UNDERSTANDING STP AND MARKETING MIX: THE CASE OF NIVEA 0

A.    INTRODUCTION

The increasingly competitive business environment is due to the tremendous increase of

organizations is pressing businesses to rethink its marketing philosophy, in order to stand
out from the crowded and information overload global environment. Many marketing
concepts and philosophies are suggested, by theoreticians, academicians, practitioners and
consultants. In this writing, the most basic but practical marketing concepts and ideas will
be introduced. These concepts and models are powerful as it is straightforward, rational and
have been applied successfully in many business contexts. The effective marketing concepts
to be introduced and discussed here is the Segmentation-Targeting-Positioning Value
Delivery Process and the 4P Marketing Mix framework. For practicality purposes, a case
study on these subjects will also be presented, to understand how these concepts are being
applied successfully in the real life. Recommendations on how to further improve marketing
activities are also presented later. The article conclude with acknowledgement that although
complicated marketing theories and frameworks are available, successfully executing the
fundamentals and marketing principles is already sufficient to ensure a company to achieve
competitive advantages in the marketplace.

 B.    LITERATURE REVIEW

1.     The Concepts and Definition of Marketing

Theoretically, marketing is a broad term dealing with identifying and delivering value to
human and society. Marketing is about meeting human and society needs, and from the
business standpoints, to meeting those needs in a profitable manner. There are various
definitions concerning the subject of marketing. For example, a widely cited definition of
marketing as defined by the American Marketing Association is as follow: Marketing is an
organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefits the
organization and its stakeholder. Some researchers argue that such a definition is
commercial-oriented and have been proposing a marketing definition that is more socially
oriented. From the sociology perspective, marketing is the process whereby individuals or a
team of individuals attain their needs by creating, promoting and exchanging valuable
products and services with one another.

Generally, in today business environment, there are three broad categories of marketing
concept. All of these concepts are based on a customer-oriented and sense-and-respond
selling philosophy. The first type of marketing concept is called the reactive market
orientation concept, where a company tries to understand and meet the customer’s
expressed needs. The second type of marketing concept is the proactive marketing
orientation concept, where the company takes initiative to understand the hidden needs of
customers and find ways to meet those untold needs. Lastly, the third one is the total
marketing orientation concept, where the company will practice both the reactive and
proactive marketing philosophy in delivering values to the society.

Marketing is essentially a process to create, deliver and satisfy consumers or customers’

needs and wants. The entire marketing process is thus often described as a value delivery
process – where it is concerning about how an organization create and deliver its value
proposition to the society.
There are various philosophy and perspectives in defining how an organization should
deliver value to the society. Generally speaking, the value creation and delivery process
contain three stages. The first stage is to choose the specific value proposition. In this
stage, the market must perform comprehensive researches on the marketplace before he
can expect to successfully deliver valuable goods and services to the marketplace. The STP
formula is a widely known marketing concept in this stage, where STP stands for
segmentation, targeting and positioning. Specifically, the marketer must segment the
market, select the relevant market target and then to develop the value offering’s
positioning. In the second stage, marketer provides value to the society. The concepts of
marketing mix, namely the 4P or the 7P framework is often applied here. In this stage,
marketer decides how he is going to provide the value to society from the products, price,
place, and promotion dimensions. In the third stage, the market must communicate the
value proposition to the society, and this can be done through promotion, advertising, sales
force, branding and even by exercising Corporate Social responsibility in the marketplace.

2.     The STP Process – Segmentation, Targeting and Positioning

According to Kotler et. al. (2004), the formula of STP, namely – segmentation, targeting
and positioning – is the essence of strategic marketing. As mentioned before, the three
steps are important for a marketer to plan how the value offered is to be delivered to the
society. The paragraphs below will discuss these steps in details.

Market Segmentation. Market segmentation is a strategy where marketers imaginarily

divide the market into various partitions with the objective of choosing one or more market
segments which the organization can appeal to through the design of specific marketing
mixes (specially attending to the particular market needs). Often, a market segmentation
strategy can also refer to the process of selecting the designated market segment where a
firm possesses competitive advantages. By selecting the best market segment a firm can
compete in (possibly due to the experience, human capital, products or any other successful
dimensions of the company), the firm can optimize its value chain and value delivery
process to the market place, through a fit of internal firm situation and external
circumstances. Through a market segment, the design of marketing mix can also be more
specific and clear.

Targeting. Once the company has chosen a market segment it should also select a generic
competitive strategy. At this point it is also critical to investigate the chosen strategy across
segments and research on the general strategic approaches. According to Kotler (2004) the
only sustainable generic strategy in the long run in a segmented market is by pursuing a
differentiation strategy. He asserted that the other generic competitive strategy choices
(such as low cost) are not sustainable or practical in a segmented market. Thus, in this
second step of STP process, it is important for the firm to select a generic strategy to target
the particular market segment.

