In today’s business world, marketing is an important ingredient for the success of business, which includes various marketing aspects that assist the business in attaining its objectives and goals. An appropriate marketing strategy is something, which helps the organizations in achieving its marketing objectives. Effective marketing campaigns and strategies generally include a set of marketing tactics, which work simultaneously in a systematic manner to establish the organizational brand, decrease sales resistance and develop desire and interest for its products and services. When an organization introduces its new products and services, it implements the process of strategic marketing planning that includes all the processes from setting a vision and mission statement and creating marketing strategies and placing goal for its products and services.
Under this process, companies use a formula, i.e. STP that consists of Segmentation, Targeting and Positioning. These are the essence of strategic marketing planning of a company. This essay includes the discussion about these major components of strategic marketing and reviews the literature on how an organization applies these concepts in the real world. There are examples of some organizations, which are taken into consideration. At the end, it includes some generic recommendations, which can enhance the application of these theoretical concepts around STP.
Nowadays, marketing and promotion is everywhere, informally and formally, organizations and people engage in different activities, which are known as marketing. But still, there is one issue that they are not able to connect to all the potential customers in diverse or large market. They want to emphasize on the people within their capability and with understanding of customers. For this, company divides entire market into different groups of customers with different needs and desires. To approaching the right customers for right products and services, the businesses need to use the different concepts of STP. STP stands for Segmentation, Targeting and Positioning. STP plays a vital role in finding out the right customers for the company’s new products. All three tools, i.e. Segmentation, Targeting and Positioning are implemented to align its products with most appropriate customers.
According to Goyat (2011), each and every organization wants to emphasize on potential customers according to their capacity and consumer intimacy. For this, marketers have to categorize the market into groups of customers and segments with different wants and needs. They try to understand the needs, demands and wants of its customers. Needs of human being can be defined as their basic requirements, like; food, water, air, entertainment and clothing. These needs work as wants, when they are led to particular objects, which may fulfill the needs and demands of customers. For example, the people in America require food, but they want hamburger, soft drink and French fries. It indicates that wants of the people are built by its society. For dividing the entire market in homogeneous segment, companies can use “S” from STP approach, i.e. Segmentation. Even the companies, who already have implemented different marketing approaches, are also adopting this strategy of modern world, i.e. segmentation.
In this context, Weinstein (2013) stated that Market Segmentation was first given by Wendell. R. Smith in the era of 1950s and defined that Market Segmentation is the process of dividing the market into small groups of customers with different characteristics behaviors and needs, who may need the different products and marketing strategies. Through this process, the companies divide customers according to similar requirements. The major objective behind this is the focus of marketing force and energy on subdividing to attain competitive advantage within market segment. Focus of marketing energy is essential for all marketing segmentation and strategies are the major theoretical and conceptual tool, which assist in attaining this emphasis.
According to Foedermayr and Diamantopoulos (2008), there are some theoretical approaches of market segmentation, which can be used for categorizing the entire market. These approaches are like; demographic, geographic, psychographic and behavioral segmentation. The variables of demographic segmentation include gender, age, family life cycle, family size, income, occupation, nationality, social class, religion etc. The organization segments the market by considering these variables. Psychographic variables consist of attitudes, values, opinions, activities and interests. Under behavior segmentation approach, the segmentation is done on the basis of behavior of customers towards the products and services of company, like; brand loyalty, usage rate, benefits sought, and buying decision etc. Furthermore, there are some examples of geographic approach, such as; region, climate, size of area and population density.
Most of the companies are working in effective manner for implementation of market segmentation and having various advantages. For example, Tesco Plc. that is located in United Kingdom food and retail market is using different bases for segmenting the market. Under geographic segmentation, it is operating its business in United Kingdom and other 13 nations all over the world and offering the products to both urban and rural population in these countries. In addition to this, it is implementing demographic segmentation, under which it is segmenting the middle and lower income level people and students and employees. Considering behavioral characteristics, Tesco is offering cost benefits to its regular and new customers, so that they can attract more customer base towards its products and services. Apart from Tesco, there are two other supermarkets, i.e. ALDI and Lidl, which segment the customers according to different bases than Tesco. Segmentation of LIdl is emphasized on the cost effectiveness to a great level in comparison to Tesco and it targets the people, who are ready to compromise the quality due to higher prices.
