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1
STP Procedure
1
Decision Making Process
Tactical level– marketing-mix
Product Place Price Promotion
Strategic level- STP
Market
segmentingTargeting Positioning
2
STP – What Is It?
• Segmenting– Dividing market according to some set of criteria into relatively
homogeneous groups of customers
• Targeting– Involves determining the attractiveness and profitability of created
segments and then choosing the strategy
• Positioning– Creating value and image of company’s offer, which should lead to
obtaining a distinguished and important place in consumers’ mindsthrough differentiation and developing competitive advantage
3
Phases in STP Procedure
Segmenting 1. Identification of segmentation criteria
2. Dividing the market
3. Defining a profile of each segment
Targeting 1. Segment attractiveness assessment
2. Segment profitability assessment
3. Choosing market strategy
Positioning 1. Differentiation tools
2. Positioning process
4
Advantages of Customer Segmentation
• You know your customer better - adjusting product to
consumer’s needs
• Make fact-based decisions rather than assumptions
• Better allocation of financial resources = effectiveness
• Keeps us aware of market changes
• Helps us discover new opportunities
5
Weaknesses and Limitations
• If you don’t identify all the areas to investigate, you
might omit an important one; then your results will be
inaccurate.
• Due to increasing complexity of today’s markets and
the proliferation of customer segments, segmentation
becomes more difficult.
• It is rather expensive.
6
2
Segmentation Procedure
1. Identification of segmentation criteria
2. Dividing the market
3. Defining a profile of each segment
7 8
Segmentation: Conditions
Do customers have similar Do customers have similar
needs and wants?needs and wants?
Can we collect information Can we collect information
about the segment?about the segment?
Are the segments profitable?Are the segments profitable?
Can the segments Can the segments
be reached?be reached?
distinct
measurable
accesible/real
sizeable/profitable
Internally homogeneous, externally heterogeneous
Criteria and Descriptors
• Segmentation criteria (basis)
– Characteristics used for describing customers,
which allow distinguishing different market
segments
• Descriptors
– Additional consumer characteristics used for
profiling
9
Segmentation Criteria 4 B2C
• Gender, age, family size, family life cycleDemographicsDemographics
• Size of town, administative, climateGeographicGeographic
• Education, job, social class, religion, race, nationality, incomeSocioSocio--economicaleconomical
• Personality, lifestyle, innovativeness, risk takingPsychographicPsychographic
• Status, consumption level, brand loyalty, attitude, purchase readinessBehavioralBehavioral
• type of preferred benefits, place of purchase, reason of purchasePreferencialPreferencial
10
Geographical Criteria
• Typical segmentation criteria: region, state,
district, municipality, town
• Also: climate, population density
• Advantages: easy access to info
• Disadvantages: too general, ignores other
important characteristics
• Other criteria should be used as well
11
Based on secondary
data
Descriptors
Demographic Criteria
• Typical segmentation criteria:
– age,
– generation,
– gender,
– family size,
– family lifecycle,
– lifestage, etc.
12
Based on secondary
data
Descriptors
3
Geodemographics
• ACORN– A Classification of Residential Neighborhoods
– Postcode areas are broken down into 5 lifestyle categories, 17 groups, and 56 types
– tool used to identify and understand the UK population and the demand for products and services
• MOSAIC– based on the premise of assigning lifestyle groups to
differing geographic catchment areas
– segmentation system consists of sixty segments which are presented as twelve separate groups
13
MOSAIC
14
Socio-Economic Criteria
• Education level
• Occupation / job
• Social class/group
• Religion
• Race
• Nationality
• Income/expenses level
15
Based on secondary
data
Descriptors
16
VW Polo46-65.000 PLN
Skoda Fabia33-60.000
VW up!32-51.000 PLN
Skoda citygo30-46.000
VW Passat76-195.000 PLN
Skoda Octavia58-120.000
Behavioral Criteria
• Typical segmentation basis:Occasions – ordinary vs special
User status – non-user, ex-user, potential, regular
Usage intensiveness – occasional, average, intensive
Loyalty – none, average, strong
Purchase readiness – unaware, aware, informed, interested, ready to buy
Attitudes toward the product – enthusiastic, positive, neutral, negative, hostile
Media usage – frequency, variety, breadth of use, depth of use, duration, usage time
17
Example – Behavioral Criteria
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Soaps and detergents (94%)
Toilet paper (95%)
Shampoo (94%)
Paper towels (90%)
Instant powdered cake (74%)
CocaCola (67%)
Beer (41%
Dog food(30%)
Bourbon (20%)
75%
71%
79%
75%
83%
83%
87%
81%
95%
25%
29%
21%
25%
17%
17%
13%
19%
5%
high intensity
low intensity
18
4
Preferences
• Type of preferred benefits
– Low price, economy, convenience, durability, reliability,
etc.
