Let's begin with understanding STP, which stands for segmentation, targeting, and positioning. Now, businesses decide how to develop their marketing strategy and create value for customers. There are essentially two issues they have to consider. First, they have to choose which customers they want to target and sell to. The challenge here is to segment the market and define the most attractive of them, afterward target the segments they want to focus on to have the best chances of success.
1.Choose which customers to serve
- Market segmentation (parts of a market)
- Targeting (segments to enter)
After identifying the market segments and those that need to be targeted, the question is to determine the best way to compete in that market, serve the customers in the target market segment, and understand the best possible market positioning. How to identify the right positioning for your product based on the features that the target customers expect?
2.Decide how to serve those customers
- Product differentiation (what makes it different from the competition)
- Marketing positioning (how customers perceive the product)
Let's briefly look at each of these things: market segmentation, targeting, and positioning. So the Segmentation Targeting Positioning is often shortened to STP.
Market segmentation is about identifying the different aspects of the market, where customers have similar needs and want; of course, the segments can be substantial. Nearly all the market consumers have similar needs; however, there can also be a niche segment.
What is Market Segmentation?
- Market segmentation involves dividing a market into parts that reflect different customer needs and want.
There are different ways of segmenting a market, for example, based on income, based on age or gender; there can be a demographic segmentation or based on where people live - geographic segmentation, how consumers behave- behavioral segmentation.
Main categories of Market Segment
- Demographic Segmentation
- Geographic Segmentation
- Income Segmentation
- Behavioral Segments
All you need to understand at this stage is that there are different ways of segmenting the market. The key benefits of segmenting a market are that it enables a business to become more focused on its place and marketing efforts. That is particularly useful if you are developing new products and services designed to meet the customers' specific needs and wants in that segment.
Benefits of Effective Market Segmentation:
- Focuses resources on parts of the market where the business can succeed
- Allows a business to grow share in markets or to "ride the wave" of fast-growing segments
- Helps with new product development - based on the needs of customers in the given segment
- It helps make the marketing mix more effective - e.g., better targeting of promotion.
The most significant benefit of market segmentation is that it enables the marketing mix to be more accurate and focused. One of the issues with segmentation is that it isn't a precise science; there are many overlaps between segments. Just because you can identify what you believe to be a group of customers with similar needs and wants, doesn't necessarily mean that you'll reach those customers. Another issue with segmentation is that these segments are fast-changing and very dynamic. You might be using some up-to-date information about the segments, but it can easily become out of date by the time you're able to use it.
Potential Drawback of Market Segmentation
- Segmentation is an imprecise science data not always available, up-to-date or reliable
- Just because you can identify a segment doesn't mean you can reach the customers in it!
- Markets are increasingly dynamic - fast-changing: so are the segments.
So market segmentation is all about identifying the different parts of the market.