Positioning. According to researchers, the positioning strategy should consist of three

dimensions: (a) customer targets (i.e., referring to the results obtained from the
segmentation research); (b) competitor targets (i.e., referring to the results from external
environment analysis); and (c) competitive advantage (i.e., referring to the research results
from environmental analysis). In formulating the positioning goals, researcher is arguing
that positioning is not what marketers do to the product, but what marketers deal with the
consumers’ mind. Comprehending how a mind perceives events, stores or rejects
information will enhance the probability of ensuring the positioning objective are
successfully implemented with actual positioning in the target marketplace.
 

3.     Marketing Mix

The 7P marketing Mix Framework is a famous and practical tool widely used by researchers
or practitioners. In the following section, all these elements of 7P will be discussed in
details.

Product. Under the dimension of product, the marketer should firstly define the
characteristics of the products to be marketed to meet the customer’s needs. The products
or services offered should provide values to the customers. The design of marketing mix in
this dimension can either be introducing a new product or improvising the existing one.

Price. The pricing strategy in a marketing mix design is primarily about identifying the total
costs to the users. The pricing strategy must fulfill two critical requirements. Firstly it must
be competitive. Secondly, it must entail profit. Several issues should be taken into account
in formulating a pricing strategy, namely, discounts, offers, and the perceived product’s
value for money. Researchers identify three types of pricing strategies. The first one is
called the cost-based pricing strategy. This strategy is designed to cover costs and include
an element of profit. It purely focuses on the product costs structure but does not consider
the perceptions of the customers. The second type of pricing strategy is called penetration
price. Such a strategy offer a low initial price to entice customers in order to quickly
increase the market share, with the intention to encourage the customers to develop a habit
of buying the products or brand. The third strategy is price skimming. This strategy is useful
for niche or unique product. By setting an initial high price, those who want to try out the
product will need to pay a premium, and this enable the business to potentially gain
maximum profit before the competitors’ products reach the market place.

Promotion. Promotion is about persuading the customers to buy. Promotion activities can
be categorized as either above the line or below the line. Above the line promotion is those
promotion the company paid directly for, such as advertising in newspaper or mass media.
In contrast, below the line promotion is about using other promotional methods to
communicate the value proposition to customers. Some examples are events or trade fairs,
direct mail marketing, public relation activities, branding, or sales promotion.

Place/ distribution channel. There are two components in this dimension. Firstly, it is
referring to how the product arrives at the destination of sales – and this is essentially a
distribution channel strategy. Secondly, it concerns about where the products are sold, such
as in the retail outlets, supermarkets, departmental store, or through internet (i.e., e-
commerce).

People. In business, it cannot be denied that people is the key critical success factor.
Common sense informs us that good services and products are impossible delivered by
unskilled or demotivated employees. However, under this dimension, people are referred to
many other parties, such as the customers, employees, management, and even the various
external stakeholders.

Process. This dimension is about how the value delivery process is being organized. It is
also about how the customers receive the products or services. It is very important to
understand if any services are helpful and friendly towards the customers, and if these
services or products are delivered in a timely and professional manner.

Physical evidence. This is the dimension regarding the physical part of a business, and it
often includes material evidences such as packaging, internet or website, paperwork (i.e.,
invoice, receipt, memo, deliver order and etc.), brochures, office furnishing, uniforms,
business cards, or even signage.

C.     CASE STUDY: NIVEA

1.     Introduction to the Company

Nivea is a famous brand in skin and beauty care industry. It is one of the subset of brands
manufactured and offered by Beiersdorf. Nivea is today one of the largest skin care products
providers in the world. In 2005, Beiersdorf launched Nivea Visage Young in order to focus
on the target market of young female aged from 13 to 19. The value proposition of Nivea
Visage Young is to enable young females to follow a proper skin care program, which will
then in turn enhance healthy and beautiful looking skin for the teenage.

In the following section, a case study focus on this product will be presented. It will be
illustrated that a market can be identified by formulating an excellent product/range and
promoting it to the market (i.e., the product-orientated method) or by discovering a gap in
the market and innovate for a product to fill it (i.e., the market-orientated method). Having
discovering a gap in the market place, Beiersdorf launched Nivea Visage Young with a well-
design marketing mix – all the product, price, promotion and place dimensions are designed
to be mutually supportive and internally consistent. It is critically important that any
marketing program should obtain the balance of these four marketing dimensions accurately
so that the value proposition to the market place is effective and clear.

2.     Analysis on the Marketing Mix of NIVEA

 i.     Product

The first step in formulating a successful mix is to comprehend the market. Nivea employs
extensive market research to target key market segments. The market segment identified
consists of groups of people with the same characteristics, from various dimensions such as
age, gender, attitude, or even lifestyle. The knowledge and information from the research
assists in the formulation of new products. Nivea arranges and implements its market
research efforts with consumers in a number of different ways. Three strategies are applied.
Firstly, the company uses focus groups to collect feedbacks from consumers directly.
Secondly, the company gathers data from customers via different research techniques.
Lastly, the company launched product testing activities with customers in different
geographical locations.

