Topic 2 Notes: STP and Positioning

Days 1 & 2 = All about consumers (mostly final users aka B2C, but some B2B)
Started by covering the internal and external factors impacting the consumer decision making process
Covered the full process

Value proposition formula: we help X (some consumer group) do Y (achieve some benefit) by Z (offering some product/feature/service)
In communicating value, different consumers have different wants, needs, interests, priorities, etc. It can be difficult to appeal to everyone at the same time
Solution: focus on specific customers and customer groups to offer products/services that have a clear and compelling value proposition for those customers
Value proposition representation: $\text{Value Proposition} = (X,\, Y,\, Z)$
This leads to targeting specific segments rather than a mass audience

STP stands for Market Segmentation, Target Marketing, Positioning
Core components: identify segments, select target segments, and position offerings in the minds of those segments
Formula-style view: $\mathrm{STP} = (\mathrm{Segmentation},\; \mathrm{Targeting},\; \mathrm{Positioning})$
Marketing objective: align the value proposition with distinct customer groups

Markets can be viewed as a continuum: everyone wants the same thing, but every individual consumer wants something different
Segmentation = dividing a large heterogeneous market into smaller, more homogeneous markets or submarkets based on meaningful common characteristics
Rationale: to tailor offerings more precisely to needs and wants

Purpose: develop different marketing strategies to best meet segments’ distinct needs and wants
Benefit: can more effectively meet these needs than in a large heterogeneous market
Differentiation = communicating and delivering value in different ways to different customer groups

Start with the generic market: broadly similar needs and sellers offering various satisfying options
Narrow by identifying the product type to be offered
Product-market definition: a market with very similar needs and sellers offering very close substitute ways of satisfying those needs
Relationships: generic market → product-market definition sharpens focus for strategy

Geographic
Demographic
Geodemographic
Psychographic
Behavioral
Note: psychographic is described in some sources as part of the demographic dimension in these slides

Geographic segmentation = based on where consumers are located (Northeast, Midwest, Urban/Suburban/Rural, climate zones, disaster exposure, growth trends, etc.)

Demographic segmentation = based on personal characteristics; Attitudinal vs Actual values; major life events can shape segments
Practical focus on observable characteristics to describe segments

Hybrid form combining geographic and demographic factors; may include psychographic variables
PRIZM-NE profiles every US ZIP code by demographic and psychographic methods
Example segments:
- Retired, senior citizens living in Florida
- Students living in college towns across the US

Psychographic segmentation = based on personality, lifestyles, and values
AIO framework: Attitudes, Interests, Opinions
VALS™ data based on level of resources and primary motivation
Recommendation: take VALS survey to learn more about yourself and how marketers view you
Link (for reference): http://www.strategicbusinessinsights.com/vals/presurvey.shtml

Behavioral Segmentation = consumers are divided into groups based on benefits sought or usage patterns
Benefits sought method = identify crucial value-adding properties of an offering
- Example: car that can fit 4 dachshunds
Usage pattern method = groups based on usage occasions, loyalty, user status (first time vs current/regular vs former vs potential)
- Example: restaurant for an anniversary dinner

SVC opens a new ice cream shop; how many segments can we create using:
- Geographic
- Demographic
- Psychographic
- Behavioral

Criteria for Effective Segmentation:
- Is the segment of sufficient size?
- Is the segment readily identifiable and can it be measured?
- Is the segment clearly differentiated on one or more important dimensions?
- Can the segment be reached in order to deliver the value of the product?

Steps: Analyze Market Segments → Develop Profiles for Each Potential Target Market → Select Target Marketing Approach
Additional considerations: competitive forces; strategic fit between the segment and the firm
Classification by attractiveness: Primary Target Market (focus now for ROI) and Secondary Target Market (future investments)
What approach will we use? Undifferentiated, Differentiated, Concentrated, Customized

Undifferentiated = broadest approach; unsegmented mass marketing; One product for ALL consumers using SAME marketing mix
Differentiated (Differentiation) = developing different value offerings for different targeted segments; Multiple products for Different Consumer Groups using DIFFERENT marketing mix
Concentrated = focus or “niche” strategy (target a large portion of a small market); Single Consumer Group using SAME marketing mix; Multiple Products for ONE Consumer Group using SAME marketing mix
Customized (One-to-One) = focus on establishing a learning relationship with each customer and then make products as customized as possible for individual customers; Many Products for Individual Consumers using DIFFERENT marketing mix

A segmenter develops a different marketing mix for each segment (single target market approach vs multiple target market approach)
Strategy 1, Strategy 2, Strategy 3 illustrate differentiated approaches; A combiner aims at two or more submarkets with the same marketing mix

Positioning = where a product/service exists in the minds of consumers in relation to other similar products/services
Positioning is not something done to the product; it’s what the company does in the mind of the consumer
Positioning is created through the marketing mix (all 4 P’s) and ongoing consumer perception

Requires Research!!! We can’t just assume how consumers will view our offering
Use focus groups to identify product/service attributes that the consumer (segment) cares about
Administer surveys comparing our offering(s) and competitors’ offering(s)
Use gap analysis to determine if what we meant to offer aligns with what consumers perceive we offer and how this relates to competition

Perceptual Map = visual representation of product positioning in the consumer’s mind
Process: take two important attributes identified by focus groups, place them on a grid, and map products based on survey results

Axes (example): Prestige vs Sportiness (with labels such as A: Low prestige, B: High prestige, C: Highly sporty, D: Not Very Sporty)

Activity: create a perceptual map for beverages using two characteristics:
- Very Healthy vs Not Very Healthy
- Very Energizing vs Not Very Energizing

Under-positioning = vague idea about the company and its products; no real differentiation
Over-positioning = too narrow understanding of the company, product, or brand
Confused positioning = frequent changes and contradictory messages confuse consumers
Doubtful positioning = claims are not credible to consumers