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STP Procedure

1

Decision Making Process

Tactical level– marketing-mix

Product Place Price Promotion

Strategic level- STP

Market

segmentingTargeting Positioning

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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

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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

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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.

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2

Segmentation Procedure

1. Identification of segmentation criteria

2. Dividing the market

3. Defining a profile of each segment

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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

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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

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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

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Based on secondary

data

Descriptors

Demographic Criteria

• Typical segmentation criteria:

– age,

– generation,

– gender,

– family size,

– family lifecycle,

– lifestage, etc.

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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

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MOSAIC

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Socio-Economic Criteria

• Education level

• Occupation / job

• Social class/group

• Religion

• Race

• Nationality

• Income/expenses level

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Based on secondary

data

Descriptors

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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

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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

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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

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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

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CONSUMER PYRAMID

TYPICAL BOYS AND GIRLS

LABEL LOVERS

AVANGARDA

EARLY ADOPTERS

CREATORS OF CULTURE MODERNISTS

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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)

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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™

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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

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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

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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

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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

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Profiling Segments

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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

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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

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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

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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

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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

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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

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Mass Marketing

• Mass marketing

– A producer practices mass

production, distribution and

promotion of the offer for all

customers (or most of them)

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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

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Large financial

resources

Many brands

Strong market

position

High marketing skills

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Selective Marketing

• Selective Marketing

– A company chooses at least 2 (but not all) segments whichare most attractive. Usually segments with high similarityare chosen

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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

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One brand

Biggest segment Economy of scale

Low costs

Concentrated Marketing

Concentrated Marketing – Small

Segment

• A company chooses one, most

attractive segment

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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

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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

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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

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8

POSITIONING

(AND DIFFERENTIATION)

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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

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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

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Product differentiation

• characteristics/parameters

• concordance with standards

• durability

• reliability

• easy to fix

• design

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Service differentiation

• delivery

• installation

• customer training/instruction

• advice

• repair

• other ;-)

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Personnel differentiation

• competences

• politeness

• credibility

• reliability

• speed of reaction

• communication

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Image differentiation

• identity

• image:

– symbols

– audiovisual and printed media

– atmosphere

– events

49 50

Choosing Market Position – Positioning

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• 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

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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”

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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.

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1D => 2D

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Multidimential Positioning

– Positioning based on 3+

attributes – risk of losing

credibility and

expressiveness

GlaxoSmithKline

AQUAFRESH3 benefits:

• Protection against decay

• Fresh breath

• White teeth

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How to Position Your Offer

1. Strengthening current position:

Continuation of current strategy

2. Seeking new position

3. Competition repositioning

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„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

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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

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