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Explain The Segmenting-Targeting-Positioning Process

1.0 Executive Summary:

The aim of this report is to explain the STP (Segmenting-Targeting-Positioning) process and compare and contrast the different segmentation bases that could be used to segment both consumer market and businesses. It will also explain the criteria used to select target market and different strategies used for product/brand positioning and also explain the benefits of using STP process. This essay will also justify STP process by explaining application and theories.

2.0 Methodology:

The internet is useful to search any kind of information, the information I gathered for this report is from the internet search engines e.g. Google, Msn and Yahoo, recommended books form university and lecture notes.

3.0 Introduction:

“Marketing is the management process that identifies, anticipates and satisfies customer requirement profitably”.

The Chartered Institute of Marketing (CIM).

“The right product, in the right place, at the right time, at the right price”

Dennis Adcock.

Marketing establish the cost-effective customer relationship. The objective of marketing is to actualize value for customers and generate more wealth for organisations. Basically marketing deals with recognise and fulfilling human and social needs. Therefore marketing plays vital role in any organisation or business, so there is systematic way of marketing and the marketing segmentation is the core of marketing. The marketing segmentation process consists of segmenting, targeting and positioning. In order to acquire market for any product organisations divide market in to different segments, each segment represents the group of consumers which have same set of values and needs. After dividing market into different segments now its organisations decision which segment or segments would be targeted, before targeting any segment it is important to understand what the segment is about, size of segment and its needs. When the organisation decided what segment or segments should be targeted then organisation should position itself in the market. The positioning process is the way how organisations deliver their values and target their selected segment and it also gives competitor advantage to organisations. This report will discuss the segmenting, targeting and positioning (STP) process, the motivation for its increasing use and its core benefits. Also compare and contrast different segmentation bases that used to segment both consumer market and businesses and will explain the criteria used to select target market and strategies used for product/brand positioning.

4.0 STP (Segmenting-Targeting-Positioning) Process:

4.1 Segmenting:

Market is based on customers, and each customer has different needs. Market segmentation helps organisation to divide customers with their same needs, thus the organisation divide massive market in to small segments that helps them to deliver value and product effectively. Business not only divides consumers in segments they also divide businesses in different segments that helps to do business with other businesses effectively.

4.1.1Bases for Segmenting in Consumer Market:

Consumer market is a massive market thus it is impossible to include consumer market in single segment. Therefore organisations divide consumer markets in different segmentations those are:

4.1.1.1 Geographic Segmentation:

Geographic segmentation means dividing the market into various geographical parts e.g. nation, state, regions, counties, cities or neighbourhoods. Geographical segmentation helps organisation to understand and identify the needs of local consumers where organisation is doing business and concentrate on their needs.

4.1.1.2 Demographic Segmentation:

Demographic segmentation means divide market demographically such as, age, gender, family size, family life cycle, income, occupation, education, ethnicity, religion, nationality and social class. Demographic segmentation helps organisation to understand the consumer needs as related to his/her background.

4.1.1.3 Psychographic Segmentation:

Psychographic segmentation means divide customers related to their lifestyle or personality such as activities, interest, opinion, attitudes and values. By this segmentation process organisation identifies the personal needs of customers.

4.1.1.4 Behavioural Segmentation:

Behavioural segmentation can be defines as customers behaviour toward product such as the way customers look at the products e.g. the brand name, benefits and it usage. This segmentation helps those organisations whom products are already beneficial and popular and this is the best starting point for organisations for segmenting consumer market.

