THE COPPERBELT UNIVERSITY

BSP 260 / BSP 262 – PRINCIPLES OF MARKETING

(BSc. Business & Project Management, and BSc. Transport and Logistics)

The STP Process

STP marketing is an acronym for Segmentation, Targeting, and

Positioning – a three-step model that assist to examine products or services
as well as the way their benefits are communicated to specific customer
segments.
The STP process refers to the three activities that are undertaken in the sub-
division of whole markets into market segments in a sequential manner.

The STP process is increasingly being used because of the realisation of the
prevalence of mature markets, greater diversity in customer needs and the
ability to reach specialised, niche segments. The three activities in the STP
process are outlined below;

SEGMENTATION
Market segmentation is the process of dividing a market into groups of similar
consumers. This can be different groups of customers with distinctly similar
needs and product requirements. Put in another way, market segmentation is
the division of a mass market into identifiable and distinct groups or
segments, each of which have common characteristics and needs and display
similar responses to marketing actions.
There are number of reasons that make market segmentation an important
undertaking in marketing and these include;

 It forms an important foundation for successful formulation of

marketing strategies and activities.
 It ensures that the elements of the marketing mix are designed to meet
particular needs of different customer groups.
 To tailor make in order to meet target market needs.

 To reduce cost of production. We cant impress everyone eg mealie meal;

25kg, 10kg,5kg,2,5kg, 1kg, 500grams
 Pricing decision making
 Easy to understand the buying behaviour.
 Competitive advantage - ability to position oneself.

SEGMENTING CONSUMER MARKETS/ BASES OF SEGMENTATION

A marketer has to try different segmentation variables, alone and in

combination, to find the best way to view the market structure. The major
variables or bases that might be used in segmenting markets include;
geographic, demographic, psychographic, and behavioural variables.

a) Geographic Segmentation

This calls for dividing the market into different geographical units such as
nations, regions, states, counties, cities, or neighbourhoods. A company may
decide to operate in one or a few geographical areas, or to operate in all areas
but pay attention to geographical differences in needs and wants. It is
common to localize products, advertising, promotions, and sales efforts to fit
the needs of geographical areas (regions, cities, and even neighbourhoods).
b) Demographic Segmentation

Demographic segmentation divides the market into groups based on variables

such as age, gender, family size, family life cycle, income, occupation,
education, religion, race, and nationality. Demographic factors are the most
popular bases for segmenting customer groups. One reason is that consumer
needs, wants, and usage rates often vary closely with demographic variables.
Another is that demographic variables are easier to measure than most other
types of variables. Even when market segments are first defined using other
bases, such as benefits sought or behaviour, their demographic characteristics
must be known in order to assess the size of the target market and to reach it
efficiently.

Age and Life-Cycle Stage : Age and life cycle segmentation consists of offering
different products or using different marketing approaches for different age
and life-cycle groups. Marketers must guard against stereotypes when using
this form of segmentation. While certain age and life cycle groups do behave
similarly, age is often a poor predictor of a person’s life cycle, health, work or
family status, needs, and buying power. For example, not all consumers aged
between 25 and 30 have the same weight that they can wear clothes of the
same size. Consumer needs and wants change with age. Some companies use
age and life cycle segmentation, offering different products or using different
marketing approaches for different age and life-cycle groups.

Gender segmentation : This calls for dividing a market into different groups
based on sex. This segmentation form has long been used for clothing,
cosmetics, toiletries, and magazines. New opportunities in this area are
emerging such as automobiles, deodorants, and financial services. There is an
increased emphasis on marketing and advertising to women. Specialized Web
sites are becoming very popular with this group.

Income segmentation: It consists of dividing a market into different income

groups. Marketers for automobiles, boats, clothing, cosmetics, financial
services, and travel have long used this form of segmentation. Using this form,
marketers must remember that they do not always have to target the affluent.
Other income groups are also viable and profitable market segments.

C ) Psychographics segmentation

It calls for dividing a market into different groups based on social class,
lifestyle, or personality characteristics. The use of AIO (Activities, Interests
and Opinions) dimensions are also used in this segmentation method. The AIO
dimensions are used to divide the market on how people “Think and Act”.
People in the same demographic class can exhibit very different
psychographics characteristics. As previously seen in, lifestyle also affects
people’s interest in various goods, and the goods they buy express those
lifestyles. This method of segmentation is gaining in popularity. Personality
variables can also be used to segment markets. Marketers will give their
products personalities that correspond to consumer personalities.

d) Behavioural segmentation

It involves dividing a market into groups based on consumer knowledge,

attitudes, uses, or responses to a product. Many marketers believe that
behaviour variables are the best starting point for building market segments.
Occasion segmentation: consists of dividing the market into groups according
to occasions when buyers get the idea to buy, actually make their purchase, or
use the purchased item.

