Executive Summary
Over the period of time, Marketing have become a vital business process in the business environment. The ultimate objective of Marketing is to target, inform and retain customers of a business in order to increase shareholder wealth.
Along with the same evolution, Segmentation, Targeting and Positioning (STP) have also become most wanted strategic marketing concepts to change the market position of a product or a service. This essay on STP debates about critical theoretical aspects, strengths, weaknesses, importance and advantages by referring to appropriate scholarly literature and factual industry examples.
Contents
1. Introduction to strategic marketing 3
2. Segmentation, Targeting and positioning 4
2.5 Implementation difficulties 7
Introduction to strategic marketing
The word Marketing does not always refers to a salesman or a mass advertisement. The concept of marketing is the ultimate tree of which holds a wide range of marketing concepts which are customer focused. Although, the saying “customer is always right” is not always true, this is a good stepping stone to start. Marketing is not a solution for a shorter period, but it is directly linked with long term plans of a company (Leventhal, 2005).
Increase in market pressure from current market environment and globalization has been impacted to organizations to undertake strategic approaches of marketing. However, this process of strengthening strategic approaches should be backed by detailed analysis tools which are from customer perspective (Maričić, 2015).
As Loots and Grobler (2014) Customer attraction and retention is crucial for business to success. As a business does not always goes through easy periods i.e. ups and downs in market competition, new regulations and globalization effects, it is not easy to develop one market strategy to serve all its requirements. An organization should have an in-depth understanding of client retention strategies and manage them accordingly.
The need of this understanding of customer perspectives and to develop retention strategies gave this world few, yet outstanding analysis tools such as market segmentation, targeting and market positioning (Shaw, 2012).
Segmentation, Targeting and positioning
In order to implement an effective marketing management system, there should be comprehensive assessments of both qualitative and quantitative in place. In the current market condition, effectiveness of a marketing management system has to be evaluated based on customer perspective. Hence, the marketing management is an integrated methodology of the aspects of implementation of strategies, evaluation, feedback and effective response. An effective marketing strategy can be implemented on a solid base of following principals. 1. Mutual Advantage, 2. Strategic orientation, 3. Individualization of demand, 4. Integration of Marketing and 5. Bench Marketing (Baimbetova Aigul Abishovnaa 2014). (What are the articles or book) Segmentation, Targeting and Positioning are prominent strategic marketing capabilities for effective implementation of marketing management.
Segmentation
Market Segmentation came a long way from its introduction and made a radical change in the market. This has be widely recognised as one of the best tool in understanding customer behavior
As mentioned earlier, an organization have to analyses the bigger picture of the market before serving to the same. This analysis involves huge number of information about customer preferences and expectations (Maričić, 2015). The basic purpose of market segmentation are (Chernev, 2012, p. 25), (What are the articles or book) Optimization of effectiveness of organization’s business actions and Cost effectiveness due to rationalization of business activities.
Market segmentation involves five main stages namely, dividing the market, depicting market portions, assessing fragments desirability, choosing target fragments and assigning assets to segments, and finding focused clients (Jun, 2011, pp87-92). (What are the articles or book) It is important for an organization to understand that they can’t cater to the entire market at once. Hence, the main reason to this is that entire market is not consists of customers who carries unique attributes, preferences, needs and wants and power of spending. Hence, an organization shall analyses the prominent fit market segment which they can serve well than its competitors.
Accordingly, segmentation will become the first step of an organizations marketing methodology as it defines an organizations potential market to serve. (No reference)
Targeting
Once an organization identifies the market segments which they have to face, the next stage is the identification of the target market. In general, sengementaion and targeting are combined approach (Bowen, 1998). Targeting requires the ability of identifying key characteristics that demarcates markets in to actionable market segments and the market most likely to provide the best result (Proctor, 2008). (cannot find in Nelson) This process includes development of measures to identify attractiveness of the segment. Hence, targeting is a critical re-evaluation segmentation.
There are various target market criteria such as, the product market maturity stage, preference of customer differentiation, market position, competition, resources availability, business capabilities and market growth potential (Proctor, 2008). Measurement of these activities can be categories as, attainability, measurability, size, Defensibility and sustainability McCabe (2009). (cannot find in Nelson)
Positioning
Upon successful identification of the target market, the next step would be identification of the best position in the market. Positioning creates a distinctive image about the given product or a service in the minds of potential consumers. A successful positioning strategy will bring a long term sustainability for the business (Chandra and Menezes 2001; Lilien and Rangaswamy 1998: 95; Proctor, 2008). (What are the articles or book) Accordingly, positioning will help the marketer to showcase the product or service to the end customer which is specifically designed to cope up with the target market which was selected from the selected market segment.
Therefore, the STP analysis is a process which all aspects (Segmentation, Targeting and Positioning) are interrelated to each other. Eventually, the STP result will become the ultimate Marketing strategy of an organization for a particular product.