After market segmentation, the second step under STP formula is targeting that includes making decisions about market segment, on which products and resources are to be emphasized. According to Hajar, Mahrani and Sinarwati, (2013), targeting is the process of selecting a marketing segment, which is determined by the set of customers, who share similar characteristics and needs. The application of target market selection results about what the company decides to serve the market and its customers. Most of the organizations utilize its target market to adapt for particular markets.
Kotler (2012) has given three strategies for targeting process, i.e. differentiated, undifferentiated and concentrated. These three are the major approaches, which direct an organization to decide how to reach to its targeted markets and customers. There are so many companies, which do not segment the market and prepare the products and services for entire market. Undifferentiated approach is used, when a company offers one product and targets all the customers with only marketing mix. There are some examples of products and services, like; toothpastes, furniture, automobiles, computers, drinks etc. The second approach of targeting is differentiated approach, under which firms manufacture several products with diverse marketing mix strategies. Under this, the companies design the products to fulfill the needs and wants of small segments. For example, a retail store can enhance its sales, which attract the people from two locations. Wal-Mart is one of the best examples, which is marketing the low cost to price conscious segment and quality of products to affluent segment.
The last approach of target market selection is concentrated marketing, under which an organization focuses on its market with its specific product. Each and every niche market defines the product features of particular product, such as; price range, design of products and quality of products. For instance, a retailer may market its products and services to the residents, who are residing in that specific town. Toyota is the best example of concentrated marketing, which assists this company in capturing the target market for hybrid vehicles.
Widiarti, (2009) mentioned in his article that decisions for targeting the market are made on the basis of buyer diversity, market maturity, preferences and needs of customers, strengths of competitors and sales. There are so many advantages of this perspective under STP, like; it allows the firms to emphasize on the particular needs and wants of target customers in addition to desires, prices and habits. It is the next important step, which follows the market segmentation. After understanding the customer needs and demands structure, organizations has to decide that which segment it desires to serve. In every case, it is not simple to choose target market. In some cases, there will be need to elaborative analysis of the market, which it targets to serve. To understand this, example of over the counter painkillers can be taken into consideration, like; there are two kinds of drugs, which are competing in the pharmaceutical industry. One is manufactured on the basis of Aspirin and other is on the basis of Acetaminophen. From them, Aspirin is very effective, but there are some side effects causing the stomach problems. So, it is important for the companies to manufacture the drugs to analyze on segments, which fit appropriately for their products and services. Thus, there is need of an effective evaluation for selection target market.
The last component of STP formula is “P” that stands for positioning, which works as an effective strategy of the company that enables the customers to create a better image of company’s products. It is the process how the products of company will be perceived by target audiences in comparison to its competitors. Kotler (2007) described that after selecting the target market, it is essential to determine the position that it wants to attain in minds of its target customers. Through product positioning, the companies can tell the world that products of company are unique and exclusive. For example, positioning of hotel can be done on the basis of particular service attributes, such as it should have district attributes like; ballrooms, bars, meeting rooms and restaurant areas. Under its positioning strategies, hotels create the differentiation from its competitors to attain more competitive advantage in some of the areas, like; human resource, service, physical distribution, brand image and location. Positioning is a significant process to make sure that a product or service occupies a desirable and different position in comparison to its competing brands. With the development and growth in the prospective industry, a powerful positioning strategy assists the company to implement a viable marketing strategy.
According to Dudovskiy (2017), product positioning includes implementing different components of marketing mix, so that it can attract the target market in an effective manner. There are different types of positioning, which can be used by the companies in order to appeal its customers, such as; symbolic positioning, functional positioning, experimental positioning, price positioning and multi-segment positioning. The organizations use these positioning strategies according to their product and service offerings. For example, Tesco Plc. is using functional positioning for placing its products in the market. Functional positioning is the process that is related to the increased quality and range of functionalities of company’s products and services. Tesco provides premium range of products via this positioning. Therefore, the quality of these products is serving as the major point of promotion for the targeted customer market. Products offered through functional positioning are costlier than basic range of Tesco’s products. Still, improved functionality and higher quality can be attained for extra costs.
