ASSIGNMENT

SUBJECT NAME - MARKETING MANAGEMRNT

SUBJECT CODE - MKM 22013
LECTURE IN CHARGE - DR. MIM HILAL (SENIOR LECTURER)

NAME - R.M.I.W.MANIKE
REGISTRTION NO - SEU/IS/17/MG/090
DEPARTMENT - MANAGEMENT
SEMESTER - 2 ND YEAR 2ND SEMESTER

SOUTH EASTERN UNIVERSITY OF SRI LANKA

 Contents
1. What is the STP?
2. The STEP formula
3. The benefits of STP marketing
4. STP marketing example
5. How to build STP marketing strategy
 Taking an example of your choice, explain how a product/brand has been
segmented, targeted and positioned in the market.

1 what is the STP marketing

The STP Marketing Model (Segmentation, Targeting, Positioning) is a framework that simplifies the market
segmentation process.

By segmenting your market into groups, targeting the right groups, and positioning your products and
services towards those groups, your marketing will be far more effective.
A current product should not target everyone as its customer. There is no such thing as one size fits all.
Even a company like Coca-Cola, which runs in more than 200 countries and sells well above one billion
people a day, provides multiple products to satisfy different groups of people.
Assuming that anyone can be a customer is a common mistake among many businesses. Going this route
can make selling your product or service challenging as no potential customers will feel like your product is
customized to them and their needs.
To make sales easier, you can employ the STP marketing model to classify your market into segments,
choose the most potential segments, and then be the most desirable to your target segments by
positioning your product or service.

Segmentation
The first step of the STP marketing model is the segmentation stage. The main goal here is to create
various customer segments based on specific criteria and traits that you choose. The four main types of
audience segmentation include:
1. Geographic segmentation: Diving your audience based on country, region, state, province, etc.

2. Demographic segmentation: Dividing your audience based on age, gender, education level, occupation,
gender, etc.
3. Behavioral segmentation: Dividing your audience based on how they interact with your business: What
they buy, how often they buy, what they browse, etc.
4. Psychographic segmentation: Dividing your audience based on “who” your potential customer is:
Lifestyle, hobbies, activities, opinions, etc.

Targeting
Step two of the STP marketing model is targeting. Your main goal here is to look at the segments you have
created before and determine which of those segments are most likely to generate desired conversions
(depending on your marketing campaign, those can range from product sales to micro conversions like
email signups).
Your ideal segment is one that is actively growing, has high profitability, and has a low cost of acquisition:
1. Size: Consider how large your segment is as well as its future growth potential.
2. Profitability: Consider which of your segments are willing to spend the most money on your product or
service. Determine the lifetime value of customers in each segment and compare.
3. Reachability: Consider how easy or difficult it will be for you to reach each segment with your marketing
efforts. Consider customer acquisition costs (CACs) for each segment. Higher CAC means lower profitability
.There are limitless factors to consider when selecting an audience to target – we’ll get into a few more
later on – so be sure that everything you consider fits with your target customer and their needs.
Positioning
The final step in this framework is positioning, which allows you to set your product or services apart from
the competition in the minds of your target audience. There are a lot of businesses that do something
similar to you, so you need to find what it is that makes you stand out.
All the different factors that you considered in the first two steps should have made it easy for you to
identify your niche. There are three positioning factors that can help you
gain a competitive edge:
1. Symbolic positioning: Enhance the self-image, belongingness, or even ego of your customers. The luxury
car industry is a great example of this – they serve the same purpose as any other car but they also boost
their customer’s self-esteem and image.
2. Functional positioning: Solve your customer’s problem and provide them with genuine benefits.
3. Experiential positioning: Focus on the emotional connection that your customers have with your brand.
The most successful product positioning is a combination of all three factors. One way to visualize this is by
creating a perceptual map for your industry. Focus on what is important for your target customers and see
where you and your competitors land on the map.
STP marketing is an acronym for Segmentation, Targeting, and Positioning – a three-step model that
examines your products or services as well as the way you communicate their benefits to specific customer
segment

Benefits of STP marketing

If you aren’t already convinced that STP marketing is going to revolutionize your business, we’re breaking
down the key benefits that STP marketing has over a traditional marketing approach.
Because STP focuses on creating a precise target audience and positioning your products/services in a way
that is most likely to appeal to that audience, your marketing becomes hyper-personalized. With
personalization:
• Your brand messaging becomes more personal and empathetic because you have your customer
personas and know exactly whom you’re talking to;
• Your marketing mix becomes more crystalized and yields higher return on investment because you’re no
longer wasting budget on channels that your audience simply ignores;
• Your market research and product innovation become more effective because you know exactly whom
to ask for advice and feedback in the development phase.
Yieldify’s recent research shows that e Commerce leaders are adopting personalization at an
unprecedented rate – 74% of e Commerce sites now claim to have now adopted some level of
personalization strategy. Their reasons?
Fifty-eight percent found that personalization helps increase customer retention, 55% cited conversion and
45% found that personalization helped minimize the cost of new customer acquisition.
Finally, STP marketing levels the playing field. The framework allows small businesses and startups to find
success in their niche markets when they normally wouldn’t have the reach to compete with the larger
wholemarket businesses in their industry

