Segmentation, Targeting and Positioning (STP)
Segmentation, targeting and positioning are crucial aspects for an organization as these elements helps the organizations to determine their target audience amongst the market. The concept of segmentation, targeting and positioning (STP) has recently been followed due to evolution of business environment. Contemporary business environment is the emergence of producing adequate products and services for the adequate customer segment. STP act as the significant elements of marketing and as the marketing has been the majorly used element by the modern corporations to analyse their adequate customer segments from the vast target market. While making a marketing or business plan for a new or for an existing corporation for promoting new as well as existing products of an organization in the target market, segmentation, targeting and positioning strategies are being used in order to evaluate the appropriate marketing where the demand for the organizational products and services are high (Chernev, 2018). After evaluation of the appropriate target market, organizations moves towards the next step i.e. targeting in order to approach towards the selected customer segment in relevance with generating the demand for the products and services. Further, positioning strategies came into action and their primary role is to set up an effective image amongst the target customer segments.
All the three elements are interlinked and whenever an organization contemplate to launch a new product in the market or plans to enter into a new market with same or new product offering, all these elements came into action. Segmentation, targeting and positioning acts as the primary elements of strategic marketing and as these are the initial steps to be executed in the marketing plan to determine the adequate target market for the organization in relevance to their products and services, their role is substantial. All the modern as well as existing business corporations have included these elements into their marketing plan in order to generate opportunities for attaining desired goals and objectives (West, Ford & Ibrahim, 2015). The process of STP is the function performed by organizations to determine the connections between the overall market and the way adopted by the particular organization to compete in that market. For example, Amazon Inc. is one of the behemoth players of ecommerce industry and the company’s CEO, Jeff Bezos always prefer to implement STP strategies for analysing the appropriate target market before introducing any product or service in the market. When Amazon was contemplating to penetrate into online entertainment industry, they first analysed the market share acquired by existing players and along with this, organization also determines the scope left in the industry so that investment could not get wasted (Dudovskiy, 2018).
Example 1: Amazon
Apart from the entrance into online entertainment industry, organization executed STP strategies before entering into Indian ecommerce industry. In February 2012, Amazon entered into Indian marketing and before entering, the main attraction for choosing Indian market for expansion was the huge customer base. Indian market has always been an attraction for the large companies due to the huge population but in the scenario of Amazon, the situation was different because when Amazon plans to enter India, internet penetration in Indian was very less and very less number of people was aware about the online shopping. Along with this, smartphone penetration in the market was also very less and most of the Indians were using 2G internet at that time (Govindarajan & Warren, 2016). In order to match up with the requirements of Indian customers, organization made their website compatible with the phones used by Indians so that it could easily be accessed on slow internet speed also. Along with this, organization came up with all those products and services whose demand in Indian market is very high. In order to determine the demand and wants of Indian customers, organization executed market research various times along with the segmentation, targeting and positioning through which appropriate product offering could be introduced in the market for the objective of fulfilment of their demands and wants. Today, Amazon has acquired the leading position in the Indian market and the major reason behind their achievement is their customer centric approach through which organization have been able to fulfil their target audience’s demand and wants with the products and services along with offering them appropriate set of after sale services such as easy return and refund policy (Diamantopoulos, et. al., 2014).
The model of STP is very effective in terms of making a communication plan as the outcomes originated from the execution of STP strategies are effective enough to give adequate information about the demands and wants about the particular market. Various organizations have identified that the adaptation of customer centric approach is one of the primary and crucial factor to set up effective position in the target market. Along with this, it has also been evaluated that organization requires bringing rapid changes in their product and service offering to match up with the changing business environment as well as to bear up with dynamic business environmental conditions. The STP approach is also considered as the customer focused approach as the primary objective of implementing this strategy is to determine the demand and wants of the customers so that relevant products and services could be offered to them (Cui & Choudhury, 2015).
Example 2: Apple
For example, Apple Inc. is another behemoth multinational corporation and it is engaged in producing smartphones (iPhone), laptop (MacBook), iPads, etc. The company serves in all over the world and mainly focus on innovation and with regards to this, it launches new products every year in order to retain their existing and potential customers’ interest within the organization as well as to target other customer segments. Their primary target audience is upper middle class people as organization launces their products on the basis of price skimming strategy (Bhasin, 2018a). Under this pricing strategy, organization launches their products on relatively high prices in comparison to the other companies in the market. With the help of this strategy, organization recovers the whole cost incurred on the manufacturing of the particular product and later on the prices for those products are decreased with the objective of targeting other customer segments such as middle class people. With the help of this strategy, organization is able to target major part of the customer segments in the target market through which they easily enhance their sales, profitability as well as the revenues in order to gain positive outcomes (Yeung, 2018).
