Your Ultimate Guide on using STP Strategically
How can you optimize STP to achieve your marketing goals?
The process can be summarized by asking yourself the following questions.
Who are your customers?
How do you reach your customers?
Do you know how your customers view your brand?
Do you know how effective your marketing strategies are?
If you do not have a clear precise answer to any of these questions, then you should consider applying an STP outlook to your marketing strategy.
If you are targeting too broad a market, where there will be no similarities or differences between customers or the way you treat them. By treating all customers in the same way, you don’t just waste time on your worst customers, but actively alienate your best ones, by failing to offer them differentiated service.
Adopting the principles of segmentation, targeting, and positioning (STP), you will assist in delivering more effective, personalized messages to your target audience. STP is a tried and tested marketing framework which is key to any successful marketing strategy, (particularly when it comes to marketing campaigns and advertisements). It considers how you can communicate the value of your products, in a way that directly targets your desired market.
This guide will show how you can take the STP framework to break down one large market into smaller consumer segments that have differing needs, wants, and motivations and how to better target them.
Segmentation is the first step in the STP framework.
Segmentation involves dividing the market into smaller segments or groups of customers who have similar needs and wants. Market segments can be comprised of individuals, groups, or organizations with one or more similar characteristics. Segmentation is important as it enables the business to more effectively allocate resources to targeting your ideal audience and engaging customers who are more likely to spend money. The Data & Marketing Association found that segmented campaigns can lead to a 760% increase in revenue. This number alone demonstrates the power of segmentation and how you can use it to drive growth for your business.
Before determining your customer segments, imagine someone who you believe would benefit the most or would be attracted to your product. Ask yourself these questions.
- What do they do for a living?
- How old are they?
- What are their hobbies?
- What is their income?
- Why would they want your product/service?
Now that you have an idea of your ideal customer, consider where fall under one of these segmentation categories:
- Demographic (age, gender, race, ethnicity, income, education)
Segmenting your potential market from the intrinsic social characteristics
- Geographic (Region, country size, climate terrain)
Segmenting customers based on location
- Psychographic (Personality attributes, motives, lifestyle)
Segmenting customers based on their personality and how they might perceive themselves
- Behaviouristic (Volume usage, end-use, benefit expectations, brand loyalty)
Segmenting based on consumer behaviour
Through segmentation, you can identify multiple segments which you can then create personalized, unique targeting strategies for.
When dividing your market segment, here are some considerations you should consider ensuring you are segmenting your audience effectively.
- The customer's needs for the market must be the same across the segment
- Segments must be easily identifiable and divisible
- You should be able to compare the sales potential, costs, and profits of different market segments
The more specific your segments are the higher your chance of success with your marketing strategies. Whilst it is easy to focus on simple demographics such as age and gender to segment your audience, finding other drivers behind decision-making can help uncover greater opportunities for you and your business.
Targeting is the second step of STP, it involves evaluating and selecting the most attractive customer segments using a mix of marketing strategies (Pricing, Products, Promotion and Placement). Now that you have identified your customer segments, next is actually targeting these segments. Although you would have identified multiple segments, not all of them will be profitable and worth targeting.
Targeting involves the use of the traditional marketing mix of product, place, promotion, and product.
There are three different targeting strategies that you can choose to adopt.
Adopting an undifferentiated strategy approach involves designing one single marketing mix strategy and then directing the strategy at the entire market. The advantages of using an undifferentiated strategy are that it is cost-efficient and can satisfy a large majority of customers. However, one of the disadvantages of such a strategy is that it is not necessarily the most effective.
An undifferentiated strategy is only effective if the target market all has similar needs and will respond to the chosen communication strategy. We only recommend this strategy for products such as commodities and staple food items for which everybody has similar needs.
If you have a niche product, we recommend steering clear of such a generalized strategy for all the reasons stated above.
This strategy selects one single market segment and directs all marketing efforts towards it. This is especially advantageous to companies who specialize in their product. If you were to opt for a concentrated strategy, you would need to ensure all characteristics and needs of the distinct customer group are understood and that your product satisfies their needs. However, one big disadvantage of this strategy is that it can be risky to place all of your eggs in one basket.
Example: If your most profitable target market was 19- to 25-year-old women, you would design products and create promotions specific to this age group and gender.
The third targeting strategy which you can implement is a differentiated strategy. This strategy directs marketing efforts at multiple segments (2 or more) and develops a marketing strategy for each. This strategy is the most widely used. It can also be adopted after a successful concentrated strategy.
This strategy is effective as it can increase sales within the overall market and increase brand recognition. Another advantage is if one segment does not perform as well as others, sales from other segments can help absorb any losses incurred.
However, a disadvantage of this targeting strategy is that it requires greater costs and production.
Examples of a differentiation strategy could be offering different tiers of products at different price points.
Now that you have chosen how to target your customer segment, the next step is to position your product or service.
Positioning is the third and final step of the STP process. In this step, consider your product through the lens of your target segment. Ask yourself what differentiates your products from others? What features make it more desirable to your competitors? What features or benefits are most relevant to the customer?
To better visualize where you stand, you can create a brand positioning map. This tool can help understand where your product is positioned within the industry, demonstrate desired future position, and check if it aligns with your present marketing strategy.
You can also position your product through a variety of positioning strategies such as:
- Product attributes and benefits
- Product price
- Product quality
- Produce use and application
Essentially, you must be able to understand how you appeal to customers and how you may appear in comparison to your competitors.
STP is the backbone of marketing strategy. Understanding who your customers are and how you will reach them is essential to the growth and success of your business. Now that you are equipped with basic knowledge about STP, what you choose to do, is up to you. For more information on how to execute a leading marketing strategy you can check out this article here.