STP marketing example

A good example of the STP process (segmentation, targeting, positioning) can be found during the Cola
Wars in the 1980s between Coca-Cola and Pepsi-Cola. As you may be aware, Coca-Cola eventually took the
dramatic act of reformulating their flagship Coca-Cola product and withdrawing it from the market to
replace it with “new” Coke.
During this era, where Pepsi were quite aggressive with their marketing programs, including the Pepsi
Challenge taste test advertising and the “choice of a new generation” positioning, Pepsi segmented the
market on a very simplistic basis, using an attitude and loyalty segmentation approach.
Pepsi segmented the market into three consumer segments only, namely:
1. Consumers with a positive attitude to the Coke brand and 100% loyal to Coke
2. Consumers with a positive attitude to the Pepsi brand and 100% loyal to Coke
3. Consumers with a positive attitude to both Coke and Pepsi, with loyalty to both brands, but
switching their purchases between these two brands from time to time.
It is in this third market segment that the battle for market leadership in the cola market was always
waged, up to the New Coke decision in 1985. This switching segment were responsive to sales promotions
consisting of point-of-purchase displays, discounts, general advertising, as well as personal factors such as
mood, social situation, taste preference, and so on.
Therefore, the combined promotional budgets of Coke and Pepsi – which at the time were in the vicinity of
$350 million per annum (with Coke spending $200 million and Pepsi spending $150 million) – were
essentially targeting the 50% of cola drinkers that would switch between the Coke and Pepsi brands. There
was less expenditure, because there was less marketing return on investment, on focusing on the brand
loyal customers, as they were unlikely to switch their purchase preferences.
However, following the launch of the New Coke product, Pepsi modified their target market selection that
started targeting loyal Coke drinkers (approximately 25% of the market). This is because there was
dissatisfaction among existing Coke drinkers that the “classic” Coca-Cola product was no longer available in
the marketplace.
As a result of this shift in target market selection, Pepsi positioned their product as the main reason that
Coca-Cola replaced their classic Coca-Cola with New Coke. This positioning change is demonstrated in the
following two TV commercials that Pepsi ran at the time. The first shows a teenage girl who is virtually
discussing a breakup scenario and is emotionally upset that Coca-Cola has changed. This positioning is
consistent somewhat with Pepsi’s youth target market at the time.
How to create an STP marketing strategy: The full STP model
We covered the three stages of the STP marketing model, looked at the benefits and examples of this
approach. While this provides you with an excellent overview of the concept, we want to get into the detail
of creating an STP marketing strategy that serves your business. Below you will find 7 steps to creating a
solid marketing strategy using the full STP mode.

1) Define the market

The global market is far too big and far too vast for anyone – even the biggest corporation with the most
resources – to address. That’s why it’s important to break it down into smaller chunks and clearly define
the part you are going after.
Typically, to evaluate your business opportunity, you will need to define your TAM, SAM, and SOM: Total
Available Market, Serviceable Available Market, and Serviceable Obtainable Market.

Think of it as an iceberg. The very top peeking from under the water is your SOM – that’s the portion of the
market that you can effectively reach. SAM is is the portion of the total available market that fits your
product or service offering. Whereas TAM is the total available market, in other words, “the overall
revenue opportunity that is available to a product or service if 100% market share was achieved.
” For example, back when Airbnb was starting to pitch investors, they used the TAM, SAM, SOM model to
explain their business potential. Their total available market (TAM) then was valued at $1.9 billion dollars
and included any type of accommodation that travelers were booking worldwide.
Because their service offering was targeted more at the budget travelers who were using online booking
engines to find their stay. In this case, the SAM was valued at $532 million dollars. Lastly, their SOM came
in at $10.6 million dollars and signified the revenue obtainable for Airbnb.
Similarly with a consumer product, we can look at Diet Coke and say that its TAM would include the total
beverage market. Its SAM would narrow it down to soft drinks, and SOM would zero in on the carbonated
sugar-free drinkers out there.

There are several routes you can choose when defining a market. You can do so by:
• Industry classification (agriculture, retail, transportation, etc.
• Product category (apparel, health and beauty, food and beverage, etc.)
• Country (United States, United Kingdom, etc.)

2) Create audience segments

Now that you’ve adequately defined your target market, it’s time to segment it using geographical,
demographic, behavioral, and psychographic variables.

