1ST

PRINCIPLES OF MARKETING
QUARTER

Module 7 : Week 7

Market Segmentation, Market Targeting and Market Positioning (STP)

Learning Competencies
1. Identify and segment market for a product or service.
2. Select the appropriate target market segment and its positioning.
Code: ABM_PM11-Iei-14-15

Objective

1. The Learners should be able to identify and segment market for a product or service
and select the appropriate target market segment and its positioning.

Let’s Recall!

Let’s try to recall our topic on consumer and business markets wherein a value chain,
consumers play a very important role in driving the sales of a business. They are the ones that directly or
indirectly affect the profit margin of the company. Any business should carefully understand the needs of
the customer whether it is a latent or a basic need. This will connect us to our topic – Market
Segmentation, Market Targeting and Market Positioning – we segment, we target and we position our
products and services to our potential customers.

Direction: If you are to use the products and services below, state your choice of brand on the space
provided. (10x2=20/20)

Products/Services Choices of Brand

1. Laundry Detergent
2. Perfume
3. Hypermarket
4. Anti-dandruff Shampoo
5. Best Smartphone
6. Hair Salon
7. Toothpaste
8. Laptop
9. Soda
10.Spicy Fried Chicken

Let’s Understand!

Let’s together comprehend the importance of segmentation, targeting and positioning to the
market. Market segmentation can help you to define and better understand your target audiences and ideal
customers. If you're a marketer, this allows you to identify the right market for your products to properly
position and then target your marketing more effectively. Today, Segmentation, Targeting and

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Positioning (STP) is a familiar strategic approach in Modern Marketing. It is one of the most commonly
applied marketing models in practice.

Market segmentation is the process of dividing a market of potential customers into groups, or
segments, based on different characteristics. The segments created are composed of consumers who will
respond similarly to marketing strategies and who share traits such as similar interests, needs, or
locations.

Why is market segmentation important for marketers?

Market segmentation makes it easier for marketers to personalize their marketing campaigns. By
arranging their company’s target market into segmented groups, rather than targeting each potential
customer individually, marketers can be more efficient with their time, money, and other resources than if
they were targeting consumers on an individual level. Grouping similar consumers together allows
marketers to target specific audiences in a cost effective manner.

Now, let’s acquire how Segmentation, Targeting and Positioning (STP) Model works. Please see
read the example below.

Segmentation, Targeting and Positioning (STP) Model

What is the STP Process in Marketing? Let’s take a look the scenario below.

Sofia has just started a new job as a Marketing Manager for a fashion outlet. She conducts a
careful analysis of sales data within the first few weeks, and quickly identifies a profitable opportunity
with a particular group of high-value customers. So, she brainstorms several ideas with her team, and they
come up with an exciting new product which has the potential to be a real success for the company. Sofia
has identified a profitable segment of the market, but how has she done it? How can her team members
develop a perfect product for these people? And how should they communicate its benefits?

In this module, we'll look at the Segmentation, Targeting and Positioning (STP) Model, an
approach that you can use to identify your most valuable market segments, and then sell to them
successfully with carefully targeted products and marketing.

Examples of Targeting in Marketing

A target market refers to a group of customers to whom a company wants to sell its products and
services, and to whom it directs its marketing efforts. Consumers who make up a target market share
similar characteristics including geography, buying power, demographics, and incomes.

The STP Model consists of three steps that help you analyze your offering and the way you
communicate its benefits and value to specific groups.

STP stands for:

Step 1: Segment your market.
Step 2: Target your best customers.
Step 3: Position your offering.

This model is useful because it helps you identify your most valuable types of customer, and then
develop products and marketing messages that ideally suit them. This allows you to engage with each
group better, personalize your messages, and sell much more of your product.

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Example:

Marriott International® owns a number of different hotel chains that target specific consumer
groups. For example, Courtyard by Marriott® hotels focus on travelers on the road, who want a nice,
clean place to stay during their trip; Ritz-Carlton® hotels target those who don't mind paying a premium
for luxury; and Marriott ExecuStay® hotels are aimed at professionals who need a longer-term,
comfortable place to stay.

As you can imagine, Marriott International doesn't communicate the same marketing message to
all its customers. Each hotel is designed and positioned to appeal to the unique wants and needs of a
specific group.

Applying the STP Model

Follow the steps below to apply the STP Model.

