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The STP Model of Marketing Segmentation, Targeting, and Positioning

STP Model of marketing

To grow your business, you don’t have to sell to everyone. There are not a lot of products in the online world that appeal to every single person on Earth.

So, instead of convincing yourself that everyone can be your customer, you need to direct your focus towards finding your target market and selling your products/services there. If you discover the people that are most likely to buy from you and target the marketing efforts towards them, the sales process will be a breeze.

Discovering your customers and targeting them is the concept that stands behind the STP model of marketing. The acronym stands for the following key parts of the concept:

Your marketing tactics will be much more fruitful and efficient if you follow the STP model. By segmenting your target market, targeting the right customers and properly positioning your products/services in the marketplace, you can grow your business at a faster rate.

Of course, there will be other factors that will influence the success and growth of your company. But the three concepts above are critical if you want your marketing efforts to be effective within the marketplace. To help you further comprehend them, let’s have a look at each of them separately.

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Segmentation

As stated at the beginning of this article, it is a massive mistake if you try to market to every consumer on Earth. What can benefit your company more is marketing to individual segments of the marketplace and develop product/services that would suit those segments.

You need to select the segment in which your venture will fit in perfectly. The application of segmentation will help you further develop your competitive knowledge which will have a strong effect on your newly formed competitive advantage.

There are different ways to segment your target market.

For example:

  • Demographic – You segment consumers by personal characteristics such as age, gender, marital status, ethnicity, education, occupation, etc.
  • Geographic – By country, region, city, county, etc.
  • Psychographic – Their personality, values, lifestyle, attitudes, interests, and opinions. Among the strongest sources that form these factors are families, region, schooling, and society.
  • Behavioral – How they use the products? Are they loyal to any product? What benefits are people looking for from these products?

For example, you have a company that sells used cars. If you split your customers into more segments, you can also differ the types of vehicles that you’ll sell to different customers. One segment can be married couples looking for a family minivan. The other segment can be young men who want a sports car. Then you have business people with bigger pockets who want a fully-equipped luxury sedan.

These segments, although similar in scope, differ in their constructive elements and have a different level of attractiveness for each target.

When you rationally segment your target customers you’ll discover more and better sales opportunities. The best market segments satisfy the following criteria:

  • Group Identity – The best target groups are similar inside segments and diverse across groups.
  • Methodical Behavior – Segments must react similarly to a given marketing tactic.
  • Efficiency Potential – Feasibility and cost of reaching a segment as well as its stability over time depending on marketplace conditions.

Targeting

After you’re clear about your segments, your next step should be to aim at each segment that you think will be profitable for your venture. Targeting is crucial at this point in your STP marketing process.

What are the market segments that you consider as your best ROI (Return on Investment? It’s not just a question of size/quantity, but like we said, it’s all about the profitability, are those people prepared to pay what you want for your product?

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That’s why you need to analyze the size and the potential growth for each of your segment groups and do a comparison between each of them. Think thoroughly about how you can serve that section of the marketplace. Also, you need to look into all the legal, technological and social hurdles that may stop you from addressing the segment.

For the purpose, it is best to opt for PEST (Political, Economic, Socio-Cultural, and Technological) Analysis. This type of analysis will help you rid yourself of every assumption about your target segment and develop better goals for that section of the market.

For example, you analyze the sales and profits from your used car company. You determine that from the first segment you have $1,000,000 in profits. From the second segment, you have $3,000,000 in profits. And from the third segment, you have $5,000,000 in profits. If you know that the third segment is big enough and brings you the best ROI, you’ll focus only on serving that part of the marketplace.

Positioning

The final stage of the STP marketing process is Positioning. Here, you need to figure out how you’re going to place your product/service in front of the target segment that you chose in the previous two phases. You need to focus on your marketing channels, as well as on the product presentation.

The most important question that you need to have an answer to is “Why should the consumers buy from me instead of my competitors?”

To answer that, you need to have your own unique selling proposition (USP) – a uniquely positive and extremely useful trait that your competitors can’t or don’t offer. That should be your “edge” and the sole reason why the customers will come knocking on your door.

However, finding your competitive edge is not easy. And when you find it, it’s really difficult to keep it hidden from your competitors because they will want to emulate and improve it. To find and keep your USP, you need to follow 3 major principles:

  • Understand What Your Customers Appreciate – Brainstorm what your customers love about your products or services. Then do the same for your competitors. Look at every trait that makes people decide which company they’ll choose. Talk to your sales team and to your customer service team, and most importantly, talk to your customers so you can figure it out.
  • Rank Every Competitor – After you learn about what your customers appreciate and value, rank yourself and your competitors according to that. Base your ranking on data and statistics, don’t assume anything. Think about the customers’ POV and how they perceive every product in the segment.
  • Defend Your USP – As a business owner, you should always be prepared for competitive attacks. Your competitors will try to neutralize, diminish and emulate what you offer with your USP. Invest in PR, patents and legislative help to defend your USP once you start to use it on your customers and establish it.

Think about it, what is it about your product/service that helps you stand out in the marketplace? Are you more affordable than your competition? Are you more inclined towards custom packaging and bargaining? Or do you offer much higher quality than the rest out there?

Whatever it is, it will decide whether you win the segment over or not. You need to establish the value that you provide to your target consumers, and define your:

  • PODs (Points of Reference) – The characteristics of your product that can’t be found anywhere else.
  • POPs (Points of Parity) – The attributes that you also share with other brands in the marketplace.

Again, if we take the used car company as an example, the cars that you sold to the business segment will most likely be marketed in places where these people hang out online and offline. After you pick the right places and the right marketing channels, you want your cars to be marketed as premium vehicles that are sold in mint condition and fully equipped.

When you’ve positioned yourself properly and you’ve convinced your target market segment why they should buy from you, that’s when the STP marketing model has done its job successfully.

Wrapping up

Utilizing the STP marketing model is one of the most crucial processes that you can undertake to grow your business. With the STP model, you and your team will be put on a test where you’ll learn whether you’re capable or not to take your business to the next level. It will test your ability to research and think creatively about your target market and marketing approaches.

Working together with your sales and customer service team to implement the STP marketing system will result in greater process effectiveness and better product positioning that you can utilize to win over your marketplace.

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