Furthermore, Singh (2011) stated that symbolic positioning is done on the basis of objectives, values and expectations of customers. This type of positioning is also used by Tesco in context of its Fair Trade products of grocery and food market. In addition to this, all the concepts of STP are implemented by IKEA. In this context, Dudovskiy (2017) stated that there is another example of segmentation, targeting and positioning, which can be seen at IKEA Company. IKEA is segmenting its marketplace by considering different characteristics and targeting the customers, such as; geographic (Asia, America, Europe, Russia and Australia), demographic (Both males and females and more than 22 years old) and behavioral characteristics (Lower and middle class, cost effective and first user and regular users). For placing its products among its target audiences, the organization uses mono-segment positioning and creates the appeal to the wants and needs of single market segment, which are very conscious about the money and wishes to get full value for their money. Thus, different companies are applying this significant formula of marketing, i.e. STP and seeking benefits. In addition to its benefits to the companies, there are some limitations and disadvantages, which are stated in the below paragraph;
When it is about thee critical analysis, it is essential to analyze the disadvantages and limitations of applied concepts. It can be seen that sometimes marketing segmentation and targeting becomes more expensive for the company. Marketers may experience many difficulties because they have to develop marketing mix strategies for different market segments. For these organizations, mass production is cheaper than a wide range of products. In addition to this, they have to face different additional costs, like; increased promotional and advertising expenses, cost on inventory, administrative expenses etc. Under this concept, it is very important to conduct deep analysis of the market and target customers, because there are so many organizations, which are failed in targeting and positioning process.
For instance, Nokia has failed in targeting its customers and developing a positive perception for its products in the customers’ minds. The marketing people at Nokia failed to understand their value proposition and marketed the phones offering longer battery life. It was failed to understand that now people and young generation is seeking for entertainment. It was the major reason behind the downfall of Nokia. So, there is a need of an in-depth analysis for implementing STP formula. Targeting an appropriate market for right products is very important under this process. With the analysis of market and customers, it is very important to analyze the competitors in the similar segment and ensure that company’s products are new and innovative, which can attract a large customer base towards company.
Moreover, one of the major disadvantages of market segmentation is that when the variables and characteristics of target market change, then the investment made by the company become useless. When the company uses different market segmentation approaches, then it needs to implement different marketing programs and strategies accordingly, which may increase the administrative expenses to the company. Thus, it indicates that the major limitations or disadvantages of STP formula are its expensiveness and need of in-depth analysis.
However, each and every organization is trying to make its marketing successful using STP formula, which stands for Segmentation, Targeting and Positioning. Developing effective marketing efforts will be very beneficial for the organization in today’s competitive business environment. It is very important that customers understand the value of products and develop a positive perception of company’s offerings in their minds. It will increase the sales and revenues of company’s products. For the above given examples, it can be recommended that Tesco should enhance its market segmentation and use pricing positioning. It can apply this approach of positioning to variety of its owned products, which include Widescreen HD LCD TV. It can assist the organization in attracting its targeted customer segment, which are very concerned with product prices in comparison to other elements of marketing mix strategies.
The company should make efforts to identify its most valuable market segment. It should implement a systematic process, in which first, it should make research for the target markets of competitors, using competitor profile, journals, Linkedln etc. After that, it should collect the information of demographic factors of target customers, like; it must consider that how much money its target audiences have. It is very important part of its market and customers. Apart from this, it should identify other factors and characteristics of customers, which will assist the company in attracting customer base towards its products and services.
Furthermore, Nokia Corporation can enhance its targeting by improving the features of its products and services. It can add new and innovative specifications and features to its products and choose an appropriate market for its products. IKEA should expand its market segmentation and targeting to psychographic variables also and target the people considering their attitudes and lifestyle. It will assist the company in expanding its market area in the industry. Moreover, the companies should conduct a marketing research for analyzing the needs and expectations of the customers, so that they can manufacture the products accordingly and then target the audiences, for whom it has developed the specific products and services. By considering these recommendations, the companies can be able to improve its strategic marketing planning process in competitive business environment and they will be able to gain more competitive advantage over its competitors.
Conclusion
From the above analysis, it can be concluded that STP is an important concept under strategic marketing planning. When an organization introduces its new products and services, it develops a marketing process using market segmentation, targeting and positioning. These are most important processes under marketing process. The above essay analyzes all the concepts and their application to different organizations. There are different authors, who have given their opinions about STP. However, it is beneficial for the organization, but there are some limitations, which can resist the organizations from effective implementation of STP formula. In the literature review, there is the dominance of demographic variables for the market segmentation, but there is a great impact of other variables, like; trends, changes in the market, price and conditions of market. These are the major variables, which affect the purchasing decisions of the customers. Finally, some recommendations are given for the organizations, so that they can enhance their strategic marketing planning process. The organizations should go ahead by considering these suggestions, so that they can be able to retain its existing customers and create new customers.
References
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