4-1 Chapter 4 Understanding the Marketing Environment: Segmentation, Targeting, and Positioning

Explain the process of STP marketing. 4-2 Explain the process of STP marketing. Describe bases for identifying target segments. Discuss criteria for choosing a target segment. Identify the essentials of a positioning strategy. Review the necessary ingredients for creating a brand’s value proposition.

4-3 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.

Segmenting—Identifying Target Segments 4-4 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.

Targeting—Prioritizing Target Segments 4-5 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.

Positioning—Formulating the Positioning Strategy 4-6 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.

Capturing Your Strategy in a Value Proposition 4-7 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