. Trigger: How much of the market can OUR company realistically win?

Market Potential vs. Market Share: What's the difference?

Market potential = Total sales opportunity.

Market share = Portion of actual or expected market sales captured by a company.

Trick: A large market does not guarantee a large market share.

Profit Forecasting: Why estimate profits before selecting segments?

To determine whether expected revenue will exceed the costs of reaching and serving the segment.

Targeting: What is it?

Selecting the market segment or segments a company wants to serve.

Trigger: CHOOSING which customers to focus on.

Segment Size: Why does it matter?

A segment must contain enough potential customers to justify serving it.

Expected Growth: Why does it matter?

A growing segment may provide more future sales opportunities.

Cost of Access or Reach: What does it mean?

The cost of marketing to, distributing to, and serving customers within a segment.

Trick: A large segment may be unattractive if reaching it is too expensive.

Structural Factors: What are they?

Competitive and industry conditions that influence how attractive a segment is.

Examples: Strong competitors and powerful buyers or suppliers.

Competition: How does it affect segment attractiveness?

Strong competition may make it harder to gain market share and earn profits.

Supplier and Buyer Power: Why do they matter?

Powerful suppliers can raise costs, while powerful buyers can pressure companies to lower prices. Both can reduce profitability.

Compatibility with Firm Objectives: What does it mean?

The selected segment should align with the company's goals, resources, and overall strategy.

Targeting Scenario: A company identifies five segments but chooses two to serve. What is this called?

Targeting — selecting specific segments to pursue.

Product Position: What is it?

How consumers perceive a brand relative to competing brands on important attributes.

Trigger: How customers SEE the brand compared with competitors.

Product Positioning: What is it?

Developing a distinctive brand image or place in the minds of target consumers.

Trick: Positioning concerns consumer perceptions, not simply where a product is displayed in a store.

Positioning Map: What is it?

A visual diagram showing how consumers perceive competing brands based on two or three important attributes.

Example: Comparing brands based on price and quality.

Trigger: Visual comparison of competing brands = Positioning Map.

Value Proposition: What is it?

The complete combination of benefits a brand promises to deliver to consumers.

Trigger: Overall value and benefits offered.

Unique Selling Proposition (USP): What is it?

A distinctive benefit or feature that makes a brand stand out from competitors.

Trigger: What makes this brand UNIQUE?

Cannibalism: What is it in marketing?

When a company's new or existing product takes sales away from another product owned by the same company.

Example: A new P&G detergent attracts customers who previously purchased another P&G detergent.

Trigger: One company's product steals sales from its OWN other product.