Benefit segmentation: involves dividing the market into groups according to

the different benefits the consumers seek from the product. Companies can
use benefit segmentation to clarify the benefit segment to which they are
appealing, its characteristics, and the major competing brands. They can also
search for new benefits and establish brands that deliver them. User status
can also be used to divide the market. Segments of nonusers, ex-users,
potential users, first-time users, and regular users of a product are potential
ways to segment. Usage rates: are another way that marketers segment
markets. These categories might be light, medium, and heavy user groups.
Loyalty status can also be used to segment markets. Consumers can be loyal to
brands, stores, and companies. Consumers can be completely loyal, somewhat
loyal, or not loyal at all. An amazing amount of information can be uncovered
by studying loyalty patterns.

e) Multi-attribute segmentation

This involves using multiple segmentation bases in an effort to identify

smaller, better-defined target groups. Today there is a trend toward targeting
multiple segments. Very often, companies begin their marketing with one
targeted segment, and then expand into other segments. This often boosts a
company’s competitive advantage and knowledge of the customer base. One
of the most promising developments in multivariable segmentation is
“geodemographic” segmentation based upon both geographic and
demographic variables.
OTHER CRITERIA/BASIS TO EVALUATE MARKET SEGMENTS

Three factors must be considered when evaluating different market segments:

segment size and growth, segment structural attractiveness, and company
objectives and resources.

Segment Size and Growth

The company must first collect and analyze data on current segment sales,
growth rates, and expected profitability for various segments. It will be
interested in segments that have the right size and growth characteristics. But
"right size and growth" is a relative matter. The largest, fastest-growing
segments are not always the most attractive ones for every company. Smaller
companies may lack the skills and resources needed to serve the larger
segments or may find these segments too competitive. Such companies may
select segments that are smaller and less attractive, in an absolute sense, but
that are potentially more profitable for them.

Segment Structural Attractiveness

The company also needs to examine major structural factors that affect long-
run segment attractiveness. For example, a segment is less attractive if it
already contains many strong and aggressive competitors. The existence of
many actual or potential substitute products may limit prices and the profits
that can be earned in a segment. The relative power of buyers also affects
segment attractiveness. Buyers with strong bargaining power relative to
sellers will try to force prices down, demand more services, and set
competitors against one another—all at the expense of seller profitability.
Finally, a segment may be less attractive if it contains powerful suppliers who
can control prices or reduce the quality or quantity of ordered goods and
services.

Company Objectives and Resources.

Even if a segment has the right size and growth and is structurally attractive,
the company must consider its own objectives and resources in relation to
that segment. Some attractive segments could be dismissed quickly because
they do not mesh with the company's long-run objectives. Even if a segment
fits the company's objectives, the company must consider whether it
possesses the skills and resources it needs to succeed in that segment. If the
company lacks the strengths needed to compete successfully in a segment and
cannot readily obtain them, it should not enter the segment. Even if the
company possesses the required strengths, it needs to employ skills and
resources superior to those of the competition in order to really win in a
market segment. The company should enter only segments in which it can
offer superior value and gain advantages over competitors.

TARGET MARKETING

After evaluating the different segments, the company must decide which and
how many segments it will target. A target market consists of a set of buyers
who share common needs or characteristics that the company decides to
serve. Note that market segmentation is simply the dividing of the market
where as target marketing is selecting or choosing the segment to go for or
serve or focus. A company can decide to serve the segments in a number of
ways discussed below.

Target Segment Evaluation Criteria

In order to target the most appropriate segment, a criterion is needed to guide
the process and below is an outline of the key aspects in the criteria

Distinct – Is each segment clearly different from other segments? If so,

different marketing mixes will be necessary.

Accessible – Can buyers be reached through appropriate promotional

programmes and distribution channels?

Measurable – Is the segment easy to identify and measure?

Profitability (substantial) - Is the segment sufficiently large to identify and

measure profit.

Differentiable – ability to stand out from competitor offering and

Target Marketing Approaches

There are several approaches that marketers can use to determine the
number of segments to enter and these are explained below;

a) Undifferentiated (Mass) Marketing

This is a target marketing coverage strategy in which a firm ignores market

segment differences and goes after the whole market with one offering. For
instance, Coca-cola once had only one type of coke packaged in the same
bottle design everywhere. This strategy focuses on what is common in the
needs of the consumers rather than on what is different. The company designs
a product and a marketing program that will appeal to the largest number of
buyers. It relies on mass distribution and mass advertising, and it aims to give
the product a superior image in people's minds. However, most modern
marketers have strong doubts about this strategy. Difficulties arise in
developing a product or brand that will satisfy all consumers. Moreover, mass
marketers often have trouble competing with more focused firms that do a
better job of satisfying the needs of specific segments and niches.

Advantages: Cheaper, Abnormal Profits, Fewer prices due to cost saving,

Increased customer bases.