Step 1: Segment Your Market

Your organization, product or brand can't be all things to all people. This is why you need to use
market segmentation to divide your customers into groups of people with common characteristics and
needs. This allows you to tailor your approach to meet each group's needs cost-effectively, and this gives
you a huge advantage over competitors who use a "one size fits all" approach.

There are many different ways to segment your target markets. For example, you can use the
following approaches:

1. Demographic – By personal attributes such as age, marital status, gender, ethnicity, sexuality,
education, or occupation.
2. Geographic – By country, region, state, city, or neighborhood.
3. Psychographic – By personality, risk aversion, values, or lifestyle.
4. Behavioral – By how people use the product, how loyal they are, or the benefits that they are
looking for.

Example:

The Adventure Travel Company is an online travel agency that organizes worldwide adventure
vacations. It has split its customers into three segments, because it's too costly to create different packages
for more groups than this.

Segment A is made up of young married couples, who are primarily interested in affordable, eco-
friendly vacations in exotic locations. Segment B consists of middle-class families, who want safe,
family-friendly vacation packages that make it easy and fun to travel with children. Segment C comprises
upscale retirees, who are looking for stylish and luxurious vacations in well-known locations such as Paris
and Rome.

Step 2: Target Your Best Customers

Next, you decide which segments to target by finding the most attractive ones. There are several
factors to consider here.

First, look at the profitability of each segment. Which customer groups contribute most to your
bottom line?

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 Next, analyze the size and potential growth of each customer group. Is it large enough to be worth
addressing? Is steady growth possible? And how does it compare with the other segments? (Make sure
that you won't be reducing revenue by shifting your focus to a niche market that's too small.)

Last, think carefully about how well your organization can service this market. For example, are
there any legal, technological or social barriers that could have an impact? Conduct a PEST Analysis to
understand the opportunities and threats that might affect each segment.

Tip:
It can take a lot of effort to target a segment effectively. Choose only one segment to
focus on at any one time.

Example:

The Adventure Travel Company analyzes the profits, revenue and market size of each of its
segments. Segment A has profits of P8, 220, 000.00, Segment B has profits of P4, 360, 000.00, and
Segment C has profits of P3, 430, 000.00. So, it decides to focus on Segment A, after confirming that the
segment size is big enough (it's estimated to be worth P220, 000, 000.00/year.)

Step 3: Position Your Offering

This is where Market Positioning happens. Market Positioning refers to the ability to influence
consumer perception. Competitive advantages allow a company to achieve regarding a brand or product
relative to competitors. The objective of market positioning is to establish the image or identity of a
brand.

In this last step, your goal is to identify how you want to position your product to target the most
valuable customer segments. Then, you can select the marketing mix that will be most effective for each
of them.

First, consider why customers should purchase your product rather than those of your
competitors. Do this by identifying your unique selling proposition, and draw a positioning map to
understand how each segment perceives your product, brand or service? This will help you determine
how best to position your offering to the market.

Next, look at the wants and needs of each segment, or the problem that your product solves for
these people. Create a value proposition that clearly explains how your offering will meet this
requirement better than any of your competitors' products, and then develop a marketing campaign that
presents this value proposition in a way that your audience will appreciate.

Example:

The Adventure Travel Company markets itself as the "best eco-vacation service for young
married couples" (Segment A).n It hosts a competition on Instagram® and Pinterest® to reach its desired
market, because these are the channels that these people favor. It asks customers to send in interesting
pictures of past eco-vacations, and the best one wins an all-inclusive trip.

The campaign goes viral and thousands of people send in their photos, which helps build the
Adventure Travel Company mailing list. The company then creates a monthly e-newsletter full of eco-
vacation destination profiles.

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Key Points:

The STP Model helps you position a product or service to target different groups of customers
more efficiently. This three-step approach helps you quickly zoom in on the most profitable parts of your
business, so that you can fully exploit the opportunities these offer.

To use the model, start by segmenting your market into groups. Next, choose which of these you
want to target. Last, identify how you want to position your product, based on the personality and
behavior of your target market.

Brand Positioning

If you have answered most of the items in Let’s Recall Activity, then these companies
successfully positioned their brand in your mind and after we have identified on how STP Model works,
let’s us recognize the importance of brand positioning in marketing the products or services.

