Successful marketing helps to attract customers and stakeholders. It is not enough to use appropriate sources, choose effective advertisements, and produce multiple services and goods. Effective business is based on properly organised strategic marketing. The role of the STP approach – that includes segmentation, targeting and positioning cannot be ignored (West et al., 2015, p. 151). The authors like Armstrong et al. add the concept of differentiation to this strategy, explain it as “differentiating the firm’s market offering to create superior customer value” (2015, p. 174). In this paper, the idea of Pyo to combine the concepts of positioning and differentiation in one step as “the creation of tangible and intangible differences on one or two key dimensions” will be used (2015, p. 258). Differentiation may be a good contribution to any part of the STP process because it helps to understand what is missing in a situation and how to cover the loss (Schlegelmilch, 2016, p. 76). The analysis of the chosen STP concepts will help to clarify how to achieve strategic advantage in modern business, what organisational examples can be used to understand the essence of the STP strategy, and what recommendations can be given to succeed.
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Importance of STP
Today, in their intentions to solve the problem of a shortage of customers, marketing experts focus on the promotion of the STP strategy (Khan, 2013, p. 56). STP consists of the three logical steps, segmentation, targeting and positioning, that have to be taken by professional marketers or other people involved in a strategic company (Pires and Stanton, 2014, p. 16). According to Hooley et al., despite the fact that they are “distinct parts of the [marketing] strategy”, they remain “linked by the central issue of focusing on satisfying customer’s needs in ways that are superior to competitors” (2012, p. 183). As soon as a company identifies its goals, evaluates its opportunities, and defines its market, it is time to understand the plan to provide customers with the best services.
The STP process helps to establish the link between the market, a company, and its customers, achieve their marketing goals, measure activities, and create a specific environment (Schultz, 2016, p. 12). The STP process may be time-consuming, expensive, and challenging (Lintern, 2013). Segmentation may be dangerous for companies because there is a chance to miss some important customers who do not meet the chosen criteria but can bring certain benefits (Lintern, 2013). Therefore, it is necessary for a company to analyse each case separately.
Segmentation is a marketing concept that describes the process of dividing a customer market into specific groups, also known as segments, regarding an existing variety of characteristics. Segmentation aims at providing a marketer with an opportunity to introduce an effective marketing mix regarding the needs and interests of potential customers who introduce segments (Pride and Ferrell, 2015, p. 164). A market segment is an important concept of the STP strategy because it introduces an individual or a group of people who possess similar characteristics. Companies should identify the details of segmentation and understand potential consumers (Khan, 2013, p. 57). However, it is wrong to believe that segmentation aims at identifying customers only. In addition to the existing forms of segmentation like demographics, behaviour, psychographics, and culture, it is also important to distinguish between brand and product segmentation (Anesbury et al., 2017, p. 524; Jaman, 2012, p. 63; Northway, 2016). Segmentation of markets is an ability to satisfy the needs of all stakeholders of a marketing process. To succeed in segmentation, it is expected to check the products for heterogeneity, to identify segments, to compare segments, to consider profit potential, and to take the steps which help to reach the chosen segment (Pride and Ferrell, 2015, p. 168). Although these characteristics are not always identified in the STP process, they cannot be neglected because companies may achieve certain benefits.
It is necessary to remember that segmentation can be a B2B concept when such segments as price, risks, and buying cycles have to be identified. To understand the process of segmentation, the works by Khan (2013, p. 57) and Weinstein (2014b, p. 60) who suggest using organisational and consumer segmentation may be used. Organisational segmentation helps companies to recognise their powers and establish the relationships with customers (Weinstein, 2014a, p. 259). Consumer segmentation aims at identifying what customers want to achieve with the company and what situations to be avoided. Segments have to be measurable not only by their individual characteristics but also by their size and profiles. Segmentation helps to increase business accuracy and identify appropriate markets. Different methods can be used to learn customers and understand organisational goals. To succeed in B2B segmentation, Boone and Kurtz (2014, p. 294) introduce two methods for the identification of the required segments: a management-driven approach when managers use their observations of consumer characteristics and a market-driven approach when customers are asked to share their interests and preferences. It is a mistake to believe that one method is better than another method because in both cases enough information may be gathered for successful and effective segmentation.