Together, STP is very effective model and individually also, every strategy has its own relevance and significance. Segmentation is the strategy where a large market is break down into smaller segments on the basis of their preference, demand, need, financial condition, age, sex, etc. After segregating the audience on the basis of various categories, organization approach towards their customer segments. For example, Coca-Cola is a soft drink manufacturing and distributing company and their primary customer segments are youngsters. Although, organization have launched various other cold drinks to target other customer segments such as Coca-Cola Zero to approach people who are suffering from diabetes and obesity, Coca-Cola Sugar free for fitness freaks and the company has recently also launched their energy drinks through which large part of the target audience could be targeted along with the objective of attaining sustainable growth and overall development in the target market.
Market segmentation could be done in many ways and the bases on which target audience is being segregated is geographic segmentation, demographic segmentation, psychographic segmentation, and behavioural segmentation. Each category has its own relevance and significance and the companies uses these methods to gain appropriate knowledge about the all customer segments and on the basis of suitability of the target audience and the relevance of the products and services, appropriate segments are being targeted (Venter, Wright & Dibb, 2015). However, the concept of segmentation is also being criticised as the business experts says that the segmentation could be replaced by the mass marketing for the purpose of approach to the target audience as well as to establish brand image amongst those segments. Also, as far as the competitive markets are concerned, major difference is rarely exhibited by the segments in the way the brand are used. Moreover, narrow clusters are failed to be identified with the help of segmentation. With regards to the all categories of segmentation, relevant communication strategies are used in order to match up with the demands and wants of the organizational products and services. But the fact cannot be denied that segmentation plays vital role for the organizations in order to determine the appropriate customer segments along with attainment of desired goals and objectives (Hassan & Craft, 2005).
Market Segmentation
The next element of STP model is targeting and it is considered as the crucial element for the organization as it plays crucial role for the objective of approaching to the selected customer segments. In the step of targeting, appropriate marketing strategies are being used for the purpose of approaching to the selected customer segment. This element has been given much importance as it is considered as the vital element of holistic marketing strategy. The outcomes of business operations, branding, customer experience, and advertising are impacted by the targeting. Moreover, it is also considered as the significant tool for the objective of communicating with the audience directly. Every organization gets confused while designing marketing and advertising campaigns to target the selected customer segments (Schlegelmilch, 2016). Thus, the organization moves towards the marketing agencies that regularly research about the market and determine the most suitable market for the particular organization. Targeting is also considered as the best approach for identifying the right people to target. For example, whenever Samsung Electronics introduces new smartphone in the market, they first identify the appropriate market from the best outcomes could be originated. Samsung Electronics is one of the biggest smartphone manufacturers and distributors across the globe and they mainly target middle class and lower middle class customer segments as the number of these types of consumers are relatively high in comparison to the upper middle class and rich class customer segments. In order to target niche target audience, organization aggressively promotes their new smartphone in relevance with generating the demand amongst and to match up with the target audience’s demands, the company offers the same features and services along with their phones to enhance suitability of the product and the demand of the consumers (Dudovskiy, 2018b).
The third segment in the STP model is positioning which is also known as establishing a unique brand image amongst the target audience through various marketing tactics (Nayak, 2012). This is done to impress the consumers with the unique features fitted in the product as well as to differentiate their product’s image from their competitors’. While executing positioning strategy, the main motive of an organization is to showcase their products above than their competitors in order to change the target audience’s mind-set as well as to attract them towards the featured product. Ultimately, all the tactics and strategies are focused towards targeting particular group of customers through which long lasting relationships are also built amongst the company and the target audience (Alden & Nariswari, 2017). For example, Amazon Inc. has recently introduced Alexa influenced with the artificial intelligence technology and the primary focus of this product is to help their users to get an artificial assistant which is capable enough to handle all tasks of a user in daily life. Although, Alexa’s primary target audience is high income group audience and the people with busy schedule through which they can manage their tasks with the help of an artificial assistant. Still, organization marketed Alexa in the Indian market because organization finds that Alexa is also suitable for tech enthusiast and millennials and the density of these types of customers are relatively high in Indian market in comparison to any other market. In order to position the brand image of Alexa, Amazon uses various marketing tactics through which they could easily their preferred set of audience. The majorly platforms by Amazon are social media platforms and television as both the mediums are capable enough to attract customers and with the help of social media platforms, organization market their product on individual basis (Keller, 2016).
