STP Notes Lecture 5

Introduction to STP in Marketing

  • Focuses on Segmenting, Targeting, and Positioning (STP) within Marketing 317.

  • Aims to understand customers in detail, moving beyond general research of needs.

  • Essential to determine how to develop products, pricing, distribution channels, and promotions effectively.

Market Segmentation

  • Definition: Grouping similar individuals based on commonalities in characteristics.

Importance of Segmentation

  • Allows for a precise focus on customer similarities rather than differences.

  • Segmentation aids in identifying homogeneous groups within heterogeneous markets.

  • Aims to create distinctive features for targeted groups that remain sizable enough for marketing efforts.

  • Crucial for progressing to the marketing mix components (product, price, place, promotion).

Reasons for Segmentation

  • Even widely appealing products are often aimed at specific segments to maximize efficiency.

  • Consumer response varies based on individual needs and preferences.

  • Affordability issues make it impractical for companies to target the entire market.

Characteristics of Segments

  1. Title: A descriptive reference for the segment.

  2. Basis of Segmentation: Key characteristics that define segments.

    • Geographic: Where individuals reside.

    • Demographic: Who the individuals are (age, gender, education, occupation, etc.).

    • Psychographic: Interests, activities, opinions, and lifestyle.

    • Behavioral: Product usage, frequency, and occasion of use.

Bases of Market Segmentation

Geographic Segmentation

  • Involves analysis based on a company's operational regions.

  • Typically begins with broad areas (e.g., country, region) and narrows down to local communities.

  • Contextual approach: Specific segments are identified based on company needs or growth strategies (e.g., market development).

  • Factors to consider:

    • Climate

    • Population size

    • Urban vs. rural preferences

Demographic Segmentation

  • Involves detailed research to categorize consumers:

    • Age: Segmenting into firm ranges (e.g., 20-30 years). Avoid singular ages.

    • Gender: Targeting based on gender considerations or inclusivity.

    • Education & Occupation: Establishing average education levels or types (white-collar, blue-collar).

    • Income: Differentiating between disposable (after tax necessities) and discretionary income (luxuries).

    • Marital Status: Often linked to the family life cycle.

Family Life Cycle Segmentation

  • Examines consumer behaviors based on familial roles (e.g., young and single, married with children).

Psychographic Segmentation

  • Focuses more on the lifestyle aspects of consumers, requiring more in-depth analysis.

  • Data must be supported through research, exploring:

    • Interests

    • Daily activities

    • Opinions on lifestyle relevance to the marketing context.

Behavioral Segmentation

  • Analyzes consumer attitudes and beliefs about products, including:

    • Usage: Frequency and amount of product use (not brand-specific).

    • Occasion: When the product is used (e.g., seasonal vs. everyday items).

    • Loyalty: Varies by segment; data-driven analysis required.

    • Benefits: Identifying which aspects are most desired by the target segment (physical, emotional, mental).

Criteria for Effective Segmentation

  1. Measurable: Can the segment be quantified using data sources like Statistics Canada?

  2. Meaningful: Possibility of access to the segment, including potential societal challenges in targeting.

  3. Profitable: Segment should have sufficient resources and market potential.

  4. Homogeneity: Internal consistency within segments, distinct from others.

  5. Market Response: Will the segment respond uniformly to marketing strategies?

Targeting Strategies

  • Definition: Targeting involves selecting which segments to pursue and how.

Types of Targeting Strategies

  1. Mass Market: Suitable for commodities with widespread access (e.g., sugar).

  2. Differentiated Marketing: Targeting multiple segments with unique offerings (e.g., automotive sector).

  3. Concentrated Targeting: Focusing on a niche segment for specific benefits or needs.

  4. Micro-Market Targeting: Personalizing marketing to individual preferences (e.g., Nike customization).

Considerations in Targeting;

  • External Evaluation: Understanding market competitors and existing segment access.

  • Internal Evaluation: Confirming that products/services match the targeted segment's needs.

  • Social Responsibility: Ethical considerations in targeting vulnerable groups, particularly youths (e.g., advertising strategies pertaining to young consumers).