The market research by the company discovered that younger females demand more
specialized face care products primarily focusing at their own age group that can further
enhance the ‘beautifying’ benefit. In contrast, the existing products for the age group are
mainly providing a solution to skin problems. Thus, to fill the gap, Nivea Visage Young is a
skin care range appealing at young females who do not want medicated products but
instead demand a solution to beautify their normal skin. As mentioned above, the
competitor products are largely medicated solutions, and this creates opportunity for Nivea
to gain competitive advantage by introducing a new product range for untapped market.
Nivea Visage Young delivers a unique linkage between the teenage as well as the adult
market.
 

ii.     Price

Nivea Visage Young is one of the key market players in the skin care industry, and by
meeting the beautifying needs of the various market segments; the company is effectively
the price leader. As a price leader, the company sets the price benchmark that competitors
will either follow or undercut. However in the future, Nivea needs to constantly review prices
if any competitor joins the market at the ‘market growth’ stage of the product life cycle in
order to ensure that the products are competitively priced.

iii.     Place

Nivea Visage Young is trying hard to use as many appropriate distribution channels as
possible to ensure a widest reach of its products to the particular market segment.
Currently, the company’s main channels are those retail outlets where customers used to
visit in finding skin care products and solutions. These retail outlets include the high street
shops, and large grocery chains. The rationale for employing such a distribution strategy is
due to the research findings from the company, where it is discovered around 20% of the
younger females purchase products for themselves from the various high street stores when
shopping with friends. Apart from that, the research also discovered that the majority of
purchasers are actually parents buying for their daughter. Particularly, the mothers are
more likely to purchase the product from supermarkets in the midst of grocery shopping.

Nivea distributes through a variety of outlets that are cost effective, while at the similar
time, able to reach the largest possible amount of consumers. In fact, the company’s
distribution strategies also take into account the environmental effects due to transport. The
company employs a central distribution system in UK. The company does not distribute
directly to smaller retailers because the volume of products sold cannot justify the high
costs to do so. Instead, the company uses wholesalers for these smaller retailers. Not only
that, the company also decided not to sell directly through its corporate website as the costs
of producing and distributing small orders would be too impractical. 

iv.     Promotion

Nivea selects promotional techniques that appeals to the tastes of its target market through
the range of mass media available. The company believes that one way advertising methods
are less effective if compared to communicating directly to the customers. Therefore the
company does not plan to use any above-the-line promotion techniques. The company
arranges the promotional techniques to be consumer-led through below the line promotion.
By employing various below-the-line routes, the company implements ways of
communicating to teenagers and their mothers as well directly. One of the critical parts of
this strategy is the distribution of product samples. These enable the prospective consumers
to touch, feel, smell and test the products. These samples be available and widely
distributed through the corporate website, and are also given out at Visage road shows
around the country. Apart from that, Nivea Visage Young implemented an attractive online
magazine, namely the FYI (Fun, Young & Independent) to increase and invoke brand
awareness. The key idea delivered behind the magazine is to provide teenage females the
confidence to become young women and yet to celebrate their newly discovered
independence.
v.     Discussions on NIVEA Marketing Mix

We have discussed how the company structures its marketing mix or the four Ps of
marketing in order to target the market segment effectively. Before the design and
implementation of the marketing mix program, the company is successful in discovering a
specialized market segment, which is largely untapped by the competitors. The competitors
are largely offering medicated products, and thus, to fill the gap or demand where the
young teenage females want to have a beautifying product, the company introduces the
skin and beauty care (but not medicated) products to these market segments. One the
market segment is identify, the company create a products to target these segment of
consumers. Later, the company design and carried out mutually consistent and internally
supportive marketing mix to deliver the value proposition, and products to the end users.
The marketing mix is designed to position the company attractively and appeals to the
young teenagers. Overall, the process of STP and the framework of marketing mix (i.e., the
four Ps of marketing) are successfully implemented by the company. The company is a case
study that adds to the evidences on how these theories can be applied in the real world.

 D.    CONCLUSION

In short, we have seen how the traditional, simple but highly practical method of 4P
framework is used successfully in our case study. The concepts of STP and Marketing Mix is
very important in assisting managers to plan for marketing efforts to local and international
market, and in fact, such a framework serves as the founding principles for development of
more complex and advanced marketing strategies in the modern days. These concepts are
not only theoretical popular and widely taught in business schools, but are also useful in
practice, in analysis or planning successful marketing campaign or strategies for
organizations.

E.     REFERENCES

“Marketing Management, Analysis, Planning and Control”, Philip Kotler – PHI.

“Marketing Management”– Stanton – John Wiley.

Kotler, P & Armstrong, G (2004), ‘Principles of Marketing’, Tenth Edition, New Jersey:
Pearson Education Inc

Lauterborn, R (1990), ‘New Marketing Litany: 4P’s Passe; C-Words Take Over’, Advertising
Age, Oct 1, 1990:26

Lazer, W (1971), ‘Marketing Management: A Systems Perspective’ New York:  John Wiley &
Sons.

McCarthy, E J (1960), ‘Basic Marketing – A Managerial Approach’, Illinois: Irwin.

Proctor, T (2000), ‘Strategic Marketing: An Introduction’, London: Routledge.