4.1.2 Segmentation Bases of Consumer Market in Organisations:

Above I have defined the four different bases of consumer market, in this paragraph I will explain how it works in organisations. Organisations are taking more and more benefits through consumer market segmentation bases. First I talk about retail organisations in United Kingdom in retail organisation we have both food and textile organisation. The organisations who produce clothes most of them are doing many segments at the same time e.g. they producing clothes from new born to elderly people and producing in different styles and colours. They are not focusing only in age groups they are focusing in all of the different bases. That helps them to stay in the market and gain competitor advantage. Those organisations in food business they are following the same procedures. If we look at the organisations like Tesco, Sainsbury, Marks and Spencers and Asda they segmented their market almost in every segment but on the other side if we look at Giorgio Armani, Gucci, Cartier and Tiffany they are expensive brands it means not everyone can afford them except upper class. Finally, most of the organisations are dealing with multiple segments to make more profit and gain competitor advantage.

4.1.3 Bases for Segmenting Business Customers:

Bases for segmenting business markets are:

4.1.3.1 Location:

In segmenting business market location is most important the location can be within region or any other region or country. One business is serving another business in same region or state it is easy to understand serving business needs and well aware of the current position of business. If doing business in any other region it is hard for other business to understand other business position, needs and way of doing business.

4.1.3.2 Company Type:

Company type can be define such as company size, kind of company, management of company and purchasing criteria. This helps one business to understand other business and make good business relationship.

4.1.3.3 Behavioural Characteristics:

Behavioural characteristic can be defined as the behaviour of the business such as usage rate, buying status and purchase procedure. This helps to identify the other business strengths.

4.1.4 Segmentation Bases of Business Customers in Organisation:

I have already discussed businesses serving consumers but here I will explain businesses serving businesses. As businesses make segments to serve consumers so they also do segmentation to serve their businesses customers. Businesses divided three segments to serve other businesses by their location, company type and by their behaviour towards their business. By focusing on location they identify the environment and tell the business is it going to be cost effective or not. By looking at the company type the organisations targets other organisation resources to see what will be the future of the business relationship. Business behaviour shows the attitude of one business to other. Finally we assume that business to business organisation do segmentation to do business with other businesses this is same as organisations do segmentation with consumer market.

4.1.4.1 Examples of Business to Business Organisation:

Dell is well known computers organisation dell deals with both business to consumer and business to business. Dell provides large scales of computer to many other businesses. Dell is famous because it divided its market in different segments for different business it has different criteria. Dell fulfils the needs of its business customer's weather it's within the region or from any other segments.

4.2 Targeting:

When the market is divided into different segments, then organisations target the segment or segments. Before targeting the segment or segments the organisation must consider the following:

4.2.1 Checking Market Segments:

To check the market segment company must look at the following three factors:

4.2.1.1 Segment Size and Growth:

Before targeting any segment the organisation must collect the information on the segment e.g. what is size of the segment and what is the growth rate of the segment. If the size of segment is big and has a faster growth rate then it's beneficial for the big organisation to target the segment. For small organisation it's not worthy as it will be difficult for them to meet the needs of segments.

4.2.1.2 Segment Structural Attractiveness:

After analysing the size and growth the organisation must consider its structural factors e.g. if they target the segment is it going to be for long term and also look at its attractiveness. In case the segment already have strong competitors in the market if they do then organisation has to compete its competitors with prices and it might leads to loss for the organisation.

4.2.1.3 Company Objectives and Resources:

After viewing segment size, growth and it is structural attractive then the final stage for organisation to look at it own resources and objectives. The organisation might not fulfil the segment requirements if they do they should have more skills and resources to compete the competitors.

4.2.2 Electing Target Segments:

When the organisation analyse different segments then it's time to choose one or more segments that the organisation will target. The targeting is the way of focusing on the segment and will explain as follow:

4.2.2.1 Undifferentiated Marketing:

In undifferentiated market organisations do not bother to segment the market and target the whole market. The organisations do this when the product is commonly used or have large number of buyers.

4.2.2.2 Differentiated Marketing:

In differentiated market organisations targets many segments and produce different products for different segments.

4.2.2.3 Concentrated Marketing:

When the organisation have limited resources and instead of targeting small share in larger market the organisation decide to target large share in segment or segments.

