What is Market Segmentation (STP) Segmentation, Targeting, and Positioning in Marketing?
What is a Customer-Driven Marketing Strategy?
Modern companies know they can’t appeal to all buyers in the market in the same way. The market is vast, and customers are widely scattered with varied needs. Because of this, companies must move away from mass marketing and instead design customer-driven marketing strategies that build the right relationships with the right customers.
This powerful strategy is built on three core steps, often called the STP model:
Market Segmentation
Market Targeting
Positioning
Let’s break down each step.
1. Market Segmentation: Dividing the Market
Market segmentation is the process of dividing a large, heterogeneous market into smaller, relatively distinct, and homogeneous sub-groups of consumers. These consumers share similar needs or characteristics that lead them to respond in similar ways to a particular marketing program.
Requirements for Effective Segmentation
For segmentation to be a meaningful strategy, five conditions must exist:
The market must be heterogeneous: If all consumers have the same needs, there is no point in segmenting.
Segments must be identifiable: There must be a logical basis (like age, income, or lifestyle) to divide the population into distinct groups.
Segments must be measurable: You should be able to estimate the sales potential, costs, and profits of each segment.
Segments must be profitable: At least one segment must have enough profit potential to justify the cost of developing a dedicated marketing program for it.
Segments must be reachable: It must be possible to effectively reach the target segment with your marketing efforts.
Bases for Segmenting Consumer Markets
Choosing the right variable to segment the market is critical. Here are the most common bases used:
Geographic Segmentation
This involves dividing the market based on geographic units like nations, states, regions, or even urban vs. rural areas. The assumption is that consumers in a particular area share similar preferences.
Example: People in West Bengal have different food habits and dress codes than people in South India.
Demographic Segmentation
This divides the market based on variables such as age, gender, income, education, family size, and social class.
Example: Toy manufacturers like Funskool segment the market based on the age of children, while car manufacturers use income as a key variable.
Psychographic Segmentation
This segmentation is based on consumers’ lifestyle or personality characteristics. It looks at their activities, interests, and opinions (AIO) to understand how they live and spend their time and money.
Example: The Bajaj Pulsar is positioned as “definitely male,” targeting customers with a certain psychographic profile.
The VALS Framework: A popular psychographic tool, VALS (Values and Lifestyles) divides consumers into eight groups based on their primary motivations and resources. These groups include Innovators, Thinkers, Believers, Achievers, Strivers, Experiencers, Makers, and Survivors.
Behavioral Segmentation
This divides buyers based on their behavior towards a product. Key variables include:
Use Occasion: When buyers get the idea to buy or use a product (e.g., Archies greeting cards for different occasions).
User Status: Segmenting into non-users, potential users, first-time users, etc..
Usage Rate: Segmenting into light, medium, or heavy product users.
Loyalty Status: Dividing buyers according to their degree of brand loyalty.
Benefit Segmentation
This powerful approach involves identifying and grouping consumers based on the specific benefits they seek from a product.
It focuses on why consumers buy a product.
Example: In the toothpaste market, different segments look for different benefits. One group wants decay prevention (Pepsodent), another wants whiter teeth (Close-Up), and a third is focused on taste (Aquafresh).
2. Market Targeting: Choosing Your Segments 🎯
Once you have identified the different segments, the next step is market targeting. This involves evaluating each segment’s attractiveness and selecting one or more segments to enter. A company should target segments where it can profitably generate the greatest customer value and sustain it over time.
There are three basic targeting strategies:
Undifferentiated (Mass) Marketing: The company ignores segment differences and goes after the whole market with one offer. It focuses on common needs rather than differences.
Differentiated (Multiple Segment) Marketing: The company decides to target several market segments and designs separate offers for each. This generally leads to higher sales but also increases costs. For example, Maruti produces different car models for various segments.
Concentrated (Niche) Marketing: Instead of pursuing a small share of a large market, the company goes after a large share of one or a few smaller segments or niches. This is especially appealing for firms with limited resources.
3. Positioning: Creating a Clear Identity 📍
After choosing its target segments, a company must decide on its positioning. Positioning is the perception of a brand or product that it brings about in the mind of a target consumer. It reflects the essence of the brand and how it is different from competitors.
Example: Nestle’s Maggi is positioned as the “two minute” noodle, BMW is positioned as the “ultimate driving machine,” and Lux soap is positioned as the “beauty soap” of film stars.
Positioning and Differentiation
Positioning begins with differentiation—actually creating a distinct and distinguished offering that provides superior value to the customer.
A company can differentiate its market offering through:
Product Differentiation: Differentiating on features, performance, or design.
Service Differentiation: Adding valued services like speedy delivery (Domino’s) or better customer support.
Personnel Differentiation: Gaining an advantage through better-trained employees.
Image Differentiation: Building a unique and strong brand image that the public perceives in a certain way.
Common Positioning Errors to Avoid
Underpositioning: Buyers have only a vague idea of the brand and don’t see anything special about it.
Overpositioning: Buyers have too narrow an image of the brand (e.g., thinking a company only sells expensive products).
Confused Positioning: The company tries to create too many associations or repositions too frequently, leaving customers confused.
Doubtful Positioning: Buyers find the brand’s claims unbelievable given its features, price, or manufacturer