Segmentation, targeting

and positioning 1 (STP)

“STP is the heart of modern

marketing”
-- Philip Kotler 1992
Objectives
 To outline the target marketing process
(STP)
 To explain marketing approaches to
defining markets
 To review a selection of bases of
segmenting markets
 To identify criteria by which a target
market may be selected
 To explain the relevance of all this to your
assignment.
Defining your market
 What business are we
in?
 The market should be
defined in terms of
customers needs, not
the product that you
make (Levitt 1960)
 Defining the market
gives you a set of
potential customers
and potential
competitors
Avoid “Marketing myopia”
Five main bases of
segmentation
 Geographic

E.g. Country (gossard), region (Coca Cola)
 Demographic

E.g. Age, gender, social class, Life-cycle stage
 Geo-demographic
 E.g. ACORN, MOSAIC
 Psychographic

E.g. Activities, Interests, Opinions, Demographics
 Behavioural

E.g. End use, benefits sought, usage rate, loyalty,
attitude, buyer readiness.
 Life cycle (stage)
segmentation in financial
services

From Soper (2002) p. 69

 Diffusion of Innovation
Curve
Particularly relevant to discontinuous or dynamically continuous innovations
Adoption Percentage

13.5% 34% 34%

Early Early Majority Late Majority 16%
Adopters Laggards

2.5% X
Innovators
Time of Adoption
6
Source: Jobber and Fahy (2006: 160)
Characteristics of
innovators?
 Demographic
 Somewhat younger
 More cosmopolitan
 Higher education
 Higher income
 Higher occupation status
 Social factors
 Greater social participation
 Higher social mobility
 Greater geographical
mobility
 Greater opinion leadership
Source: Doyle and Stern (2006: 221-222)
 Personality factors
 More risk-tolerant
 Oriented towards new
things
 More information
sources used
 More print media
readership
 High involvement with
the product /service
category
 But much depends on
the product category
 Food vs. technology
How do you now if a base
is worth using?
 A valid segment is:
 Homogenous in its response to marketing
variables
 Substantial
 Measurable
 Accessible
 Again, the nature of the product is
important
 One base is rarely enough
Evaluate the relevance of each
segmentation base for the various
markets

 Gender  Snacking
 Age chocolate
 Personality  Cars
 Clothing
Select a target or targets

Undifferentiated

Segment 1
Differentiated Segment 2
Segment 3

Segment 1
Concentrated Segment 2
Segment 3
Choosing a target
segment
Company

Narver & Slater 1986

Profit

Competitors Customers

Remember the marketing orientation?

Evaluation of market
segments
 Market segments need to be evaluated and
ranked for possible targeting
 Evaluation is typically based on:
 Size of segment
 Growth prospects
 Profitability
 Customer
Competitive pressure (competitor factors)factors
 Fit with company objectives (company factors)
For your assignment
 Define the market carefully in terms of
customer needs
 Segment the market using a range of relevant
bases
 Give a clear argument for your choice of
segment
 Support with hard (secondary) data and
explicit reference to theories you have used.