4.2.2.4 Micromarketing:

Micromarketing focuses on individual customer needs in this process they tend to seek individual needs in every customers rather than seeing customer's needs in every individual. It is classified in to local marketing and individual marketing.

Basically target market is the process of creating communication between customers such as how organisation introduces their product to them. Practically looking at the targeting process the organisations like Tesco, Sainsbury and ASDA target the middle and lower class people by offering them their own products. The organisations like Rolex, Burberry and many more expensive brands target the high class people. In every organisation they have created segments and they target by the segmentation. In airline industry business class is for business people and executives and economy class is for normal individuals when they advertise about business class they straight target to business people. In telecommunication industry they have different packages for different segments. Finally we can conclude that targeting right segment will help organisation to make more profit and gain competitive advantage.

4.3 Positioning:

Positioning is the final stage in STP (segmenting-Targeting-Positioning). Positioning is the process in which how the organisation brand or product is viewed by the customers. In positioning process organisation do their best to make their product unique for the customers as the customers always remember the product or brand. The organisation that got success at the positioning process their product generates more wealth for them. If we look at the Marks and Spencer brand in United Kingdom it famous as British brand and attract more customers although it is bit more expensive than other high streets brands. The coco cola industry achieved a big success in positioning as whoever thinks of soft drink the first name come up is coca cola. There are many organisations that made their position very strong in market. Some made by quality some by prices and some by names. The positioning is very important for long run business for organisations. Many organisations did very well in segments and targeting but when they reached to the positioning level they failed. To build a strong positioning organisation must have cost effective products and resources to compete the competitors. Tesco hold the strong position in supermarkets as it provides cheap food as compared to other supermarkets. Once any organisation successful to gain strong positioning and made its product or brand famous then there is less chance for any competitor to compete. Finally we conclude that position is the important aspect in the STP process it helps organisation for long term business and make organisation position strong among its competitors.

4.3.1 Strategies for Product/Brand Positioning:

There are three different steps in product/brand strategies those are:

4.3.1.1 Selecting the Positioning Concept:

When the organisation target the market the organisation must find out what is important for target the market. The next task is to do a survey between different competitors and organisation and find out what are the customer's views about the product. If there is any weakness found in the product they must be improved.

4.3.1.2 Design the Features that most effectively Conveys the Position:

Positioning can be communicated with a brand name or its appearance. The main point is how you sell your product the place, environment and the employees how they are serving to your customers.

4.3.1.3Coordinating the Marketing mix Components to carry a consistent Positioning:

The organisation must look after the marketing mix aspects product, price, promotion and place in the positioning of product.

4.4 Benefits of STP (Segmenting-Targeting-Positioning) Process:

STP is the process in which organisation divide market in to different segments related to their needs and then targets each of the segment. This process helps organisations to understand the consumer needs and manufacture the product that customers want. This process attracts customers towards the organisation and value the organisation. By following the STP organisation can lead their competitors, the small organisation hardly able to compete the big organisations in the market. This process helps organisation to identify their cultural, religious and personal needs if they are not in their homeland. This is the systematic way in marketing process to understand what the community wants from the product developers. Most of the organisations targeted most of the segments and they are running successfully because customer want is comparability they everything under the one roof this is the one reason most of the organisations are heading towards more and more segments. STP builds strong relationship between customer and organisation. In this era of competition every organisation wants to make more profit and enjoy competitor advantages. The big organisations are keeping growing because they are fulfilling customers need. The small organisations are still remaining small organisations as they do not have enough resources to fulfil customer's values. This is the reason big organisation are attracting customers because of dividing market in to different segments and targeting each segment by providing their needs and values.

4.5 The Marketing Mix:

The marketing mix was influenced by segmentation. The marketing mix consists of 4 p's:

1. Price

2. Product

3. Place

4. Promotion

Product:

Product put the strong influence on the organisation, the organisation produce the product keeping in mind customers needs the product must be good in functionally.

Price:

Pricing must be done by profit margin and keeping in mind about the competitor prices.

