Market Segmentation, Targeting and Positioning| LGMW01/04

by Bella Williams March 07, 2016

Market Segmentation, Targeting and Positioning – Marketing Management

Segmentation, Targeting and Positioning (STP) are the three vital components of a firm’s strategic marketing efforts. Organisations, in their endeavour to create a space for themselves in the market, may devise revolutionary products or services. However, this is not enough. They must also carefully identify who, among the population, would ideally purchase the product or service, and what they seek from such a transaction. A well executed and implemented STP program will help the firm in devising the proper marketing mix – the right product to be sold at the right place at the right price and in the right way .

STP is a sequential process, where a firm first splits the entire market into various groups based on certain criteria, then proceeds to select one or more of these groups based on the profitability and other criteria and finally creates a suitable space for the product or service in the minds of the consumers. Given below are the definitions of STP according to the Market Segmentation Study Guide.

  • Market segmentation can be defined as the process of splitting a market into smaller groups with similar product needs or identifiable characteristics, for the purpose of selecting appropriate target markets
  • Targeting refers to an organization’s proactive selection of a suitable market segment (or segments) with the intention of heavily focusing the firm’s marketing offers and activities towards this group of related consumers

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Source: http://www.smartinsights.com/digital-marketing-strategy/customer-segmentation-targeting/segmentation-targeting-positioning-model/

Positioning is the target market’s perception of the product’s key benefits and features, relative to the offerings of competitive products

Segmentation

The first step in strategic marketing planning , segmentation is essentially slicing the entire market into various groups, based on a pre-determined set of criteria as it done in various marketing management assignment hep solutions. The population within each segment is homogenous, and across segments in heterogeneous. Using segmentation, firms can identify specific niches, market conditions, and people groups so that they can deliver a focused and more integrated marketing communications. The most common ways to segment the market are:

Demographic segmentation: Based on age, gender, education level, income, ethnicity, marital status, family size, profession and so on

Geographic: Based on country, region, urban-rural classification, climate, population density and landscape

Psychographic: Based on personality, emotions and behaviour that motivate purchase decisions and choices such as lifestyle, values, attitude and traits

Lifestyle: Based on entertainment, recreational choices, vacations and so on

Beliefs: Religious and political inclinations, cultural outlook, nationalist and values

Behaviour: Based on consumers nature of purchase, level of usage, disposal, brand affinity , benefit required, channels of distribution and response to marketing efforts

Targeting

Targeting is essentially picking up one or more segments that have resulted due to the market segmentation process. There could be various criteria for selection of segments. Some firms may treat the entire market as a segment, since their offerings may not be differentiated according to segment composition (Eg: Coca-Cola). Others may carefully select one, two or more segments that they can best cater to. The following features must be present in a segment to fall within the target consideration set.

  • Market and segment size of the segment: Both, the market as a whole, as well as the segments, must be of a considerable size. A smaller market will yield smaller segments, which could sometimes work in the firm’s favour if the segment is profitable. But if the segment is small in itself, the volume of sales generated will be small
  • Difference: The segments need to have a clear-cut difference between each other; they need to be heterogeneous in terms of their composition
  • Profitability: The expected or anticipated revenue generation and profits must exceed the costs of marketing
  • Accessibility: Each target segment needs to have adequate accessibility to the firm’s products and services, and marketing communication
  • Benefits: The entire point of segmentation is to tailor products and services that suit the varied needs of each segment. Hence, different segments need to be offered different benefits

Positioning

Positioning refers to occupying a certain place in the minds of the target consumers. The last phase of the STP process, positioning of a product or service favourably, and using the benefits that consumers seek, is the focus of this step. Integrated marketing communications form an important part of positioning, as the firm needs to customise its messaged keeping in mind the product and service benefits sought, the popular medium of choice for the target market, the costs of such a marketing plan and the image that the firm wants to create in the minds of the consumers. Positioning also seeks to differentiate one’s offering from those of competitors. In this context, points of parity (PoP) and points of difference (PoD) are utilised to aid in effective positioning as suggested by experts of ExpertAssignmentHelp

According to Strategic Brand Management, Points of Parity are usually the attributes or functionalities or benefits or any other marketing mix elements that are not unique to the brand and might be shared by some or all the competitors, as they mostly include the basic necessities for a brand to be considered in a particular category. Points of Difference are usually the attributes or functionalities or benefits or any other marketing mix elements that a consumer strongly associates with a brand, which he/she feels is not offered by and of the competitors.

Illustration of STP

Let us consider Tourism Australia’s STP strategy.

Tourism Australia has opted for different bases of segmentation namely geographic, lifestyle and demographic segmentation. It has split the world into various countries or regional groups, and has picked a handful of the largest, most profitable and most accessible groups as their target market. It has also categorised the market into various lifestyles, age groups, income profiles and so on.

Once the market was segmented into several groups that are homogenous within and heterogeneous across, Tourism Australia selected or targeted a few of these groups as follows:

  • Market Regions: Australia, Americas, Europe, New Zealand, Greater China, Japan and Korea, and South and South East Asia
  • Market Segments: Focus on a high yielding consumer segment, those who will spend more and do more on their trips to Australia. – Tourism Australia. The below is an excerpt from the Tourism Australia website
  • Experience Seekers: This target market is highly predisposed to Australia’s offer and is more likely to stay longer, spend more and disperse to regional areas. They are looking for unique, involving and personal experiences from their holidays. Experience Seekers are long haul travellers who are less affected by the traditional barriers to travel of distance, time and cost. They are more informed, interested and curious about potential travel destinations. They constitute around 30 to 50 per cent of all potential long haul outbound travellers. Experience Seekers can be found among all age groups, income levels and geographic locations
  • Youth: A new focus for the tourism board, the youth segment has been the focus for Tourism Australia, along with its other affluent segments, through their new campaign “There’s Nothing Like Australia”.

In terms of positioning, Tourism Australia wishes Australia to be viewed as a holiday and vacation destination that boasts of affluence, class and a variety of experiences, and is always welcoming. This is effectively portrayed through its communications via traditional print and television media, digital and social media campaigns.

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Closure

A well-defined STP strategy is the core of a firm’s strategic marketing mix. It is essential to split the market in the right way, select the right segments and position the product or service in a favourable light and with benefits that competitors cannot offer, through effective messaging and tailored communications.

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