Discuss about the Evolution of Sustainability as Marketing Strategy.
Strategic marketing is very essential in the modern world to gain competitiveness in the market. It is the process that firms adopt to effectively differentiate themselves from the existing competitors (Proctor 2014). Firms capitalize on its current and potential strengths for providing better value to their customers than the competitors. It is a continuous process of gaining and retaining competitive advantage in the market (Wilson and Gilligan 2012). Strategic marketing is fundamentally based on a framework, with three ideologies, namely, segmentation, targeting and positions, which is known by the acronym STP. This framework summarizes and simplifies the market segmentation process, required for marketing.
As stated by West, Ford and Ibrahim (2015), the purpose of any marketing strategy is to identify the needs of the customers and create an appropriate marketing plan for achieving customer satisfaction, improving the company performance and increasing the profit. A formal strategic marketing plan includes detailed strategy for identifying market needs, creating customer groups based on particular needs and desires, creating specific targeting and positioning strategies, creating schedules and implementation plans and presenting the product or service in the market (Proctor 2014). With the help of this plan, the organizations can grow and raise its level of market domination.
Segmentation, targeting and positioning process is very crucial for any organization to design and successfully implement the marketing plans. This is helpful in identifying the changing market dynamics and needs of the consumers, which determines the suitable strategy to be taken to capture market share (Tanner and Raymond 2015). The following essay will explore the segmentation, targeting and positioning framework in detail and highlight its applications in the industrial marketing. Based on the findings, generic recommendations will be made for successful application of the strategies.
STP model is used by the firms for creating effective marketing communication plans. This helps the marketers in prioritizing the propositions, developing and delivering personalized and suitable messages to the consumers, based on their needs (McDONALD 2016). In doing so, the marketers for any particular product or service must know which customers it is planning to serve, how they will satisfy the needs of those particular customers and how to create value for them by differentiating. The in-depth analysis of the STP model is as follows.
Segmentation is the first step in the STP model for marketing. As stated by Kumar et al. (2012), market segmentation refers to the method, through which the firms divide the consumers or buyers within a market and put under different profiles. These profiles are created on the basis of particular characteristics and consumer behavior patters. This step comprises of identification of the market for segmentation, identifying the tactics to be used for proper segmentation and developing appropriate properties.
The segmentation process is a highly debated issue regarding the choice of variables to be used for dividing the market. Armstrong et al. (2015) debated to use individual factors, like, brand loyalty, social and economic factors to divide the consumers while Kotler (2015) proposed to use a wider base, that is, geographic, demographic, physiographic and behavioral factors. Thus, segmentation process refers to organization of the market into different groups with different characteristics to gain competitive advantage. However, () argued that there should be a limitation in making too many segments of the market as over fragmentation can make it difficult for the firms to serve each segments effectively with specific diversified products and increase profitability. According to Fahy and Jobber (2012), the marketers look for the following characteristics.
Gbadamosi (2013) highlights two approaches for creating segments in the market, namely, discovery approach and analytic approach. Discovery approach is mainly applied for a limited customer base. The process of discovering the segments depends on the interest in the offer or a similar offer that a company can provide. It is a time consuming process as the businesses need to find out the customer responses for an offer for quite some time and make decisions about its profitability. On the other hand, analytic approach is data and research based approach. In this approach, the analysis is done for prediction. Consumer purchasing behavior data is collected from the market and those are analyzed scientifically to identify the trend. This gives an idea about the future profitability of the segment and whether the investment is worthwhile (Keegan and Green 2015).
This approach is most commonly used while measuring consumer behavior while making marketing strategies and plans. The example of the Marriott International Hotel can be illustrated in this case. The hotel business has multiple hotels and brands across the world that target specific and different customer groups. Courtyard by Marriott targets the travelers wanting a nice, clean and comfortable place to spend the night while on a road trip; while Ritz Carlton targets those who do not mind to pay a good value for luxury. On the other hand, Marriott ExecuStay is for the professionals who need to stay for a longer time away from home for business purposes (Marriott.com 2018). All the different types of hotels under Marriott have different brand names and use different strategies for segmenting and targeting specific markets. Another example of applying segmentation strategy is the production of different types of tour packages provided by any single tour operating company. The tour organizing companies segment the market majorly based on demographics, psychographic and behavioral characteristics. The incomes of the customers are as important as their tastes and preferences. They generally create segments like, family, senior citizens and young couples. Thus, they usually provide honeymoon packages for newlyweds, family tours and less adventurous and easy torus for the seniors. At the same time, they also create segments based on the income status, such as, lower, middle and higher income groups of the society and provide tour options according to their budget.
Targeting is the second step in the STP model. After the segmentation of the market is done, the marketers will focus on developing appropriate targeting strategies. In this step, the marketers evaluate the potential commercial attractiveness of each of the segments created earlier and select one or more that suits best with their profiles and resources (Pyo 2015). As highlighted by Alon and Eugene (2013), there are three steps of targeting. The marketers should analyze the profitability of each segment and find out the most profitable one as per their resources. Next they should analyze the size and the potential growth of each of the customer segments. They should consider that if the group is large enough to deliver profits, if steady growth is possible and its differences with other segments. Lastly, they should analyze their capability to serve the market group most effectively. Internal and external environment analyses are conducted to see if the firm can cater to the market segment.
According to Diamantopoulos et al. (2014), market targeting is fundamentally a process of capability and cost benefit analysis of a firm, which helps in assessing its potential to effectively cater to the target market and earn profits continuously. Along with that, the potential commercial attractiveness of each segment can be evaluated by using the following characteristics.