Thus, it could be said that positioning plays rime role for the organizations in terms of gaining competitive advantage in the target market. The brand positioning is mainly affected by the perception of the target audience, thus, three types of positioning strategies have been given much more importance for the objective of positioning of the brand and these are symbolic positioning, experimental positioning and functional positioning. The primary motive of functional positioning is focusing on different aspects of the products and featuring them amongst the target audience in relevance with fulfilling the needs of the consumers. For example, Tata Motors introduced a car few years back in the name of Nano especially in the Indian market to target lower middle class customer segments. In relevance with this, before the introduction of Nano in the market, huge pre-bookings were received and the positioning of the car was mainly done through functional positioning strategy by showcasing the prime features and suitability for the relatable audience (Bhasin, 2018b).
The characteristics of symbolic positioning are to fulfil the self-esteem of the customers. Companies use this type of marketing strategy for the objective of fulfilling the needs of target audience by delivering them what exactly they need. For example, McDonald’s regularly introduce new products in order to increase their menu range through which larger part of the target audience could be targeted. In relevance to this, they have made their breakfast range totally unique and for that breakfast range, customers are required to visit the outlets of McDonald’s in the set time periods. With the help of unique breakfast range, organization has been able to deliver unique sort of customer experience to their target audience (Dudovskiy, 2016). Apart from the functional and symbolic positioning strategy, experimental positioning is dependent on the brand’s characteristics through which emotional connection with the customers is stimulated. In order to gain competitive advantage and to enhance the competent capability of the brand, combination of all the three positioning strategies is combined. Thus, critics also appreciate the usage of positioning strategy as it assists the organization in terms of delivering better value to their target audience in comparison to their competitors and it also performs the function of communication to the consumers in different manner.
For example, KFC is a multinational fast food chain and the organization is specialised in delivering high quality roasted chicken and related products. Their unique product offering differ them from their competitors in the fast food market and thus, their target audience is also different from the other fast food retailers. This has helped the KFC to mark its separate and effective position in the global fast food retail industry. Before entering into any new market, KFC applies the model of STP in order to determine the density of non-vegetarian customers as their primary food range includes roasted chicken, chicken burgers, and other non-vegetarian products. Further, to attract the customers, organization promotes their menu range with attractive offers and discounts on the selected days in a week (Bhasin, 2017). This helps the KFC to enhance their revenues, demand for their products and the sales which ultimately results in developing effective brand image in the target audience’s mind-sets.
The above examples clearly showcase the effectiveness of STP strategies and it could be said that the positive results could easily be attained with the help of these strategies. Apart from this, these strategies are universally accepted thus, it could be applied to any of the business irrelevant to their nature, size and nature of the industry. In order to generate positive results along with the expectation of accomplishing desired goals and objectives, it is necessary for the organization to implement STP model in accordance to its relatability. Firstly, organizations needs to segregate the large target market into smaller segments and on the basis of suitability with the products and services which will be offered, appropriate customer segments needs to be targeted (Heding, Knudtzen & Bjerre, 2015). Further, targeting strategy is being implemented in order to approach selected customer segments and in this step, the products and services are marketed to the audience through various marketing tactics along with describing the relevant features and USPs to attract the customers. Then lastly, positioning strategies are being implemented in order to set up effective brand image amongst the selected customers’ mind-sets as well as to build relatable high brand loyalty amongst the customers in comparison to their competitors.
Thus, it could be concluded from the aforesaid discussions, examples and topics that strategic marketing plays vital role in designing plans to fulfil the needs and wants of the consumers as well as to enhance the demand for the products in order to accomplish desired goals and objectives. In relation with the fulfilment of demands of customers, it is required for the organizations to maintain an effective relation between supply and demand of the goods and services. This is relatively more important for the organizations in being consistent because a small glitch could affect the functionality of the organization and newly established brand loyalty could be lost easily. In the modern business environment, competition is relatively tough for the companies and the same sort of situation could be found in all sorts of market conditions. So, it is necessary for the organization to be consistent while fulfilling the demands of the target audience and it also plays crucial role in setting up effective brand image in the competitive business environment. STP model is the primary stage for setting the initial pillars of success for the organization and to maintain that success and to attain the sustainable growth and overall development in the target market, it is required to shift according to the target audience’s demands as well as by expanding product and service offering to retain the existing customers along with generating the opportunities for approaching other customer segments.
References
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