In today’s modern marketing, Segmentation, Targeting, Positioning or STP marketing is a standard strategic practice. Marketing leaders claim it to be one of the most efficient and streamlined communications practices.
The STP marketing strategy focuses on selecting the most valuable segments for a business and then creating a marketing mix and product positioning strategy for each segment.
In this comprehensive guide, we delve into each aspect of the STP in marketing, providing clarity and actionable insights for businesses aiming to optimise their market approach.
What is STP in Marketing?
STP in Marketing stands for Segmentation, Targeting and Positioning. As said earlier, once you identify your market and group them into look-alike audiences with similar and shared interests and values, you can position your products according to their needs. You tend to effectively communicate with those particular groups using the benefits that those groups of people are looking for.
What is the STP Marketing Model?
The STP of marketing is a hyperfocused method to communicate and position your products before the right audience. Once you identify and categorise your audience based on similar interests, outlook, and other specific factors, you can tailor your marketing messages towards each group in a more relatable and effective way. Likewise, you can appeal to different types of audiences more powerfully.
During the market segmentation phase, first, identify a basis for segmenting your target customers. You also need to determine important characteristics to differentiate each market segment.
Next, during the targeting and positioning strategy phases, we must evaluate the commercial value of each segment. Then, we can design an elaborate product positioning for each customer segment. This includes a tailored marketing mix based on your knowledge of that segment.
1. Segmentation: Dissecting the Market
Segmentation is the initial and crucial step in the STP marketing process. It involves dividing a broad market into smaller, more defined groups.
One thing to remember is that the positioning and messaging for each segment should highlight the value your customers can draw and are currently missing out on. This proves to be more effective rather than relying on a one-size-fits-all marketing approach, as in the words of Seth Godin,
“When you speak to everyone, you speak to no one“
Let’s take a look at the different bases for segmenting your audience. Segmentation must be specific to truly understand the persona to make the next process effective.
Types of Audience Segmentation in B2B and B2C STP Marketing:
- Demographic Segmentation
The B2C STP marketing involves dividing the market based on demographic factors like age, gender, income, education, ethnicity, marital status, household, profession, type of residence, etc. Moreover, for the B2B business, the first step of the STP marketing process involves company size, industry, location, revenue, etc. These information bites help the business understand different industries and their needs for better communication.
- Firmographic Segmentation
Firmographic segmentation emphasises the distinct attributes of a business. This includes the number of employees, purchasing power, organisational structure, and budget conditions. The firmographic information helps a B2B company understand the decision-making process within an organisation. It further helps in creating personalised communication and messages for key stakeholders.
- Geographic Segmentation
Here, you tend to divide the market based on geographic boundaries such as country, region, or city. Geographic data helps businesses understand cultural nuances, regulatory variations, and localised demands. This enables you to tailor your marketing efforts accordingly.
- Psychographic Segmentation
This segmentation is mostly for B2C as it focuses on lifestyle, values, attitudes, and interests. A luxury car brand, for instance, might target consumers valuing prestige and status. It enables you to group people with similar values to appeal to them through communication that sticks to them.
- Behavioural Segmentation
In B2C, the segmentation happens based on consumer behaviour, like usage rate, loyalty, benefits sought and reactions to marketing aspects. A software company might segment its market into regular, occasional, and first-time users.
In B2B, behavioural segmentation groups customers based on their actions, preferences, and interactions with the business. You can also acquire this information from website interactions, purchase history, email engagement, and content consumption. Understanding each segment helps businesses design personalised marketing strategies and cultivate long-term relationships.
2. Targeting: Pinpointing the Ideal Audience
After segmenting the market, the next step is targeting. This involves selecting the segment(s) that the business will focus on. Here’s a list that tells you the things you need to assess the commercial value of each segment.
- Segment Size: The market you are targeting must be of a substantial size to justify the segmented group sizes. If the market size itself is small, the segmenting may get smaller.
- Difference between Segments: Each audience group you created in the earlier step, must have a reasonable difference(s).
- Money: The projected profits must be higher than the cost of all the marketing plans and efforts.
- Different values/benefits for different groups: To communicate your product value effectively, you must identify the values that each segment looks for. Likewise, you can showcase those benefits and increase chances for monetary conversion.
3. Product Positioning: Establishing Market Standing
Positioning involves crafting a distinct image of your brand in the customer’s mind. In this step, you can use the insights that you acquired from the previous two steps: segmentation and targeting. Those insights will help you understand how to communicate your product value to your audience groups. One example is that if you are planning to sell to a price-conscious segment, your positioning must focus on highlighting the product as a high-value lifestyle item.
Multiple brands tend to find gaps in the market using a positioning map. Such a map helps you compare two different variations on a spectrum.
The purpose of this map is to find a gap in the market positioning that would show an uncharted opportunity that you can leverage and position your product likewise with less competition in that space. In this dummy example above, perhaps, you’ll find that no one offers economical big family cars.
Here are a few common aspects that help you position your product:
- Symbolic Aspect: This factor focuses on the impression or status that comes along with owning a particular product. For example, luxury and premium brands smartly use this symbolic aspect to signify the essence of exclusivity, power and prestige.
- Functional Aspect: The functional factor is mostly regarding solving problems or discomfort that your audience is currently facing. This is all about finding your customers’ pain points and positioning your product to resolve their biggest issues.
- Experiential Aspect. This focuses on your audience’s feelings whenever they use your product. Brands like Hallmark employ experiential positioning to appeal to customers’ emotional connections with their brands.
These are the three common factors that will help you in your positioning. However, you can customise it to match your business requirements.