• Preferred purchase place
– Modern-traditional trade
– Electronic-stationary trade (click vs brick)
• Reasons of purchase
– business, holidays, family (trip)
– For oneself, gift
19
Require empirical research
Psychographic Criteria
Segmentation basis include: life style,
personality, interests, etc.
Basic areas of marketer’s interest include:
• Social behavior – free time activity, recreation, sport, holidays,
shopping habits
• Interests – music, books/magazines, science, history, fashion
• Opinions – social issues, aesthetics, economical, political,
cultural, religious, educational
20
CONSUMER PYRAMID
TYPICAL BOYS AND GIRLS
LABEL LOVERS
AVANGARDA
EARLY ADOPTERS
CREATORS OF CULTURE MODERNISTS
21
Creators of
culture
Modernists Avangarda Label lovers Early
adopters
Typical
Creative,
artistic, creating
opinion, original, self-inspired,
borrow ideas from various
cultures and sources. Self-
confident, don’t need
and don’t look for new
brands
Urban and
tribal, often belong to
niche subcultures. Against
social norms, live
as they look. Often do
extreme sports
Sophisticated,
urban, expressive –
want to make an impression.
Understand brands and
fashion, aware of
trends. Like to be seen in
right places with right
people
Seek things
with very visible labels.
Labels serve as confidence-
boosters, want to
belong to a group.
Daring, urban pose
covers uncertainty
and shyness
Funny,
sociable, like flirting – live
the moment. Impulsvie shopaholics,
always seek new things
(at attractive price). Like
sharp, colorful,
sexy look
Less self-
confident and less
interested in fashion, but still
fashionable. Adopt new
styles late. More rational
and quality oriented
discovery Mission,
discovery
Social thing,
seeking, discovery,
therapy
Social thing,
mission, discovery
Social thing,
seeking, discovery,
therapy
mission,
social thing (boys)
Social thing, seeking, mission (girls)
22
VINTAGE
Levi’s®TYPE 1JEANS
MAINSTREAM
OPINION LEADING
Levi’s®RED TAB® jeans
Levi’s®RED TAB®
Finish Concept
Levi’s®ENGINEERED
JEANS®
Levi’s®RED™
23
1. Leading Edge Originators
2. Trend Diffusers
3. Mainstream
BASIC JEANSERIA & OTHER BASIC OUTLETS
jeanseria Local independentfashion & sport
Local independentsmart casual
sports/ leisure
jeans specialist
casual basics
diffusion chic
diffusion streetstreet & board
designer chic
urban underground
Clothes atelier
smart fashion
street fashion
24
5
Segmentation Criteria 4 B2C
• Gender, age, family size, family life cycleDemographicsDemographics
• Size of town, administrative, climateGeographicGeographic
• Education, job, social class, religion, race, nationality, incomeSocioSocio--economicaleconomical
• Personality, lifestyle, innovativeness, risk takingPsychographicPsychographic
• Status, consumption level, brand loyalty, attitude, purchase readinessBehavioralBehavioral
• type of preferred benefits, place of purchase, reason of purchasePreferencialPreferencial
25
Segmentation Methods
Depend on:
– Number of criteria used
• one, multiple
– Way of using the criteria
• Multiphase (nested), matrix (parallel)
– Quality of data used
• Subjective approach, sindicative data (TGI, PRIZM),
primary research
26
Matrix Segmentation - Sweetener
Health issues No health issues
Age and
consumption place
diabetics overweight dieting innovators other
Adults –
home
Kids –
home
Adults -
HORECA
Kids -
HORECA
27
Profiling Segments
28
Segment ACriteria
Segment BCriteria
Segment A
profiledescriptors
Segment B
profiledescriptors
Segment size
Marketing-mix
Segment Attractiveness Assessment
Segment Attractiveness
Demand Criteria
Current size
Growth dynamics
Potential size
Competition Criteria
Number of competitors
Exit barriers
Offer differentia-
tion
Substitutes
Accessability Criteria
Brand awareness
Access to distribution
Compa-tibility
29
Demand Criteria
• Current size of the segment
– How big is the segment?
– Measures: number of customers, sales – quantity, sales - value
• Growth rate
– What is the growth rate of the segment?
– Measures: change in number of customers, change in quantity and
value of sales
• Last year, 3 years
• Potential size of the segment
– What is the potential size of the segment?
– Measures: potential number of customers (market penetration),
increase of amount of purchased goods, increase of price per unit
30
6
Competition Criteria• Number of competitors
– How man competitors are there in the segment?
• The more – the less attractive
• Entry barriers
– How easy is it to enter the segment?
• The easier – the less attractive
• Offer differentiation
– How differentiated is the market offer?
• The more differentiated – the more attractive
• Presence of substitutes
– How many substitutes are there?
• The more – the less attractive
31
Market Presence Criteria
• Market position
– What is the company’s/brand’s position on the market?
– Measures: segment share, segment penetration, brand/company
awareness
• Costs
– What are the costs of market presence?
– Measures: promotional expenses, intermediaries’ profit margin
• Compatibility
– Are customer preferences compatible with offer characteristics and
company’s strengths?
