What
Is STP marketing?
Segmentation, targeting, and positioning (STP) is a marketing
model that redefines whom you market your products to, and how. It makes your
marketing communications more focused, relevant, and personalized for your
customers.
In
short, STP is a marketing approach where you segment your audience, target the
best-fit audience segments for your product, and position your product to
capture your target segment effectively.
The STEP Formula
Segmentation
+ Targeting = Positioning
Segmentation with an example
Suppose your product is plant-based milk. Your
general audience is people who want to move away from dairy-based products. You
can segment this audience into two categories:
Segment A: people who are looking at dairy-free
alternatives for lifestyle purposes, typically high-income groups.
Segment B: lactose-intolerant people looking
for other options.
The message you use for these two segments is
obviously going to be different from each other. Using tools like Data Studio,
you can further segment the above two segments into groups that already use a
competitor product and those that don't. You can then hone your messaging
according to it.
Targeting
The next step in the STP model
is targeting. This is the stage where you decide which segments you created
during the segmentation phase are worth pursuing. You should ideally consider
the below criteria to choose your targetable segments:
Size: Your audience
segments must have enough potential customers to be worth marketing to. If your
segments are too small, you may not get enough conversions to justify your
marketing efforts.
Difference: There should be
a measurable difference between any two segments. The lack of it leads to
unnecessary duplication of efforts.
Reachability: The segments
should be accessible to your sales and marketing teams and not be marred by
technical or legal complications.
Profitability: The segment
should have a low-to-medium customer acquisition cost (CAC) while bringing in
high returns, i.e., the audience must be willing to spend money on your
product.
Benefits: Different benefits attract different segments. In
our plant-based milk example, Segment A would go for cruelty-free while Segment
B for dairy-free.
Positioning
The final stage of the STP model, positioning, is where you use
the insights gained from segmentation and targeting to decide how you're going
to communicate your product to chosen audience segments.
While segmentation and targeting are about customers, positioning
is about your product from the customer's perspective. You can consider
positioning as the bridge that connects your product with the audience. This is
the stage where you perform competitor analysis, figure out your value
proposition, and communicate that to your customers.
Based on what your brand stands for, you can position your
product in several ways. If you're in the luxury market, you can appeal to the
‘desire for prestige’ among customers by positioning yourself as a status
symbol. Or, if you fall in the budget category, you could differentiate
yourself by offering more benefits to your target at a lower cost than your
competitors.
The best way to approach positioning is by drawing a Product
Positioning Map that has two key market attributes as its axes and plotting
your competitors and you in it. This will give you a clear picture of how you
stack up against your competition and where you should place your product to maximize
profits.
Benefits of STP marketing
Improved engagement: Because you're targeting precise audience
segments with personalized messages, your audience finds you relevant and is
more likely to engage and convert.
Reduced marketing costs: Since you're going after only those
segments with a high potential return on investment, you're no longer wasting
your budget on channels and segments that don't work.
More robust product: Because you know precisely whom you're
pitching your product to, you can make improvements based on feedback from that
audience segment, fostering focused product innovation.
How to create an STP model for
your business: Implementation strategy
We've covered the basics of the STP marketing model with
benefits and examples. Now, it's time to get down to the brass tacks; that is,
see how you can implement a segmentation, targeting, and positioning
model for your business step-by-step.
Step 1: Define your market
The world may be your market, but breaking it down into
manageable segments is how you conquer it. To know the market segment in which
you can hit the bullseye, you start by defining your Total Available Market
(TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market
(SOM). Let's look at what each of these is:
Total Available Market (TAM): TAM is the total
market demand for a product or service. In other words, it's the biggest
available market for the brand. TAM is the maximum revenue that a business can
generate if it achieves 100% of its market share.
Serviceable Available Market (SAM): SAM is a subset
of TAM, that is, a portion of the total available market that fits your product
or service. You can define SAM by geographical or product specialization
constraints.
Serviceable Obtainable Market (SOM): SOM is a subset
of SAM, that is, the segment of the serviceable available market that you can
realistically reach after considering factors like product differentiation,
budget, and competition.
In the case of Coca
Cola, its TAM is the entire beverage market, while its SAM would be soft
drinks. Its SOM is the market that Pepsi does not capture. For Diet Coke, the
SOM would be health-conscious, sugar-free drinkers.
Step 2: Create audience segments
Now that you know your market definition, you can segment the
audience within that definition.
You can segment the audience based on geography, demography, behavior,
or psychography, but ideally, a mix of all four can help you achieve clearly
differentiated segments. The more segmentation layers or variables you add, the
more delineated your segments would be.
For example, suppose you're selling a luxury makeup product. In
that case, you can target high-income working women (demographics) in India
(geography), who follow makeup handles on social media (behavior) and are
willing to spend money on premium makeup products (psychography).
This kind of repeated layering and segmentation creates focused
audience groups that you can target with hyper-personalized messages. Research
by McKinsey found that companies that excel at personalization
generate 40% more revenue from those activities than average players.
Step 3: Identify the more
attractive segments
Have all the segments data in one place and evaluate the
attractiveness of each segment. You can use metrics like return on investment,
segment size, and growth potential in your evaluation. Again, solutions like
Salesforce Data Studio and CDP help gather data and get comprehensive
visibility into different audience segments, improving segmentation.
Step 4: Evaluate your competition
With your audience segmentation sorted, it's now time to look at
your product and determine how it stacks up against your competition. Prepare a
table that lists down all of your product capabilities and your competition's,
do a SWOT analysis, identify gaps, and figure out the most viable entry point
into your desired customer segment.
Step 5: Fix your positioning
The groundwork on segmentation and targeting is now out of your
way, so you can focus on positioning your product to grab the lion's share of
the market. You can follow any one or a mix of the following positioning
strategies:
- Competitor-based positioning: where you show in what aspects better than your competitor.
- Consumer-based positioning: how
well your product aligns with consumer needs.
- Price-based positioning: how
you're competitively priced and give customers more value for their money
- Benefit-based positioning: how
your customers benefit from buying your product, either individually or
over your competition.
- Attribute-based positioning: what your unique selling point or value proposition is,
above and beyond benefits and price.
- Prestige-based positioning: how
customers get a status boost from buying your product.
Step 6: Determine your marketing
mix
The final step of the segmentation, targeting, and positioning
model is to choose your 'marketing mix' that helps reinforce your positioning.
The marketing mix consists of four Ps - Product, Price, Placement, and
Promotions.
Product represents factors like quality, benefits,
features, design, services, support, availability, and edge over the
competition.
Price reflects what customers are willing to pay for the
product. It covers list price, discounts, payment methods, etc. Pricing your
product much lower than your competitor might fetch you immediate benefits but
will be detrimental to revenue in the long run.
Placement covers "where" your product is
available. It includes ecommerce, physical stores, inventory, logistics, trade
channels, etc.
Promotion takes into account "how" your product
reaches your customer. It covers marketing campaigns, advertising, public
relations, sales promotions, word of mouth, and influencer marketing, and so
on.
Conclusion
STP model is a scientific, tried-and-tested marketing approach
that helps businesses identifies segments where they can indeed provide value, personalize
their marketing communications, and reap sizeable profits.
If you want to get started on your segmentation, targeting, and
positioning journey, you could give solutions like the Salesforce Marketing
Cloud a try. The products inside Marketing Cloud provide you deep insights
about your audience, help you identify the most viable segments, and hyper-personalize
communications across channels, leading to 1-1 customer connect.