STP Marketing Examples: 3 Brands That Use STP Marketing
The STP marketing model is thus an effective process to communicate to your audience about your product’s value. Due to the hyperfocused messaging and targeting of the STP marketing model, the chances of monetary conversion increase. However, to understand this concept in action, here are certain STP marketing examples of brands that use this technique of effective communication.
1. Starbucks: Starbucks targets high-income big spenders in the busy urban region, technology adopters, health-conscious professionals, and drivers of change. Likewise, by segmenting the coffee market and targeting higher-income, convenience-seeking customers, Starbucks positioned itself as a premium coffee brand, different from traditional coffee shops.
2. Nike: Nike targets athletes and fitness enthusiasts, positioning itself as a provider of innovative, high-quality sportswear. Nike targets middle-aged consumers with high disposable income and develops its relationship with younger audiences to ensure future growth. This also helps them build life-long brand enthusiasts. Moreover, the brand also taps into the youth demographic, noted as the favourite footwear and apparel brand for teens in 2019 in the US.
3. Apple: Apple dominated STP marketing as it had a highly specific segment and didn’t target the whole world. The brand taps into a segment that includes high-income and well-off people who care about details like design, performance, and luxury. Apple simultaneously marketed itself as a high-end premium brand using symbolic and experiential positioning.
Understanding the Role of Pricing in STP Marketing
Pricing methods are crucial for drawing in customers from various groups. When setting prices for your products or services, think about what each group likes. Some people might look for cheaper options, while others might prefer high-quality things. Do some research to find out how much people are willing to spend on products like yours. This way, you can set prices that match what people expect and are competitive.
As the market gets complex, pricing is becoming a more powerful factor to drive profit margins. Hence, a growing need for a strong Artificial Intelligence-powered pricing tool can help you automate your pricing process and also offer uniform discounts to your channel partners leaving healthy profits for each channel. You can research into whether you Should Invest in Pricing Software or Not.
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1. Segmentation and Price Sensitivity:
In the segmentation phase, understanding the price sensitivity of different market segments is crucial. Different groups may have varying levels of price sensitivity. For example, luxury buyers might be less price-sensitive compared to value-driven consumers. Pricing strategies need to reflect these differences to cater effectively to each segment.
2. Targeting with Price as a Key Differentiator:
When targeting specific segments, pricing can be a decisive factor. For businesses, choosing a target segment often involves assessing which groups are most profitable, and pricing strategies play a significant role in this assessment. For instance, targeting premium segments might involve setting higher prices to reflect the perceived value and exclusivity of the product.
3. Positioning Through Pricing Strategies:
Pricing is a powerful tool in positioning your product or service in the market. A high price point can position a product as premium or luxury, while competitive pricing can position it as an affordable, value-for-money option. The price must align with the overall brand image and the expectations of the targeted segment.
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Practical Pricing Applications in STP Marketing
Here are some practical pricing tips for your STP marketing strategy:
- Dynamic Pricing Strategies:
Dynamic pricing, where prices change based on demand, competition, or other factors, can be highly effective in STP marketing. For instance, a software company may use the dynamic pricing solution to attract small businesses with more affordable options while offering premium features at higher prices to larger corporations.
- Psychological Pricing:
Psychological pricing techniques, such as charm pricing (e.g., $9.99 instead of $10), can be particularly effective in more price-sensitive segments, making products appear more affordable.
- Tiered Pricing Models:
Offering multiple pricing tiers can cater to different segments simultaneously. For example, a basic, standard, and premium pricing tier can appeal to budget-conscious consumers, the general market, and luxury-seekers, respectively.
- Price Promotions and Discounts:
Strategic use of discounts and promotions can attract specific segments. For instance, seasonal discounts can target budget-conscious shoppers, while exclusive offers can attract premium segment customers looking for unique deals.
In STP marketing, pricing isn’t just about setting a cost for products or services; it's a strategic tool that interacts intricately with each stage of the STP framework. Effective use of pricing in segmentation, targeting, and positioning can significantly enhance market penetration, customer satisfaction, and profitability. Businesses must carefully analyze their market segments to develop pricing strategies that align with their overall STP marketing objectives.
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Best Practices for STP Marketing: How to Create an Effective STP Marketing Strategy?
Using an STP marketing strategy can make your business more successful in its target market. Here’s how to do it with the STP marketing model:
1. Understand Your Market: First, figure out the total size of your market, how much of it you can serve, and how much you can actually reach. This helps you know the number of potential customers.
2. Divide Your Audience: Use the advice in this article to split your audience into groups based on where they live, their age and lifestyle, how they behave, and other factors. You'll end up with different groups at this point.
3. Choose the Best Groups: Find out which groups fit your marketing plans best. See which groups are most likely to bring in money and focus on them.
4. Check Out Your Competitors: Don’t forget about your competitors. Compare what you offer to what they do. Look into what they do well and where they don’t. Make sure what you offer is something the market needs and gives people a good reason to choose you.
5. Decide How to Position Your Product: Decide how you want people to see your product or service. This could be based on its symbol, how it works, the experience it gives, its price, how it's different from competitors, or its status.
6. Plan Your Marketing Mix: Use the 4 Ps of marketing - Product, Price, Place, and Promotion - to complete your marketing plan. Think about what your product does, how much it costs, where you can sell it, and how you will promote it."
The STP model is more than a marketing framework; it's a strategic approach to understanding and serving the market effectively. By meticulously segmenting the market, accurately targeting consumer groups, and positioning the brand uniquely, businesses can achieve a competitive edge, enhanced market relevance, and improved customer engagement.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!