Disadvantages: Dynamic needs, less competitive to sell a single product.

b) Differentiated (Segmented) Marketing

Using a differentiated marketing strategy, a firm decides to target several

market segments or niches and designs separate offers for each. Toyota tries
to produce a car for every "purse, purpose, and personality." Nike offers
athletic shoes for a dozen or more different sports, from running, fencing, and
aerobics to bicycling and baseball. By offering product and marketing
variations, these companies hope for higher sales and a stronger position
within each market segment. Developing a stronger position within several
segments creates more total sales than undifferentiated marketing across all
segments. Procter and Gamble gets more total market share with eight brands
of laundry detergent than it could with only one. But differentiated marketing
also increases the costs of doing business. A firm usually finds it more
expensive to develop and produce, say, 10 units of 10 different products than
100 units of one product. Developing separate marketing plans for the
separate segments requires extra marketing research, forecasting, sales
analysis, promotion planning, and channel management. Thus, the company
must weigh increased sales against increased costs when deciding on a
differentiated marketing strategy.
Advantages: Risk is spread, more sales are created, strong positions in several
segments.

Disadvantages: High cost of doing business, confusing eg diet coke, lite etc.

c) Concentrated (Niche) Marketing

This market-coverage strategy, concentrated marketing, is especially

appealing when company resources are limited. Instead of going after a small
share of a large market, the firm goes after a large share of one or a few
segments or niches. Concentrated marketing provides an excellent way for
small new businesses to get a foothold against larger, more resourceful
competitors. Through concentrated marketing, firms achieve strong market
positions in the segments or niches they serve because of their greater
knowledge of the segments' needs and the special reputations they acquire.
They also enjoy many operating economies because of specialization in
production, distribution, and promotion. If the segment is well chosen, firms
can earn a high rate of return on their investments. At the same time,
concentrated marketing involves higher-than-normal risks. The particular
market segment can turn sour. Or larger competitors may decide to enter the
same segment.

Advantages: Strong market position because of greater knowledge of

consumer needs it serves and special reputation it requires. The firm can
serve better and profitably.

d) Micromarketing (Local or Individual Marketing)

This is the practice of tailoring products and marketing programs to suit the
needs and wants of specific individuals and local customer groups. It includes;
Local Marketing which is tailoring brands and promotions to needs and wants
of local customer groups e.g cities, neighborhoods etc. This strategy can be
effective in the face of pronounced regional and local differences in
demographics and lifestyles. The drawback of this strategy is that it can drive
up manufacturing and marketing costs by reducing economies of scale. It can
also create logistics problems as companies try to meet the varied
requirements of different regional and local markets. The overall brand image
may also be diluted especially if the product and message vary too much in
different localities.

Advantage: Customer satisfaction since their needs are known

Disadvantages: Time consuming, high marketing costs, Brand image might be

diluted in different localities.

e) Individual marketing (one-to-one or customized marketing) which

involves tailoring products and marketing programs to needs and preferences
of individual customers. Although this is effective for relationship building
with customers, this strategy can be costly.

POSITIONING

Positioning is the unique place for our product/service relative to the

competition in the mind of our customer. Positioning is the means by which
goods and services can be differentiated and so give consumers a reason to
buy. There are two major fundamental elements that encompass positioning.
The first element concerns the physical or intangible attributes, the
functionality and the capability that a brand offers. The second positioning
element concerns the way in which a brand is communicated and how
consumers perceive the brand relative to other competing brands in the
marketplace. The attributes and design of the product alone are not enough
for successful positioning just as communication of the product alone is not
enough. For example, claims through communication that a detergent paste is
powerful and will remove all dirt from clothing will be rejected if the product
fails to deliver. Positioning, therefore, is about how customers judge a
product’s value relative to competitors, its ability to deliver against the
promises made and the potential customers have to derive value from the
offering.

Positioning Strategies

A number of positioning strategies that firms can use are explained below;

i. Positioning by Product Attributes and Benefits – This a common

positioning approach and entails setting the brand apart from the
competition on the basis of the specific characteristics or benefits
offered. Marketers attempt to identify the salient features (those that
are important to customers) and use them. They can use one or more
features.
ii. Positioning by Price/Quality – Marketers often use price/quality
characteristics to position their brands. This is common for premium
brands to justify a premium price. Another way this method is used is
when the focus is on the quality and value offered by a product at a very
competitive price.
iii. Positioning by Use or Application – This is where you position the
brand by associating it with a specific use.
iv. Positioning by Product Class – This positioning strategy entails
positioning your product category against another product category as
competition often comes from a product that comes from outside the
class.
v. Positioning by Product user – This strategy entails positioning a
product by associating it with a particular user or group of users.
vi. Positioning by Competitor – This approach entails positioning
yourself against the competition. For example Euro Buses has taken up
a positioning strategy of not having ‘ghost passengers’ each time their
buses are loading in contrast to some of its competitors.
vii. Positioning by Cultural Symbol – This is a positioning strategy that
entails using a meaningful cultural symbol to differentiate brands. For
example, mothers pride used by National Milling depicts this
positioning strategy.