Despite the necessity to gather consumers in groups, it is important to remember that every customer is an individual with a unique way of thinking, behaving, and learning, and these needs usually become a priority for companies (Schiffman et al., 2013, p. 74). An understanding of needs is an important step due to their innate and acquired nature. Innate needs are based on the physiological level, and people cannot neglect them. Acquired need depend on the environment and motives supported by society. Regarding the individualism of each customer, another peculiar feature of segmentation can be defined. It is the possibility to cover different aspects of human life and divide people according to their age, gender, race, or ethnicity (demographic segment), region, country/county size, or climate (geographical segment), possible motives or lifestyles (psychographic segment), and price sensitivity, expectations, or loyalty (behavioural segment). Attention to all these factors will better work in the company because even if one segment is poorly or mistakenly identified, it may be replaced with another properly recognised segment. Such attention to needs and choices promote loyalty of customers and increased satisfaction (Melnic, 2016, p. 57). Therefore, individualism in segmentation has to be taken into consideration and used to divide customers and understand their needs.
When the segmentation process is over, companies have to start working on targeting the market. It is the second stage of the STP process, the identification of the number of customer groups for targeting (Barton, 2015, p. 50). If the segmentation process includes the necessity to investigate all customers, market targeting is a step when the choice of customers has to be narrowed, and all options have to be discussed. If the segmentation process makes marketers think about the people who can buy goods or services, the targeting process is about the necessity to think about the people who a company is going to sell goods and services to.
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Modern people want to think that they have a variety to choose from and the possibility to consider their personal interests. They use their demands to promote the creation of new products and services. Companies have to investigate the fields of possible interests and clarify what services they can meet regarding the scope of their work. Companies have to make their final decisions regarding their available sources and employees’ skills to be ready to develop marketing mixes for every chosen segment (Pride and Ferrell, 2015, p. 167). This type of marketing is usually expensive, and not all companies are ready to spend their money at this stage of work and make a similar mistake to raise prices and question customer loyalty.
A concentrated targeting segment is chosen by companies that usually lack resources to meet the needs of different populations (Brennan et al., 2017, p. 160). Such limitations should not be defined as one of the possible shortages of the strategy. Dumitru and Caescu (2013, p. 122) claim that concentrated targeting is a good chance to cover the weaknesses that could be possibly identified during a segmentation process and choose the right direction in cooperation with consumers. Organisations focus on several segments to market. It is possible to combine geographic and demographic factors or investigate the combination of socioeconomic and psychographic factors. The main benefit and threat of this approach is its depth. It implies a concentration of available resources and strong positioning so that even small companies are able to compete in the market. Still, high investments and costs may be lost in case one segment is wrongly identified. A wrong STP plan usually leads to the decrease in customer satisfaction and low loyalty (Aithal et al., 2015, p. 421). Large competitors can easily take advantage of such company and achieve success regarding the failure of one company.
Positioning is the last step in a marketing process that deals with segmentation. When several segments are identified, it is high time for a company to develop a position regarding the segments (West et al., 2015, p. 160; Brennan et al., 2017, p. 160). Positioning is the period when all employees have to work hard to offer something bigger and more interesting than their competitors may imagine (Kokemuller, n.d.). At this stage, the first ideas of how customers can see a future product should be developed. Current technological progress and the use of the Internet provide customers with a good opportunity to learn their options, investigate the services of different companies, and develop their final conclusions about their further cooperation with a particular company and the usage of its services or goods.