Each segmentation variable helps you tap into a different aspect of your audience and when you use them
in unison you can create niche segments that really make an impact on your overall marketing effort.
For example, if you split your serviceable obtainable market into men vs women (demographic variables)
you are still left with a pretty broad audience segment. However, if you start layering other segmentation
variables on top, you can create a precise audience that you can make the biggest impact on.
Perhaps you go after women (demographics) in the United States (geographics) who prefer to spend
money on luxury products (psychographics) who follow you on social media or have visited your website in
the past (behavior).
As you can see, this layering method creates a hyper-focused audience segment that allows you to create
an extremely personalized experience. And as we mentioned before, personalization has a huge impact on
the success of your marketing efforts.

3) Construct segment profiles

When you’ve landed on your viable market segments, it’s time to develop segment profiles. Segment
profiles are very similar to your ideal customer personas but they act as subsets of your main persona –
they are detailed descriptions of the people in each segment.

Describe their needs, behaviors, demographics, brand preferences, shopping traits, and any other
characteristics. Each profile should be as detailed as possible to give you and your business a good
understanding of the people within each segment. This will allow you to compare segments for strategy
purposes.

4 Evaluate the attractiveness of each segment

Cross-referencing your findings with available market data and consumer research will help you assess
which of your constructed segments can bring in the biggest return on your investment. Consider factors
like segment size, growth rates, price sensitivity, and brand loyalty. With this information, you will be able
to evaluate the overall attractiveness of each segment in terms of dollar value.
5.Select target audience/s
Now that you have detailed information on all of your segments, you need to spend some time deciding
which ones are the most viable to use as your target audiences. You’ll need to take into account your
overall business strategy, the attractiveness of the segment, and the competition that exists in that
segment.
The best way to determine the most viable segment is by performing cluster analysis. Quite a complex
and technical topic on its own (check out this guide to get more insights), clustering in the context of
eCommerce segmentation means using mathematical models to identify groups of customers that are
more similar to one another than those in other groups.
Your ideal audience segment is one that is both large and still growing, and you are able to reach with your
marketing efforts. You’ll also want a segment that aligns with your business strategy – it makes no sense to
focus your efforts on a segment of men in Australia if you are phasing out your menswear and don’t offer
free shipping to Australia.

6 . Develop a positioning strategy

Next, you need to develop a positioning strategy that will give you the best edge to compete in the
selected target audience. Determine how to effectively position your product, taking into account other
competitors – focus on how your positioning can win the largest amount of the market share. There are
several positioning strategy paths you can follow:
1. Category-based positioning – This calls for determining how are your products or services better
than the existing solutions on the market.
2. Consumer-based positioning – This calls for aligning your product/service offering with the target
audience’s behavioral parameters.
3. Competitor-based positioning – This is a pretty straightforward approach that calls to prove you are
better than competitor X.
4. Benefit-based positioning – This calls for proving the benefits that customers will get from
purchasing your product or service.
5. Price-based positioning – This calls for distinguishing based on the value for the money people get
when purchasing your product/service.
6. Attribute-based positioning – Competitors, price, and benefits aside, this calls for zeroing in on a
unique selling proposition that makes your product or service stands out from the rest.
7. Prestige-based positioning – This calls for proving that your products supply a certain boost in status
to those who purchase.

7. Choose your marketing mix

The last and final step in this long and winding process is to actually implement your strategy. For that,
you will need to determine a marketing mix that will support your positioning and help you reach the target
audience(s) that you’ve chosen.

A marketing mix consists of the so-called 4 Ps: Product, Price, Place, and Promotion:

• Product takes into consideration factors like variety, quality, design, branding, features, packaging,
services, availability, convenience.
• Price takes into consideration factors like pricing strategy, list price, penetration price, premium,
discounting, payment methods, credit terms, payment period.
• Place takes into consideration factors like channels, coverage, location, inventory, logistics, trade
channels.
• Promotion takes into consideration factors like advertising, public relations, social media,
sponsorship, influencer marketing, content marketing, product placement, sales promotion.

A carefully-curated marketing mix will ensure business success. However, if you do leave gaps in it, all the
precious work you did at the previous stages might go to waste.
Here’s an example to illustrate a poor marketing mix: Let’s say you want to sell a luxury skincare product to
women in their 4ps..

Your goal is to position it as a high-end addition to their skincare routine that targets concerns related to
mature and aging skin. So you invest in print marketing and get your product featured in a couple of
popular women’s magazines that skew towards the 30+ audience. You also make sure to price the product
accordingly so it indicates the luxury category.

However, your packaging is cheap and poorly designed, while the product itself is sold in drugstores.
This inconsistency, which isn’t aligned with the overall positioning strategy, will prevent you from reaching
your target audience in the first place; those who get reached will experience dissatisfaction resulting in
negative word-of-mouth, which will eventually make your sales slumber.