Segmentation, Targeting And Positioning: STP Formula

Identifying market segments and targets is the first thing that marketing specialists should do. Companies cannot create products and services and deliver them to anyone. Organizations should divide markets into groups of consumers or segments with distinct needs and wants. A well-organized company that wants to serve its customers well, needs to identify which market segments it can serve effectively. In this case strategy is very important.

The key to success in marketing is to identify the right customers and create, communicate and deliver value to them thanks to the creation of new products and services. Satisfying everyone is quite impossible in a context where customers want diversity of products and services. Quality is a must, we know it well, and only through building up a solid relationship with potential customers is possible to get long-term success. Segmentation means identifying and profiling distinct groups of buyers who differ in their needs and wants. The next step is Targeting, which can be implemented  by selecting one or more market segments to enter. Then comes Positioning, the last part of the marketing process which involves for each segment, establishing and communicating the distinctive benefits of the company’s marketing offering.

Market segmentation divides a market in well-defined slices. A “market segment” is a group of customers who share a similar set of needs and wants. Marketers’ job is to identify the right market, segment it and then pick the right target audience.

Segmentation can be implemented by looking at certain characteristics: geographic, demographic and psychographic. In the last few years a great number of marketing specialists started to analyze market segments in terms of their behavioral responses. Let’s start with the first method: geographic segmentation. Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities or neighborhoods. The company then operates in one selected area. Regional marketing for example means marketing right down to specific zip code.

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In demographic segmentation, we divide the market on variables such as age, family size, family life cycle, income, gender, education, occupation, religion, race and so on. There’s one reason why demographic variables are so popular with marketers: usually they’re associated with customer needs and wants. SPSS & Excel are two main statistical software which can be used to measure the variables I’ve mentioned before. They’re quite easy to measure. Customers’ needs and wants change with their age and with their lifestyles. Men and women have different attitudes and behave differently based on socialization. Income is another major variable which has a great relevance in categories such as cars, financial services and travel. At the same time, each generation is deeply influenced by the times in which it grows up… think about the movies, political and economic events and so on.

Another important topic which concerns segmentation is the Generation Y Analysis. Gen Y, the so-called Millennials, born between 1979 and 1994, are usually studied by marketers in terms of new ways which can be used in order to reach and persuade them. We think about Online Buzz, or even Cool Events, or Computer Games.

Identifying new market segments through demographic tools is not particularly difficult. It’s quite easy. While Psychographics is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality traits, lifestyle or values. What seems to be important during our discussion today, is to underline that consumers who are in the same group under the demographic point of view, can have really different lifestyles and values.

The first group which we’ll analyze today are Innovators: they’re successful people, active, people with high self-esteem.

Then we have Thinkers: they’re mature, satisfied and reflective people motivated by ideals and who value order, knowledge and responsibility. They seek products that have a great level of durability, functionality and value.

Achievers are successful, goal-oriented people who focus on career and family.

Then we have lots of different groups of buyers which are the result of the psychographic process: Believers, Strivers, Makers and Survivors.

Segmentation is the first process of the STP path (Segmentation, Targeting and Positioning). Choosing the right group of potential customers may have a powerful impact on the company’s behavior. Every corporation should segment the market properly in order to pick the right target audience and achieve financial results.

FL

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