Chapter 4

Understanding the Marketing Environment: Segmentation, Targeting, and Positioning

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1. Explain the process of STP marketing.

2. Describe bases for identifying target segments.

3. Discuss criteria for choosing a target segment.

4. Identify the essentials of a positioning strategy.

5. Review the necessary ingredients for creating a brand’s value proposition.

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STP Marketing

• STP marketing is the process of segmenting, targeting, and positioning. Marketers pursue this set of activities to formulate marketing strategies for their brands.

• STP marketing also provides a strong foundation for the development of advertising campaigns.

• While no single approach can guarantee success in marketing and advertising, STP marketing should be considered when customers in a category have heterogeneous wants and needs.

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Segmenting—Identifying Target Segments

• In market segmentation, the goal is to break down a heterogeneous market into more manageable subgroups or segments. • Markets can be segmented on the basis of:

• Usage patterns and commitment levels—heavy users (primary target segment), nonusers, brand-loyal users, switchers or variety seekers, and emergent consumers (point-of-entry marketing).

• Demographics—age, gender, race, marital status, income, education, and occupation• Geography—geodemographics (PRIZM)• Psychographics—activities, interests, and opinions (AIOs) • Lifestyles—Pillsbury’s eating habits segmentation (chase and grabbits, functional feeders, down-home stokers, careful cooks,

and happy cookers); VALS system (groups consumers by psychological characteristics—primary motivation—and key demographics—resouces)

• Benefits sought—segmentation by benefit package • Different bases are typically applied for segmenting consumer markets versus business-to-business markets.

• Standard Industrial Classification Codes—SIC codes are commonly used to identify categories of business and to locate them precisely.

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Targeting—Prioritizing Target Segments

• In STP marketing, after segment identification, an organization must settle on one or more segments as a target audience for its marketing and advertising efforts.

• Several criteria are useful in establishing a target segment:

• The organization’s ability to serve the segment in question

• The size of the segment and its growth potential

• The intensity of the competition the firm is likely to face in the segment.

• Often, small segments known as market niches can be quite attractive because numerous competitors will not be hotly contesting for the same market.

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Positioning—Formulating the Positioning Strategy

• The P in STP marketing refers to the positioning strategy, which should guide all marketing and advertising activities undertaken in pursuit of the target segment.

• Effective positioning strategies should be linked to the substantive benefits offered by the brand. The brand should then have no problems delivering on its promises.

• Effective positioning strategies are also consistent internally and over time, and they feature simple and distinctive themes.

• Options for positioning strategies include: • benefit positioning—features a benefit or option of the brand • user positioning—focuses on a target user • competitive positioning—uses an explicit reference to a competitor

• Advertisers often opt to create a hybrid strategy by blending all or some of the three positioning strategies. A frequent hybrid is benefit-plus-user positioning.

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Capturing Your Strategy in a Value Proposition

• Many complex considerations underlie marketing and advertising strategies, so it is useful to summarize the essence of one’s strategy with a device such as a value proposition.

• A value proposition is a statement of the brand’s various benefits (functional, emotional, and self-expressive) that create value for the customer.

• These benefits as a set justify the price of the product or service. Clear expression of the value proposition is critical for developing advertising that sells.

• Thorson and Moore’s Strategic Planning Triangle is a useful tool in identifying and applying a brand strategy. The three apexes of the triangle are:

• Identify and profile target segments• Specify the brand’s value proposition• Select persuasion tools

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