Positioning may be introduced as a process of designing a marketing mix in terms of which the concept of product value can be created in customers’ minds (Anozie, 2013, p. 158). It is what can be done by a company with a product, not physically but figuratively. Positioning is a step with the help of which it is possible to attract the attention of stakeholders and get support in completion in the marketplace (Chowdhury, 2013, p. 57). If some mistakes and doubts can be allowed during segmentation or targeting, positioning is the stage where each mistake influences the results of the work directly. If stakeholders fail to understand the offered position, it means that the company makes a mistake. The correction is possible. Each case is unique, and much depends on the position of a company, the choice of customers, and the recognition of other segments that may improve the situation.
In other words, positioning is an image that can be offered to people by a company. Some companies find it normal to use their leaders or employees as the main marketing goals. In some cases, a positioning purpose is to underline price or promote sales. Positioning may be based on values (the example is Apple iPhone proposition that is based on unique experience), quality (for example, IKEA uses its brand and customer loyalty as the best evidence of its quality in terms of services and products), and competition (in the technological field, Apple competes with Samsung using various user interfaces to prove its innovation compared to Samsung differentiation).
The evaluation of each part of the STP process shows that it is wrong to separate these three concepts if the goal to succeed in marketing is established. It is impossible to start positioning of the product or services in case segmentation or targeting is not finished or even neglected. Segmentation is useless if other concepts are not followed in the STP strategy. Targeting does not make sense without proper segmentation organised beforehand. Therefore, segmentation, targeting and positioning are three core aspects of any marketing campaign, and organisations are free to develop these processes in the most appropriate for them ways.
Examples of the STP Process
In a competitive business world, it is crucial for a company to know how to attract customers, how to introduce a product or a service, and how to ask for additional help. Some companies succeed in developing effective marketing strategies and using the concept of segmentation, targeting, and positioning, and some companies have to work better to achieve the desired results.
Amazon is an international organisation whose STP strategy works successfully. In the analysis, Bhasin (2017) introduces Amazon as one of the brightest examples of how to use demographic and psychographic segmentation in the market. This company focuses not on what people can be interested in, but what they can really purchase and need. Individual work with each customer is a cause of customer loyalty and the possibility to develop long-term relationships around the whole globe. Amazon is not interested in a customer’s race, age, or gender. The only requirement to consider is people’s technological experience. Customers should know how to turn on their PC or smartphones and surf the web. Amazon gives clear instructions on how to promote customer segmentation. Every segment is based on certain segmentation criteria like region, age, gender, lifestyle, social status, etc. Therefore, it can be dynamic and change with time inviting new customers and promoting loyalty of current users. Segmentation of this company is based on customer behaviour analysed at the micro-level, including price, information, brand recognition, and personal services. There are four main groups of stakeholders recognised by Amazon Company, including customers (who want to buy something), sellers (who try to sell something), enterprises (who want to cooperate with the company), and content providers (who offer services to improve the work of the company independently). Geographic segmentation of Amazon includes regions (the citizens from more than 100 countries can use its services) and density (both rural and urban areas are included). Demographic and psychographic segmentation is general and includes both genders, all life-cycle changes that occur in people older than 18 years, all social classes and lifestyles.
Targets are chosen in regards to the groups of people to whom it is possible to sell products and services. Customers may be interested in multiple products, sellers want to observe favourable conditions, and content providers have to investigate the scope of their possible work. The positioning of the company is developed in two different ways. There is multi-segment adaptive positioning that has already brought the company a number of benefits (Dudovskiy, 2017). This type of positioning leads to the possibility to redefine customer experience and improve the already offered services according to new needs and expectations (Davis, 2016). Its position is based on low-cost leadership, differentiation of customers and their interests through design and quality, and the development of customer-focused strategies. Customer choice and loyalty introduce the best evidence of the STP appropriateness of the company. Multi segmentation includes an offering of many different products that may be interesting to a wide stakeholder segment. Adaptive positioning is used to check the latest changes and needs of customers addressing people’s expectations. In general, Amazon strategy is effective and works due to the possibility of its leaders to involve as many countries as possible in its development.