Identification of customer behavior is the key inception point in this process as an organization will develop a product or service where the target market going to accept. (No reference)
Advantageous
STP is a widely acknowledge concept for strategic marketing. There are many reasons that STP become famous. The world has made upon of many different customers and their needs. Hence, STP requires to capture these behavioral changes. Marketing segmentation strategies can be implemented through a large amount of changing customer behaviors as STP segregates customers based on gender, age, geographical location, power of earning etc. (No reference)
Fennell and Allenby (2004: 34) (Not in Nelson) discussed the advantageous of STP approach. 1. This approach compares the comparability of the strategic nature of variables. These variables are considered throughout the STP process. 2. STP approach analysis the detailed customer behavior in the market which enables an organization to understand customer data.
Consumers change their preferences along with the time. Organizations that serve distinctive fragments along a consumer life cycle can guide their customers from stage to organize by constantly offering them an exceptional answers for their particular needs. (No reference)
Continuous researches in the segmented market will allow an organization to move in to untapped markets. This will enable an organization to identify niche markets where the organization can sell at a premium price and take good care of the consumer. Eventually, the organization will increase its value in both financially (profit) and non-financially (brand name) in the long run. (No reference)
Recklies (2015) status that customers can be served better as the segment is limited to number of verity of products. Premium segments will help absorbing purchasing power by price differentiation. Sustainable customer management throughout the customer life cycle. Effective communication to the target market as it becomes smaller than the mass market. Market leadership in chosen sections enhances the aggressive position of the entire organization in its affiliation with sellers, channel accomplices and clients. It reinforces the brand and guarantees benefit. On that premise, originations have better opportunities to expand their pieces of the pie in the general market.
Implementation difficulties
(Branko R. Maričić, Aleksandar Đorđević. 2014) (what’s the article or book) some articles demonstrated that there are practical difficulties in identifying STP process for an organization. Such articles mentioned that segmentation implies identifying products and markets who have same expectation and exhibits same purchasing power. There are four basic limitations in market segmentation which require solutions. Structuring segmentation, Formulating segments, Evaluating and selecting segments and Formulating marketing strategy for different segments (Zandi et al., 2012). ((what’s the article or book)
The primary issue emerges, from the uncertain utilization of division language. The inherent attraction of the procedure and the satisfying nature of the advantages on offer have brought about the name of segment being connected to any gathering of clients. As a rule these groupings don't comprise of clients with homogeneous necessities and purchasing conduct. (Dibb, 1998) ((what’s the article or book)
There is always a risk that an organization measure the STP integration too narrowly, however, this can mitigate by a wider range of analysis which requires significant time and an effort (Branko R. Maričić, Aleksandar Đorđević. 2014).
Increasing complexity of customer behavior is also impacted to make the process difficult. Customers defines their experience in such product or a service based on individual values. In the value evaluation process the customer will not only be referring to the functional benefits they obtain but also the other benefits such as social benefits. Accordingly, an organization has to evaluate both monetary and non-monetary factors emended in a product or a service in order to correctly recognised market segment (Branko R. 2014). (what’s the article or book)
Expecting the managers have the suitable statistical know-how, those wishing to embrace multivariate segmentation analysis should even scrutinize the nature of their information. It is vital to think about that in preparing information, multivariate procedures are additionally improving the data accessible. On the off chance that the nature of the information is poor in the first place, the explanatory procedure will just intensify any mistakes (Dibb, 1998). (what’s the article or book)
Industry examples
STP implementation of Fly Emirates
Fly emirates is a gulf based aviation service provider managing a fleet of most luxurious and efficient air planes. This fleet consists of world’s biggest airplanes namely A380s and Boeing 777. Fly Emirates market segment is the group of people who flies with comfortable and premium environment. Hence the target market will be high end and middle class travelers. Accordingly, Emirates charges a premium price compared with other rivals in the industry to maintain the customer relationship.
Emirates provides a luxurious passenger service from the entrance of the airplane. They serve a wide range of international cuisine in-house with state-of-the-art interior.
Emirates is also providing a luxurious drive from the passengers’ accommodation such as hotel to the airport which is also included in the package. Their lounges, suites, seating and the airport can be watched though Internet as a 3D model from which the position of customer about the atmosphere of Emirates facilities are ensured (Emirates Homepage).
The airline industry is a typical example of Market segmentation representing two different of the STP strategy ends from Segmentation to Positioning perspective. Market segmentation has played a significant role in changing how the various players in the market operate. The growing customer choices and needs, increased the company’s involvement in segmentation. Luxury or budget flying are the main areas of segmentation in the airline industry (Emirates Homepage).
For instance, the airline industry in the UAE (United Arab Emirates) homes 4 airlines, of which the Emirates airlines charges a premium price whereas and Fly Dubai charges a budget fare.