Place:

Place defined as the distribution channel that will perform the process of delivering product to the target customers.

Promotion:

Applying promotion to the product helps gaining the market share and make product strong in market.

4.6 Ansoff Matrix:

Igor Ansoff introduced a matrix that targets the organisation recent and potential product markets. This matrix tells that an organisation can become larger by their existing product or by new product and in the existing market and in the new market because of four possible product- market combinations.

Market Penetration

Market Development

Product Development

Diversification

In market apnetration organisation look to grow with the existing products in existing market segment, to maintain the market share maintain market share will result in the growth of the organisation. In market development the organisation look for growth by targeting its existing product to the new market segments. In case of product development the organisation produces new products and introduce to its existing customers. Diversifying is the process in which organisation produce totally new product for the new market segment. If we compare this case with STP process in STP process first we segment the market then target that segment or segments than final process is brand positioning. By the help of Ansoff matrix organisation can improve because Ansoff matrix also target the market segment and in market development when any organisation look for new segment for its product they need to carry out the study whether this product meets the need of the consumer. Ansoff matrix talks about diversification in diversification process organisation will follow the STP process from the beginning.

5.0 Conclusion:

Marketing is the management process that identifies, anticipates and satisfies customer requirement profitably”.

The Chartered Institute of Marketing (CIM).

The objective of marketing is to actualize value for customers and generate more wealth for organisations. Basically marketing deals with recognise and fulfilling human and social needs. Therefore marketing plays vital role in any organisation or business, so there is systematic way of marketing and the marketing segmentation is the core of marketing. The marketing segmentation process consists of segmenting, targeting and positioning. Market segmentation helps organisation to divide customers with their same needs, thus the organisation divide massive market in to small segments that helps them to deliver value and product effectively. Consumer market is divided in different segmentations those are:

Geographic Segmentation

Demographic Segmentation

Psychographic Segmentation

Behavioural Segmentation

Bases for segmenting business markets are:

Location

Company Type

Behavioural Characteristics

When the market is divided into different segments, then organisations target the segment or segments. Positioning is the final stage in STP (segmenting-Targeting-Positioning). Positioning is the process in which how the organisation brand or product is viewed by the customers. In positioning process organisation do their best to make their product unique for the customers as the customers always remember the product.

6.0 References:

1. Anonymous. (2007). The marketing Mix. Available: http://www.quickmba.com/marketing/mix/. Last accessed 07 Dec 2009.

2. Anonymous. (2008). Ansoff Matrix. Available: http://www.quickmba.com/strategy/matrix/ansoff/. Last accessed 07 Dec 2009.

3. Anonymous. (2009). The marketing Mix and 4p's. Available: http://www.mindtools.com/pages/article/newSTR_94.htm. Last accessed 06 Dec 2009.

4. Anonymous. (2007). Market Segmentation. Available: http://www.netmba.com/marketing/market/segmentation/. Last accessed 06 Dec 2009.

5. Anonymous. (2009). Segmenting Targeting and Positioning. Available: http://www.download-it.org/free_files/filePages%20from%208%20Segmentation%20targeting%20and%20positioning.pdf. Last accessed 04 Dec 2009.

6. Armstrong/Kotler (2005). Marketing An Introduction. 7th ed. Pearson Education: Prentice Hall. P183-220.

7. David Jobber, John Fahy (2006). Foundation of Marketing. 2nd ed. Spain: McGraw-Hill Education. P111-136.

8. Michael J. Etzel, Bruce J. Walker (2007). Marketing Concepts and Cases. 13th ed. New Delhi: Tata McGraw-Hill. P116-172.

9. Philip Kotler (2003). Marketing Management. 11th ed. USA: Prentice Hall. P278-306.

10. Subha Rudra. (2009). Segmenting Targeting and Positioning. Available: http://www.scribd.com/doc/6356725/MARKET-SEGMENTATION-TARGETING-POSITIONING-By-Subha-Rudra. Last accessed 04 Dec 2009.


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