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The STP Model of Marketing Segmentation, Targeting, and Positioning

The STP Model of Marketing Segmentation, Targeting, and Positioning

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. 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:

STP Model

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 direct your marketing efforts towards them, the sales process will be a breeze.

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 strategy to be effective. To help you further comprehend them, let’s have a look at each one separately.

Related: Your Complete Data Analytics Guide to Help Improve Your Business

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 products/services that would suit those segments.

You need to select the segment in which your venture will fit in perfectly. The application of market 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.

4 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 do they use the products? Are they loyal to any product? What benefits are people expecting to gain from these products?

For example, you have a company that sells used cars. If you split your customers into more segments, you can also differentiate the types of vehicles that you’ll sell to them. 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 Of People - Segmentation

  • 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.

There are various ways to approach market segmentation, however, not all of them are effective. Market segments have to be relevant to the product/service being marketed. Moreover, they must have the following four characteristics:

  • Measurability – Measure the purchasing power and the size of the segment.
  • Sustainability – Estimate the degree to which your segments are profitable enough to pursue.
  • Accessibility – Consider how easy it is for you to reach and serve segments.
  • Actionability – The extent to which effective marketing strategies can be applied to successfully serve relevant segments.

The purpose of these four parameters is to help you conduct your stp analysis to identify a market segment you can easily target.

Targeting

Targeting is crucial at this point in your STP marketing process. After you’re clear about your segments, you need to identify the wants and preferences of each selected segment and identify any untapped needs that you can cater to. Next aim at each segment that you think will be profitable for your venture.

STP Model - Targeting

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

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It’s essential that you analyze the size and the potential growth of each of your segment groups and do a comparison between them. While doing so, think thoroughly about how you can serve that section of the marketplace. Also, look into all the legal, technological and social hurdles that may stop you from addressing the segment.

For this purpose, it is best to opt for a 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.

What Does a PEST Analysis Include Graphic

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 highest ROI, and you know you have the resources to cater to it, it would make sense to that particular part of the marketplace exclusively.

Related: 14 Creative B2B Marketing Growth Hacks

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.

At this point you need to craft your positioning statement. Your goal here is to occupy a greater space in your customer’s minds than your competitors. Hence, you should evaluate your marketing channels, as well as your product presentation.

Customers compare products/services all the time, so your design positioning statement should improve their perception of your brand. An effective stp positioning strategy has four key elements:

  • It concentrates on the benefits your business can provide.
  • It helps differentiate your product/service from key competitors.
  • It requires companies to possess the resources, skills and credibility to deliver on what’s been promised.
  • It’s strong enough to not be challenged by an aggressive competitor.

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

Related: 6 Ways to Improve Brand Recognition with PPC Campaigns

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.

Positioning

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 select and protect your USP, you need to follow 3 major principles:

3 Major Principles to Find and Keep Your USP

  • 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 Difference) – 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 the most, both 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 of market segmentation targeting and positioning 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 Model of 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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