STP – Segmentation, Targeting, and Positioning

What is STP?

Modern marketing covers various steps of selling goods and services to customers. There are various techniques and models that the business analyses and opts for best to sell goods and services in the market. One very effective marketing strategy is the STP (Segmentation, Targeting, and Positioning) model. In STP, S means Segmentation, T means Targeting, and P means Positioning.

Geeky Takeaways:

• Segmentation means dividing the whole customer base into different subgroups based on their similar characteristics.
• Targeting means deciding which subgroup the company should target to sell its products and services.
• Positioning means placing a good image in the minds of customers about the product.

What is Segmentation?

Segmentation is the first step of the STP strategy. Segmentation is the process of dividing the whole market into small subgroups based on shared characteristics like age, gender, taste, preferences, etc. Customers having similar needs and behaviours are to be put together. A market segment is a portion of the whole market that is expected to respond similarly to a given situation. Segmentation helps the business identify what type of customers they should target to sell their product/service. For these reasons, a company should properly do the segmentation process. Market segmentation can be done based on:

• Psychographic Attributes (lifestyle preferences)
• Geographic Attributes (location)
• Behavioural attributes (habits)
• Demographics (age, gender, etc.)

Once the company is done with the market segmentation process, it can focus on choosing the best segment for its products and/or services. When the segmentation is done correctly, a company can entirely focus on one or more segments, without wasting any time and resources. For example, Volkswagen. Volkswagen Group is responsible for producing brands like Audi, Porsche, Lamborghini, and Ducati. Even after being so expensive, brands still generate a handsome revenue. Volkswagen depicts the importance of perfect market segmentation.

What is Targeting?

The process of evaluating market segments and choosing the best to target comes under Market Targeting. Market Targeting undertakes the decision of choosing the best target audience and the degree to which the target market should be targeted. In simple terms, it is a process of choosing the best target audience for the product/service and declaring the other segments to be useless for a particular kind of product/service. A business must determine the target audience after thorough research; otherwise, the business is going to end up wasting time and resources with no return on investment. Generally, a new product/service is first made available to a single target, and if it remains optimal, the business takes up other segments as well. Market targeting also depends on the size of the company. Besides, the more the target markets, the more will the cost of targeting. For example, Nike’s target market includes those people who are interested in getting fitter.

What is Positioning?

The activity of positioning involves placing the product/service in the minds of the target customers and making the image of the product/service superior as compared to other similar products. Various factors affect the process of positioning such as:

• The larger the size of the target market, the more it will be difficult to position the product/service.
• If there is no competition in the market, then the business can create a completely different and new market positioning strategy.
• If the product has already a good brand value, then it will be of advantage to the business to position any new product/service.
• If the company decides to offer fewer prices for its product/service than the rival firms, then the business can have an advantage in market positioning.

For example, Starbucks. Starbucks wanted to make itself ‘The Third Home’ between home and work so that people can come and relax whenever they are tired. They decided to target customers with medium and high-level income. Starbucks uses the following taglines to strengthen its positioning in the market:

• 100% Recycled Paper Use
• The Finest Milk Use
• The Best Coffee
• Rich & Smooth Flavours
• Natural & Clean

Importance of STP in Marketing

STP is one of the most important concepts of marketing which helps in developing a suitable marketing mix. STP is necessary to understand the behaviour of customers and choose the right target market for products. It tells the business about the target market so that they can focus on the right audience and not waste time on other segments. Segmentation is necessary to divide the whole customer base based on their similarities. Segmentation tells us how a particular segment of customers tends to behave similarly. Targeting is also a most important activity, as it tells us which customer group the business should focus on?, and Which customer base is most appropriate for one’s products/services? Positioning helps the business in placing a positive image of their products/services in the minds of target customers so that customers will remember the product and keep buying it.

Relationship between Segmentation, Targeting, and Positioning

Marketing mix undertakes activities like segmentation, targeting, and positioning, namely STP. These activities are interlinked and sequenced to form an optimal marketing mix. The very first step is segmentation. Segmentation involves dividing the whole customer base according to their needs, preferences, age, gender, etc. Segmentation tells us how a particular segment of customers tends to behave similarly. After dividing the whole customer base into segments, businesses choose the optimal segment(s) for their products. This process is known as Targeting. Targeting involves choosing the right customer segment(s) for the product. After targeting, there comes Positioning. Positioning involves activities of creating an image in the minds of the customer base, the base that gets chosen in the targeting process.

STP Strategy of McDonald’s

Segmentation – McDonald’s segments its market based on several factors:

• Demographics: They consider age, gender, income, and family size. For instance, they have offerings like Happy Meals for children and Value Meals for budget-conscious consumers.
• Psychographics: McDonald’s taps into consumers’ lifestyles and personalities. For example, they offer healthy options for health-conscious individuals and late-night hours for those seeking convenience.
• Behavioural: They target customers’ buying behaviour, through the frequency of visits and order preferences. They have tailored options for regular customers and promotions to attract occasional visitors.

Targeting – McDonald’s primary target audience includes:

• Families: They provide a family-friendly atmosphere with play areas and offerings like Happy Meals, targeting parents and children.
• Young Adults: The menu offers a range of products that are appealing to young adults, from classic burgers to trendy items like wraps and salads.
• Teens: They attract teenagers with affordable items, quick service, and a place to hang out.
• Children: Through Happy Meals, toys, and colourful packaging, they create an appealing environment for kids.

Positioning: McDonald’s positions itself using the following strategies:

• Convenience: They emphasize fast service, drive-through options, and extended hours, positioning themselves as a quick and convenient dining option.
• Affordability: McDonald’s offers value menus and combo meals at reasonable prices, targeting budget-conscious consumers.
• Variety: Their diverse menu caters to different tastes, from classic burgers to salads and healthier options, appealing to a broad range of preferences.
• Consistency: McDonald’s maintains a consistent quality and taste across its global locations, creating a sense of familiarity and reliability.