Segmentation, Targeting and Positioning (STP) approaches

In this globalised world, all the market of different countries is interconnected and this makes the planning of marketing strategy difficult for various business organisations. For any business enterprise, it is important to meets the customer needs effectively with the help of strategically segmenting the market. This not only builds the foundation of decision-making process but also helps the organization to recognise their potential customers so that to deliver the respective benefits.

The first section of the report states different approaches and significance of Segmentation, Targeting and Positioning. This second phase of this assignment gives better insight into this model with the help of application on various companies in a respective industry. In last, several necessary recommendations are also presented to align with the above concept and applications.

In strategic marketing, the principle of segmentation, targeting and positioning helps in delivering various key benefits that help the organization to meet the customer needs, marketing of communication plans and enhance the ability of the markets to select crucial prepositions (Ferrell et al, 2010)

The focus of segmentation strategy is on meeting the changing needs of different customers ranging through incomes, preferences, demographics, and may more. The organization also faces various issues in this process of segmentation, which has a direct impact on the marketing strategy of management in relation with product, price, place and promotion (Haigh and Hoffman, 2012). Further, this also influences customer satisfaction. In this area, there had been done several kinds of research and so various literature is present to help the managers in the attainment of respective objectives and goals.

For making the customer loyal towards the brand, an organization needs to position its brand in the market by framing and moulding the consumer preference. They need to focus on the core requirement of the customer. For instance, if a customer is very hungry, he will not consider which restaurant needed to be chosen for the purpose of eating food.

According to Morgan, Vorhies and Mason (2009), an organization needs to divide the market in the same way as they divide the customer needs in various aspects. This will include recognising the individual segment needs in align with the targeted profile to deliver respective product benefits. This process will help the business enterprise to maintain a competitive position in the industry by meeting out those respective preferences.

Constantinides and Zinck Stagno (2011) also defined market segmentation procedure to be a nominal strategic marketing tool. By using this tool, an enterprise can be benefitted in various ways through designing of strategic marketing drivers that meet the customer expectations and deliver them true value in the form of products.

Targeting of the market is the next process where the management needs to select a specific market place order to serve and offering of various products. By acknowledging the targeted groups, the business organization may use single or combination of marketing strategies and tools. After targeting, the next phased comes is positioning where the decision needs to be made in relation with targeted segments to pitch a brand or a specific product. Positioning of a product can be defined in terms of customer perception where maximum potential benefit needs to be delivered with the help of selling USP (Kumar, Rahman, Kazmi and Goyal, 2012).

Use of the STP strategy in organizations

When an organization rationally segments their target customers, they will get better opportunities in different areas with delivering of satisfaction to the potential market segment. It will also satisfy the following criteria such as –

• Group Identity– The top target groups are identical inside segments and diverse across groups.
• Methodical Behavior– Segments needs to respond likewise to a specified marketing approach.
• Efficiency Potential– feasibility and cost of reaching a segment based on market settings.

In addition, effective targeting helps in development of better goals and objectives to the different section of the market. For this approach, management uses PEST approach, as this help in evading various circumstances and assumptions in relation with the target segmentation so have to develop better strategies.

On the other hand, positioning helps the organization to create a point of difference through the help of specific characteristics of a product and also with the different attributes of the product sharing with other brands in the market. This is also called creating Points of Parity.

Utilizing the STP model is one of the most crucial procedures that can help in the growth and development of the business (Fuiller and Matzler, 2008). With this model, a business can be taken out to the next level in both the industry and market and thus offers greater process effectiveness with better product positioning.

For the growth, diversification and expansion of the enterprise in the global market, STP proved to be a vital tool, however it is limited by various prevailing economic trends. The rise of globalisation open the market place for various organization, however, these also possess various challenges on the management in creating effective segmentation and positioning strategy. In addition, rise in the various e-commerce channels also increase the bargaining power of customers and these customers have a significant influence on the position and targeting strategy of the organization (Rehman and Saba, 2011).

On the other hand, with the changing demands, expectations and needs of the customers, the process of segmentation is getting outdates very rapidly. Moreover, now a customer is belonging to more than one segment and the management finds it’s very challenging to recognise which is the profitable segment. This all leads to losing of various opportunities from the perspectives of business.

STP approach is crucial for every organization irrespective of industry, geographical areas and global economic sectors. It splits buyers into groups having identical needs and so to best utilize firms finite resources with the help of buyer based marketing. This part of the report focuses on STP strategy applied to below mentioned company and industry so as to gain practical implications in a competitive business environment.

There is various basis for segmenting a market and Starbucks has chosen a Socio-Economic factor to segment their markets. Therefore, the enterprise focuses majorly upon middle earners such as workplace administrators who require a place with good ambience and facilities during break-time (Lipsman et al, 2012). Market studies were accompanied to identify the catchment area of administrators and coffee lovers so that to finalise store locations. Using innovative measures in segmenting a market attested to be very useful in some scenarios. Moreover, the company main targets are men and women between the ages 25-44 as it accounts for almost half of their total business. The company also emphasis on buyer’s lifestyles as they offer a wide range of products categorised as luxury beverage drink in most cases.

