3.3.3 STP

Segmentation

divide the market into groups with similar characteristics such as needs and wants

Targeting

Decide which market segment to focus on and adapt the product to appeal to this group.

Positioning

Position the product in the target customers' minds so they see it as better than the competition.

How are markets segmented

Demographics
Geographic
Income
Behaviour

Geographic

divided to neighbourhoods, city, countries, or region
used by mulit-national countries

Income

Socio-economic class (businesses can segment their market based on the kind of jobs people have)

Behaviour

the life customs actually lead, when they buy, how much they buy

Benefits of market segmentation

-Identifies opportunities for new product development
-”ride the wave” in fast growing markets
-Improves the allocation of marketing resources

Drawbacks of market segmentation

-Difficult to identify the key groups needed
-Difficult to reach the chosen groups
-The segments may not always stay interested in the product
-not an exact science

uses of market segmentation

-identifying a consumer base for the product
-identifying a consumer need the product can satisfy
-identifying a focus for integrated marketing communications

niche market

A smaller part of a larger market in which customers have more specific needs and wants

Mass Market

all possible customers in a market, regardless of the differences in their specific needs and wants

Mass market advantages

+Large Customer Base = High sales revenues
+Economies of Scale = Lower production/ unit costs

Mass market disadvantages

-Severe Competition
-High Promotion Costs = reduces profitiabilty
-Have to be price competive = lower profit margins

Niche market advantages

+Less competition = Can set prices High
+Easier to satisfy customer needs = Repeat Purchases

Niche market disadvantages

-Very little room for expansion
-Lack of economies of scale = Higher Unit Costs

Targeting Strategies

Product aimed at everyone with same marketing strategy.
Product aimed at a specific targeted group of consumers and
marketing strategy reflects this.
Each market segment will be targeted in the most appropriate way by individual marketing strategy.

Positioning and competitiveness

-Price
-Brand image
-level of service the products provides
-benefits that the product offers