– Measures: customer satisfaction, customer loyalty
32
Segment Assessment: Ranking
Segment Criterion
1
Criterion
2
Criterion
3
Sum total
A 1 2 2 5
B 2 3 4 11
C 3 1 3 7
D 4 4 1 9
33
In our case: Cost, income, competition and compatibility
Mass
marketing
Full-scope
marketing
quality
No problems
Low costs
Selective
marketing
No problems
Low costs
Concentrated
marketing – big
segment
Low costs
Concentrated
marketing –
small segment
quality
Niche
marketing
Niche A
1-2-1
marketing
Market Service Strategy
34
Mass Marketing
• Mass marketing
– A producer practices mass
production, distribution and
promotion of the offer for all
customers (or most of them)
35
Homogeneous
customer needs
Very price sensitive
customers
Early stages of
product life cycle
One brand
Full-Scope Marketing
• Full-Scope Marketing
– A company targets all segments – each with a differentoffer
36
Large financial
resources
Many brands
Strong market
position
High marketing skills
7
Selective Marketing
• Selective Marketing
– A company chooses at least 2 (but not all) segments whichare most attractive. Usually segments with high similarityare chosen
37
Similar segments
Many brands
Avoidance of
competing with
market leader
High marketing skills
Concentrated Marketing
Concentrated Marketing – Large
segment
• A company chooses one, large and
highly attractive segment
38
One brand
Biggest segment Economy of scale
Low costs
Concentrated Marketing
Concentrated Marketing – Small
Segment
• A company chooses one, most
attractive segment
39
Most attractive
segment
Avoidance of
competing with
market leader
One brand High marketing skills
Niche Marketing
• Niche Marketing– A company focuses on a niche – small
size and little or no competition
40
Attractive niche
Avaidance of
competition with
other companies
One brand High marketing skills
1 to 1 Marketing
• Marketing 1 to 1
– All marketing activity is focused on particular
customers
41
Few customers
Data base
Individual offer
High marketing skills
Determinants of Market Service Strategy
• Company’s resources
• Homogeneity of product
• Homogeneity of market (needs and wants)
• Competitors’ marketing strategies
• Product life cycle
42
8
POSITIONING
(AND DIFFERENTIATION)
43
1• Identify competitors
2• Determine product characteristcs important for customers
3• Compare your product with competitors’
4• Choose differences
5• Make perceptual map (competition context)
6• Choose the spot on the map and position yourself!
Procedure: Positioning and
Differentiation
44
Differentiation
Differentiation tools – offer attributes (product, service, price),
company’s characteristics and qualities relating to market
position of the company which allow to distinguish the offer
Differentiation methods:
• Operational excellence
• Closeness to the customer
• Product innovativeness
45
Product differentiation
• characteristics/parameters
• concordance with standards
• durability
• reliability
• easy to fix
• design
46
Service differentiation
• delivery
• installation
• customer training/instruction
• advice
• repair
• other ;-)
47
Personnel differentiation
• competences
• politeness
• credibility
• reliability
• speed of reaction
• communication
48
9
Image differentiation
• identity
• image:
– symbols
– audiovisual and printed media
– atmosphere
– events
49 50
Choosing Market Position – Positioning
51
• 1 dimension
• 2 dimensions
• Multidimentional
What
differences
• Important
• Out-standing
• Safe
• Connected
• Additional criteria
How many
differences
• Strengthening current position
• Seeking new position
• Competition repositiongHow
What Differences?...
• Important
• Beneficial
• Outstanding
• Safe
• Logically connected
• Other: profitable, easy to communicate
52
safe durable comfy family Swedish
Positioning 1D
Creation of Unique Selling
Proposition – focus on one
quality/attribute and try to
become a leader in that
field
Ferrari„Number 1 among sport cars”
53
Positioning 2D
– Positioning is based on two
attributes which distinguish the
offer on the market, there
should be logical connection
between those attributes
Walmart
Save money. Live better.
54
1D => 2D
10
Multidimential Positioning
– Positioning based on 3+
attributes – risk of losing
credibility and
expressiveness
GlaxoSmithKline
AQUAFRESH3 benefits:
• Protection against decay
• Fresh breath
• White teeth
55
How to Position Your Offer
1. Strengthening current position:
Continuation of current strategy
2. Seeking new position
3. Competition repositioning
56
„Stolichnaya is
different. It is
Russian”
Communicating
Main issue:• Design the content of promotion
Complementing elements:
– Forms and tools of promotion
– Distribution channels
– Points of sale and customer service
– Product
– Packaging
– Price
57
Positioning Mistakes
• Wrong positioning
– Product/brand do not have a desired place on the market (in consumers’
minds)
• Limited
– Do not manage to convey the real and full image of a product/brand
• Misleading
– Product/brand do not have an obvious and clear image (frequent changes)
• Doubtful
– Attributes used in positioning strategy are not convincing
58
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