Different customers have diversified interests and desires, thus witnessing the extensive array of products and services available in marketplace. This diversifying buying needs and practice makes companies impossible to fulfil every customer’s desire with one sole product or service. In past few years, organisations have responded by providing a proliferation of brands and products, therefore, have found it necessary to move ahead of mass marketing towards targeted marketing strategies where they can focus on particular group of buyers. This identification of targeted group of customers is called market segmentation where consumers can be amassed into groups who have peculiarity in buying characteristics (Dibb & Simkin , 2007).
Targeting, segmentation and positioning are three parts of process named STP that involves taking a closer look at potential customers to determine marketing mix strategies. Targeting, positioning and segmentation helps companies narrowing down the market into a manageable group so that pursuing segment according to business is feasible. According to Larsen (2010), targeting refers to those processes in which selection of specific group or people is done by organisations to promote their products or services. It involves identification of overall characteristics of prospective consumers share, like challenges they face and the result they expect their product or service to be like (Kotler, 2000). Segmentation takes one position ahead of targeting where further breaking down of potential buyers in smaller segments who poses similar characteristics is done. This allows organisation customise their market to fit into each group (Dibb & Simkin , 2007). After completing the process of selecting the market and segmenting it, positioning is the end stage in STP process. In other words, positioning is something that is done by businesses to read the mind of prospects in which the product position is forced within the minds of prospective buyer (Premkanth, 2012). According to Hooley, et al. (2012), two major characteristics of contemporary marketplace are the degree to which they prove capable of being segmented due to diversification between customers needs that requires to be treated individually, and the existence of the massive and superior technology related to distribution, communication and production that allows to pursue segmentation strategies. According to the authors, this can lead to one-to-one marketing or micro-segmentation, depending on the case in which customers are treated like a different segment all together.
However, few issues can also be recognised in market segmentation. One major issue identified is that segmentation is identifiable on particular market only and thus selection of the market itself become crucial for the companies (Ernst & Dolnicar, 2017). To get clearer picture of market, the base for selection can result both positive as well as negative in providing with different outcomes. This theory is further supported by Goyat (2011) where according to the author, however diversified is the base of market segmentation, it gives more importance to traditional basis like demographic, psychographic, geographic and behavioural that does not fulfil today’s market pace. Other factors like ethnocentric and benefit sought approach is also significant for segmenting consumers in market. Nevertheless, to certain extent, STP can be looked upon as a force in marketplace that can not be denied. It can be result of trials and errors to some sense that generalize plans of product or service differentiation that may turn out to be operative in some marketing segments and inoperative for the others. Therefore, recognition and intellectual response to given situation is necessarily involved while making a shift in emphasis ( Hooley, et al., 2012).
The expansion in Aldi, a major grocery store in UK is a fine example that shows how the retailers positioned themselves rapidly in upper and middle market with extensive variety of own label goods as well as giving priority to service. Aldi’s large stores are carefully designed providing with facilities and atmospherics in which budget conscious segment of market are left in the hands of the company. With 2,500 lines that concentrates on manufacturing of brands and no-frill service, this small supermarket became one of the most successful company in UK. In spite facing change in market, Aldi, the German discounter opened his first store in Midlands. Aldi operates in European market also and offers no luxury, no customer related service or secondary sites along with giving minimum devotion to store fitting and design. Aldi’s main concentration is on its own brand products, along with manufacturer’s brands that are displayed in shipping container and boxes. Pricing is the key approach of Aldi; however, discounting image does not seem successful to that extent in UK market. In fact, where lot of retail grocery companies had to transform themselves and were shaken by former discount image, Aldi margined 5 to 7 percent growth in UK market. Aldi created a network of stores large enough to provide with necessary degree of economies to make business based on effective pricing. UK customers had to accept the discounting force with limited range positioning in marketplace that was led by high profile retailers such as Tesco, Argyll, Asda, Marks and Spencer’s, etc (Aldi , n.d.).
According to Martin (2011), “The rationale behind marketing segmentation is to allow businesses to focus on their consumers’ behaviours and purchasing patterns”. The author suggests that if market segmentation is done effectively, it allows organisations to benefit through high returns against sales and marketing activities. Therefore, if any organisation markets service or product to customers, it should focus on various factors that are related to market segmentation like geographical, psychographic, demographical and behaviour. Kotler (2000) further describes market segmentation as classification of potential buyers within a market that shares related needs and thus establishes related purchasing behaviour and habits. To understand the market segmentation concept more precisely, this paper will examine Apple Inc, Tupperware and Nestle case study to find out how these companies have applied STP in their marketing strategies.