Targeting refers to the evaluation of each segment and finding out which segment can be served best by a company (Hassan and Craft 2012). While targeting a market segment, the resources and the capabilities of a firm is highly important. If the resources are limited, the firm might focus on a smaller segment or a niche market. In this case, the best strategy would be to focus on the segment, which the competitors tend to overlook or ignore. Apart from that, big companies often tend to enter different market segments through product differentiation or different categories. For example, the clothing and accessories companies always target three segments, men, women and kids. The large car manufacturers offer different cars satisfying the different needs of different segments of the market (Khan 2013). Similarly, the tour operating companies do cost benefit analysis of each tourist segment and depending on the profit forecasts, it enters into the market that suits best its resource capabilities and profitability. This is generally based on the strong relation between different segments in terms of similar needs or the resources and capabilities of the company. However, it is found that companies enter a new market by addressing a single consumer segment and if the business gets successful, more segments are added in the company profile. For example, supermarket and grocery chain stores are entering into the clothing business for men, women and children. Kroger is an American retail company, headquartered in Cincinnati, Ohio. The company was retailing in groceries, consumer goods and gas stations since its establishment. In 2014, Kroger entered into the clothing business, and the section is placed within the supermarket outlets only (Thomas 2017). Thus, after a long running success in the supermarket retail, it entered into new segments for the new clothing business.
Boone and Kurtz (2013) highlight that, targeting is a dynamic process. Based on the changing characteristics of the market, the targeting options also change. To sustain in the industry and make profit, companies need to segment and target their market quite frequently and offer product or services to satisfy their need.
This is the final step of the STP framework. This process works on creating an image of the product or service in the minds of the consumers. This process helps in creating a brand in the market. According to Kotler (2015), positioning is the process of arranging a product or service to occupy a precise, distinguishing and desirable place in the minds of the consumers relative to the competing products by rivals. This process is also known as differentiation and positioning. Gbadamosi (2013) highlight that, through differentiation, the companies aim to create a different and superior value of the product or service to the customers and this helps in achieving the beneficial position in the customer’s minds. Hence, creating customer perceptions is the ultimate goal of positioning, as that affects the brand value immensely.
In this process, the companies design the marketing mix to address the target segments of the market. The marketers draw a positioning map and identify the unique selling proposition which is different from the competitors. Positioning map is also referred to as perceptual map. Rettie, Burchell and Riley (2012) describe that, the firms need to decide on what position they want to achieve with their product or service. Position is what the consumer would think of while hearing the name of the product or the brand. Thus, the position should be very carefully chosen, which will distinguish the product or the service from the other available substitutes from other brands in the greatest possible way. This results in gaining the competitive advantage in the market. Hence, the companies must identify the potential customer value differences provided by the product or service while deciding the position. A generic positioning map is illustrated below.
In the positioning map, four quadrants represent combination of high and low price with high and low quality. In the above map, product 1 has the position with high price and high quality, product 2 is placed with low price and low quality and product 3 gives high quality at a low price. The position map is designed by the firms according to the features of the product or service and that of the target market.
Armstrong et al. (2015), on the other hand, provide an insight on some different approaches of positioning. Those are functional, symbolic and experiential positioning. Functional positioning focuses on the features of the product or service that aim to fulfill the customers’ needs. Symbolic positioning depends on the features of the brand fulfilling the customer’s self esteem. Lastly, experiential positioning depends on the features of the brands that excite the emotional connection with the customer. This process is mostly relevant with the existing products that help in creating brand loyalty.
Tanner and Raymond (2015) point out that, to retain the market share, the firms must deliver the value to the customer that they offered to give while positioning of the brand. Hence, differentiation is also important for positioning. The firms need to deliver the desired value to the customers by applying differentiation strategies. For example, if an accessories manufacturing brand wants to position its products as the cheapest in the market, then it must differentiate its products by offering at lowest price available relative to the competitors. Similar is applicable for delivering quality also. Hence, the companies need to create a value proposition, which would clearly state how the offered products would meet the requirement in a better way than the rivals’ products. If the company fails to deliver the committed value, the perceptions of the consumers would change and that would affect the business and profit of the company in a significant way.
For example, Walmart is the biggest retail giant in not only in the USA but also in other locations in terms of revenue, which is nearly $500 billion annually. The retail giant positioned its products as cheapest in the market, that is, ‘low prices every day, on everything’ (Green 2017). Till date, the company is providing good quality products at the cheapest prices available in the industry, which has made the company hugely successful. Walmart has launched a price match service in its mobile app, which enables the users to scan their bill and the app searches the price for the same products in other nearby retailers. If any of the billed products is available at a lower price at any other retailer’s store, then Walmart gives back the difference in price to the customer. This way the company keeps its commitment to provide lowest value to the consumers and maintain its market status. Thus, Walmart not only has successfully positioned its products, but also differentiates will lowest price to maintain the consumer perceptions about it.
The Segmentation-Targeting-Positioning model should be analyzed and applied very critically. The profitability of a company highly depends on the effective and efficient application of the STP model. For achieving the effective implementation of the STP, the companies can adopt the following steps.
Conclusion
The ultimate goal of any product or service company is to satisfy the needs of the customers. In this process, efficient marketing strategy and plans are required to be developed and implemented. Segmentation, targeting and positioning framework is the most essential and basic step for developing a marketing plan. Segmentation refers to the creation of customer groups on the basis of different features of the consumers. Targeting is the process of decision making regarding which market to enter on the basis of suitability of resources and capabilities of the firm in relation to the characteristics and needs of the market segments. Lastly, positioning refers to the creation of brand or product image in the minds of the customers by offering unique value proposition. A firm that offers products or services in the market must conduct the STP in the most effective manner so that it creates a brand image and earn profits.
References
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