On the first class suite: https://www.youtube.com/watch?v=a7NJ6Gek9v4
High end prices: https://www.youtube.com/watch?v=84WIaK3bl_s
Luxury experience: https://www.youtube.com/watch?v=1bWyKHz10Jc
STP implementation of BMW
BMW is an extremely successful German based automobile company which provides a premium quality driving experience as Fly Emirates. In 2001, the company started an advertisement campaign just to inform their target market how quality a BMW is and why its worth buying such car. Each of their car series is specifically segmented to different market segment although entire BMW models are designed to high end customers. For instance, the BMW 3 Series is positioned to sell to an executive in a corporation whereas the BMW 7 Series are positioned to sell to an elderly CEO of a corporation. BMW cars always carries a luxurious interior and state-of-the-art technology in built. The company employees the best materials in the market and the staff to design the next level cars. BMW is always driven by innovation. Although the company keeps an additional markup on the cost as the brand value, the premium price is charged due to heavy innovation that the company brings to the production. BMW includes world class features such as sensor based safety features, central security systems, sensor systems that are both around and within the car, GPS tracking systems, electrical seating systems, break systems and computerized AI powered computer system actually brings a next level of experience where the owner cannot experienced in another budget car (BMW Homepage).
Back in 2001, when the early stage of Internet is in commercial use, BMW released a short-film series over the internet about their cars. BMW was targeting young market so that as they grow up, they will have an intention to purchase their cars. Their intention was to convince that BMW is a brand which is linked with a premium positions in the world such as chief grade positions and director positions so that the crowd they were targeting to will buy the car as they grew up. This was a blue ocean at that time. Even if someone couldn’t afford BMW, will be dreaming of and will be inspired to buy a premium quality car with a brand.
STP implementation of OnePlus
OnePlus is a Chinese smartphone manufacturer based in Hong Kong established in 2013. The company believed in working with the consumer is the key to ne next revolutionary smartphone series in the market. As a result, OnePlus introduced an invite-only smartphone sale which made a hype in the market. OnePlus was the first company to introduce invite-only product in the smartphone market. The aim of this strategy was also to create physiological want in the market for this product as this phone was a limited edition and contains a revolutionary features.
Then the company carried out some market researches as the next step. In this analysis, the company did a segmentation analysis such as geographical, demographical, Psychographic and benefit segmentation. As the targeting strategy the company selected not to fight with the competitor, instead, they introduced a strategy to create limited number of products at a lower price so the company can gain more demand for their products (OnePlus Homepage).
OnePlus managed to secure the target market between the age group of 15 – 35. This range consist of tech enthusiasts and purchasing capability of the phone. As a result, OnePlus selected a brand new position in the position map. Their strategy is to provide a low budget phone with huge number of specifications where all the other manufactures stands on the other side of the position (high specifications and high price). Currently, if OnePlus releasing a smartphone, they will first take the preorder from customers before launching the product to the market.
OnePlus was able to develop a whole new smartphone market by creating a hype in the phone demand and manufacturing low budget yet powerful smartphone which anyone within the age of 15 – 35 could afford. The company used STP in an efficient way to understand the market and develop potential customer base where other manufacturers could not think of. Currently OnePlus mobile itself does the marketing for the company.
STP implementation of Victoria Secret
Victoria Secret is a world famous ladies fashion brand established in 1977. Perfumes and undergarments are the prominent segments in the business. Owners have decided to target women as the market segment and decided to target ladies between 18 and 30 as the target market. Victoria Secret is a branded product which is designed to affordable for ladies who earns decent amount of money. The Company identified a niche market that there are market segments who likes good looking luxurious undergarments and feminine perfumes (VS Homepage).
These products are usually sold in urban and highly populated areas targeting teenagers to girls up to 30s. Main theme of Victoria Secrets is the involvement of fruits. This makes the consumer familiar with the product. The position of the product is also secured by holding its own mega fashion shows with world famous model icons. Lately, this strategy become a culture among the segment. Victoria Secrets further introduced swimwear, sportswear, cloths and other accessories which equally got popular as its initial products. Victoria Secrets products are priced at a premium prices which also carries the same look in the product, most of the products in the portfolio is colored in Pink which ensures the attraction of ladies to the store, product promotions are done though prominent fashion magazines and Victoria Secret fashion show.
Victoria Secrets has also used STP analysis in an effective manner. They created a culture where undergarments with decorations priced at a premium rate.
STP implementation of Tesla Power Wall
Power Wall is an innovative power storage product that developed by a highly innovated world recognised company “Tesla”. This offers a household power storage with an amazingly high storage capacity. This device allows a home to store power during day time and utilize whenever the consumer wants. This became a revolutionized product as invention sustainable household power storage was a dream back then. Tesla pitched this product initially to the segment who have already installed solar panels. Their intention was to sell these power packs to moms and dads in the domestic segments Debord M (2015).
Initially, consumers did not purchase the product as it costs within the range of USD 14,000 – USD 17,000 Donovan, S (2015). Tesla marketing team managed to sell this product by showing the cost saving in the long run. They used return on investment calculations to showcase the sustainable investment opportunities in the product. Hence, the consumers started purchasing these power banks Park, A (2015). The product is sold through authorized agents who installed the unit once purchased.
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