Apple Inc. is one of the leading companies dealing in electronic hardware and software industry. This paper will analyse market segmentation done by Apple company for one of its popular products, iPhone. The company targets people lying under the age group of 20 to 45 years old as they are the ones who show interest in buying latest technology. In fact, male customers are more targeted than female ones for iPhone due to presence of gaming and other features like wireless internet that are usually liked and used by male population than female ones. Other than demographic segmentation, Apple products are also targeted to upper- and higher-class people since its products are quite expensive. All the products launched by the company are sold first in USA and UK markets along with few parts of Europe because these nations comprise infrastructure ready for the company products and also due to intense competition in market present there. Apple has a strong product portfolio along with reputable image, therefore, customers describes Apple product as more of an experience. The pricing positioning of iPhone is of premium strategy in which the product is given high quality to get higher pay from its customers. According to Kotler (2000), positioning is defined as a perspective of consumer’s mindset based on the thinking they have regarding the brand. However, Hidayat (2017) argues that positioning should always be sustainable and relevant to changes in contemporary business environment like change in competition, socio-cultural and customer behavioural changes etc. The positioning of Apple products through pricing strategy is done exclusively since the company has made its image in the market of providing with something different than traditional products as available in its competitors brands (Mickalowski, et al., 2008). However, for Apple, it can be recommended that the company should consider targeting other group of people also by introducing different set of products suitable for middle and lower middle-class people. This will not only help the company target broader market segment but also make difficult for its competitors survive with limited product portfolio (Ritson, 2011).
Tupperware, a Malaysian company, is another brand dealing in plastic made water and food containers who focuses comparatively more on giving attention to segments rather than serving entire market like other companies. Tupperware Corporation has segmented its customers in two prime categories; psychographic and demographic. The company focuses more on demographic factor that means in gender-based marketing. The company’s main target is mostly based on women; however, male customers are also targeted for Tupperware plastic bottles. Psychographic factor like lifestyle, targets those people who poses good lifestyle and are more concerned regarding their health as well as mother nature since Tupperware products can be recycled, reduced and reused. According to Khan (2013), “target market is a chosen segment of market which a company has decided to serve” With regards to this statement, Tupperware follows a process to separate markets into different segments to concentrate more on marketing effort only on one or few prime segments. It can be noted here that the company predetermines its business success even after targeting less customers. This strategy of the company makes Tupperware products target market after making effective pricing, distribution and promotion of its products along with service that are readily available in cost effective prices. The company also uses differentiated marketing policy however, most of its sales are forced by women customers only ( Humaira & Handayati, 2016). Since Tupperware is focused more by women customers, it can be recommended that the company must focus on alternative products also so that male customers also take keen interest in company products. (Goyat, 2011).
The consideration in consumer food products have brought immense changes in food industry where Nestle is doing well by adding its customers loyalty while operating in competitive food industry. Nestle is one of the leading companies dealing in processed food products where the company provides with quality food related products mainly based on developed formulas. The company segments its market based on criteria where clustered groups deploys multi-stage segmentation strategy to meet individual needs of customers. According to Premkanth (2012), “Market segmentation is no accident, but a result of careful planning and execution”. Under this context, the author states that there are many strategies and techniques available for the companies to segment market, but tuning the market segmentations to ensure success is through achieving efficient customer satisfaction only. By offering new products, the company does not hesitate in closing old and outdated ones to extend its promise of satisfying customers with loyalty. To position itself in market, Nestle includes promotional programs that act majorly in re-launching products with developed formulas. In targeting strategy, Nestle makes sure that each products are meant to fulfil individual customer’s needs. The company focuses on demographic factors also and thus targets women centric market. Nestle also focuses on milk and baby products for which the company targets new age generation by building strong relationship through providing variety of eatable products. Other than these, geographic segmentation is also considered by the company which is done utilising spatial location for market segmentation. Markets of Nestle products are divided on geographical segmentation where different schemes are allotted according to the distribution channel such as city, regions and states (Nestle, 2006). Since Nestle targets mainly on demographic basis which shows targeting customers above aged 30 years, it can be recommended that the company must also focus upon 18-24 years old who belongs to educational tertiary or college goers. There is immense need of ready to eat and processed food products in universities and where students stay in hostels.
After evaluating present literature and various companies about how they perform STP in their marketing strategies, few generic recommendations can be provided that can assist managers of the firms while formulating STP strategies.
Conclusion
The expanse of market segmentation has been discussed in the above essay to realise the reason behind preparing this report i.e. to provide a framework for understanding how market segmentation helps in determining appropriate targeted audience. While discussing STP theory, evidences like its application in major companies made the concept clearer. It was observed that although STP of market segmentation are powerful tools of marketing strategies, they eventually end up focussing more on consumer satisfaction in ways that makes them superior to competitors. Nevertheless, its importance can also be determined through identification of success recognised by major companies through application of STP in their marketing strategies.
References
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