Effectiveness of the STP model

Starbucks sought to develop a strong bond with its consumers (Eventige.com, 2018). The company mainly targeted the parents having young childrens and this proved to be positive (Tan and Lo, 2008). Moreover, the company also raised its segments by aiming early teens plus improving its product range in the marketplace. The company also focuses on affordability of the services. Starbucks targets their segment groups through the growth of technology and creative ideas. The company also develops a unique and relaxing “experience” for the customers within the range tend to have high income and professional careers. Starbucks target audience is laid back but driven (Kumar, 2008).

After deciding the target markets, Starbucks decides on the position, aspect needs to be occupied in the target market. Starbucks realised public opinions, even though it will take longer to cultivate. The company try to position themselves as a premium product in the coffee business with creation of high standard and innovative products and delivering superior service too (Simon, 2011). In addition, there positioning strategy is customer based which helps them to give best customer service. It holds their competitive advantage in terms of both employee and customer satisfaction. Below, is an example of the company using reward tool to attract and retain more number of customer.

Unique Selling Proposition: Starbucks offer membership privileges, not available with most of the competitor.

The company has focused on demographics aspects like gender, income class, age distribution as well as also includes psychographic factors such as personality traits and lifestyles. For instance, the company comes out with Jaguar S-type that target younger customer base (Baltas and Saridakis, 2009). In referring to income class, the company launches Jaguar XF series that target luxury car market for the high net worth individuals. This shows that the company have segmented their market on all basis i.e. demographics, psychographics, geographic, etc. As a pioneer organization, the company have maintained a distinct position in the industry.

In response to targeting, the company has adopted differentiated strategy. To attract the target audience, Jaguar cars launched different Jaguar car models, suiting to different market sectors and well as the varied needs of the customers. The company today has a model for almost every segment in the marketplace. This tactic can create more total sales than a un-differentiation approach but there are risks of eating away the sales and decreasing profitability. The logo of Jaguar cars, which is Jaguar cat itself, is also one of the key features, which attracts the target market they are targeting. The company also uses various taglines that made the consumers believe in dynamism such as – “Born to performe”, “Grace.Space.Space” and so on.

Jaguars also positioned themselves as a luxury brand, which provides both comforts of luxury vehicles and speed and handling of a sports car (Kapferer and Bastien, 2009). In 2015, Jaguar was one of the top three Automobiles brands in the world. Jaguar did not only position themselves based on its uniqueness and pricing, but it also provides premium services to their potential and new customers. For instance, when a newcomer comes to Jaguar, the company directs them to the section of “WHY JAGUAR” on their website as this will makes the customer understand about the history behind Jaguar and what differentiate themselves from the competitors.

Limitations of the STP concept

In terms of segmentation, they are hardly any geographic base and demographic. The company serve people on global level and provide them a substantial attraction in terms of guarantee. Samsung mobile segment their customers on behavioural aspects and thus targets their prospective clients based on the benefits they look for in the mobile technology realm, for instance, superb value and a salient design. Moreover, Samsung Mobile generally examined trends in the market to recognise the prospects of their target market from their products and so beat the market expectations by delivering the best features they could offer (Lee et al, 2010).

Samsung is targeting to people who are enjoying with a rapid pace of life but able to fit in a modern hi-technic lifestyle. The target audience of Samsung is trendy young people who seek for latest design and feature in a smartphone. Moreover, the company also targets professionals and large business people who need various necessary features like camera, pen notes, etc. Target is not only number driven but also acquiring and retaining customers (Hughes and Fill, 2007). The target group of customers is also increasing as this group has more spending power in recent years compared to in the past. In addition, the diversification in various product portfolios also helps the company to develop at a faster pace.

With the increasing competition in the smartphone industry, Samsung has positioned itself on a distinct place with the customer perception about the brand as being unlike from the other brands on several particular dimensions containing product attributes. These dimensions include Samsung concept stores, wider care network, access to Samsung care line, quality products and unique brand identity. This gives them a competitive edge over the other rivalries in the industry and thus helps in continuous development.

Conclusion

STP is a crucial tool for every business enterprise for effectively penetrates the market based on various aspects. To deliver the quality products and services to a customer, an organization needs to focus on certain aspects like value proposition, unit-level goals analysis and several management practices.

The above three industry and company are taken with an example of STP application and this shows, how every company has distinctly positioned themselves in the marketplace. Some of the organization is using differentiation strategy while some of focusing on high income level customers. However, in this competitive environment and digital era, a company needs to adopt varied number of practices in order to meet the demands of the customer and fulfil necessary expectations. Several recommendations are given below –

• This era is moving towards digital scenario and this makes business organisations to divide the target market into various types of homogenous groups. For instance, division of customers based on technology, social media usage, and other applications.
• In order to attain sustainable competitive advantage, business enterprises need to match customer benefits into every phase of the product life cycle. For example, an organization can adopt loyalty programmes for the purpose of engaging customers. In addition, company also needs to identify potential threats to the company and industry in order to formulate adequate strategy.
• The company needs to focus on each segment as recognise the unique characteristics respectively. The company also needs to analyse emerging segments effectively with the help of deep investigation.
• The business enterprises can also adopt using of digital tools as with the help of technology evolution, there is a change in the consumer purchasing patterns and so to analyse their behaviour effectively, every organization needs of some tools that gains required interest, desire, expectations and awareness so as to stimulate consumer behaviour into the purchase decisions.
• In last, in response to effective positioning, the organization needs to use forecasting and modelling tools like big data analytics in align with several quantitative procedure and techniques.

References

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