Mary Kay is a multi-level marketing organisation that focuses on cosmetics selling and promoting supplementary services. The peculiar feature of this organisation is a possibility to combine the customer’s need and employment. Regarding the core values of this company, it is not enough to provide customers with the best services. It is obligatory to enrich women’s lives both, customers’ and employees’) and open a new door to success with pink Cadillac, legal patents, and a legacy of giving (Mary Kay, 2018). The company pays much attention to its clients and co-workers.
There are several criteria that are established by the company to segment the market: geographical (urban areas in more than 35 countries), demographic (females older than 18). Its leaders admit that the company does not divide its consumers according to their income or social status. Therefore, a part of psychographic and behavioural criteria remains to be unclear in comparison to those of Amazon. The core of its psychographic segmentation is the promotion of good look of the skin among women who wear make-up regularly, have regular annual incomes, prefer to shop at stores or online, and enjoy high-quality customer services. Positioning of the company is based on the idea to enrich women’s lives and explain how to look confident. Mary Kay is a brand that offers high-quality products at an affordable price with the help of which a woman can leave a good impression, develop self-confidence, and gain respect. The chosen approach works properly in the company due to the intentions to work with certain customers under specific conditions.
Volkswagen is a world-known automaker that takes successful steps in targeting and positioning. Volkswagen sells about 9 millions of cars annually (Muller, 2013). Though the company takes certain steps to create premium products and avoid low-priced products (Taylor, 2017), these attempts are not enough due to the already established strong segmentation and targeting. Volkswagen segments its market into four main categories: cars for passengers (the development of cars that are comfortable for families of different types), commercial vehicles (the production and promotion of trucks, buses, and other vehicles that promote interlinking), financial services (the relationships between dealers, customers banks, and insurance companies), and engineering field (the introduction of diesel engines and compressors for different industries). To cover all segments with appropriate services and products, Volkswagen tries to target urban consumers who appreciate quality, speed, and comfort. Price is not a critical point because of the possibility to cooperate with dealers and banks to divide payments. The company finds it optimal to target young and older buyers who understand the importance of a safe environment and an attractive design. Therefore, radio and TV advertisements can be used. Positioning of Volkswagen is based on the access to environmentally friendly, safe and attractive vehicles for urban people. The chosen STP strategy works in this company because its leaders and marketers establish their goals and higher standards with a possibility to meet customers’ expectations.
Taking into consideration theoretical and conceptual perspectives of the STP model, several recommendations can be developed:
- Never mix up or neglect the stages and follow the steps in the STP model;
- Develop a list of segments according to the model developed by researchers, including geographical, demographic, etc. segmentation;
- Brainstorm all possible variables at the stage of segmentation and choose only the best and most appropriate options at the stage of targeting;
- Evaluate all available resources for positioning before targeting;
- Identify one or two major company’s segments at the initial stage of targeting;
- Investigate the attitudes of customers and employees to services and their expectations that have to be met in the field;
- Make a plan with several options on how to introduce the same product in different ways;
- Communicate with a team about the appropriateness of decisions;
- Share personal opinions and experiences in the intentions to develop a strong STP model;
- Think about the connection between employees, customers, and leaders and use different sources to exchange information.
- Compare the results of strategic marketing demonstrated by different companies to understand what improvements are possible in a particular case.
Segmentation, targeting, and positioning are helpful tools for companies who want to establish a link between customers and products. The factors mentioned in this work play an important role in business and organisational management. When managers and marketers work to understand customers’ needs, they get an opportunity to develop a new effective product or service with all possible benefits. The main requirement that has to be followed is to never separate the processes of segmentation, targeting, and positioning. Separately, they do not make any sense and have no power; and together, they introduce a strong combination of helpful steps for developing a marketing campaign.
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