Brand positioning is defined as the conceptual place you want to own in the target consumer’s
mind — the benefits you want them to think of when they think of your brand. An effective brand
positioning strategy will maximize customer relevancy and competitive distinctiveness, in maximizing
brand value. Positioning is how you align your brand or products in the target market. The goal is to offer
something that is bigger, better or more valuable than what your competitors offer to a particular market
segment.

Examples:
1. Apple attempts to position itself as an innovative, cutting-edge technology provider to
discerning tech buyers who want top-quality solutions. Your positioning serves as your big-
picture guide in building your marketing campaign.
2. Anlene Gold is positioned as high in calcium milk for elderly.
3. Gatorade as a sports drink.
4. Promil is for a gifted children.
5. Gardenia’s high fiber wheat bread as the ―healthy bread‖.

The key to positioning is to examine the relationship between your values as a company and what
you offer as it relates to the customer segment you want to target.

Brand positioning is an important step in helping customers and prospects understand why your
products and services are valuable to them. So to add real strength to your brand, devote the time and
effort in a strong positioning strategy and then start using the numerous communication channels
available to you for success.

Steps on How to Create Brand Positioning

To have a successful brand positioning, you have to analyze the following questions:

Target Market
 Understand what your consumers want
 Understand what your company’s and brand capabilities are
 Understand how each competitor is positioning their brand

Positioning Statement

 Is my positioning statement can be a big hit for my consumers?

 Is my company has the capability to offer this in the market?
 Is my positioning unique and can be identified easily the
difference from the other competitors?

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 Let us take a look on how Maria Maganda do her Brand Positioning to her Viggier Burger.

Maria Maganda owns a Burger Stall. She conducted a research found out that 80% of the market
wanted to have a burger that will not give them too much calories. Her target markets are those who are
health conscious, so she made the Viggier Burger. Maria Maganda wanted to position Viggier Burger as a
nutritious burger, so when people talk about healthy burger, her brand will be the first thing that comes in
their mind. To achieve this, she followed the steps stated below.

Step 1: Identify Competitors in the Market

Note: Only Identify competitors that offers the same product you want to create a brand
position to. Example: Angel’s Burger, Burger King, Zark’s Burger

Step 2: Know where they are positioned.

You can use the elements such as price (low price, freebies, payment plans, discounts),
product attribute (quality, specs, features, taste, nutritious), product category (Is it organic
or processed?) product source (where the product is made), user segment (based on
customer’s perception regardless of the other factors given), experience/feeling (depends
on the target market’s preferences), and against competition (No. 1, No. 2 Mo. 3 etc.,) or
combinations of them.

Step 3: Decide on the positioning of your product.

V B IGGIER URGER

Step 4: Look for Market Gaps. Use Product Differentiation.

(Horizontal, Vertical, or Mixed Differentiation)

V BIGGIER URGER

Step 5: Develop a unique selling proposition. You can focus on the following factors below.

Price: Unique Tootpaste: Maximum fluoride at your price

Product Attribute: Safeguard: 24 Hour Germ Protection
Product Category: Family Rubbing Alcohol: Hindi lang pang pamilya, pang-sports pa
Product Source: YKK: World Class Zipper, Gawang Pinoy
User Segment: Dunkin Donuts: Pasalubong ng Bayan
Usage Behavior: Royal: Ilabas ang kulit
Experience/Feeling: Chooks-to-go: Masarap kahit walang sauce!
Against Competition: Head and Shoulder: World’s no.1 anti-dandruff shampoo

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 So among the factors mentioned, Maria Maganda focused on her product attribute and
come up with her own product unique selling proposition.

V B IGGIER URGER
―Satisfying your craving while on a diet‖

Step 6: Communicate.
Choose your message channel or your promotional mix to inform your market. You can
use advertising, personal selling, public relation, or sales promotion.

Maria Maganda used Advertising specifically the social media because she believes that
it will greatly influence the potential customer’s perception especially nowadays. She can
also save promotional cost for it.

Can we reposition the brand?

The answer is yes. We do repositioning if we want to change the past perceptions of the target
consumer about our product. Repositioning has two concepts:

1. Changing an old brand positioning to a new brand positioning.

Example: Anlene shifts positioning from Anlene BoneMax that focuses on first having a strong
bone before you can have the freedom to move with Anlene MoveMax ―Move As Young As You Feel
Inside‖ positioning wherein most customers would want to achieve. They use commercial as their
advertising mix that shows a middle-aged woman dancing in an arcade. (See the link )

Another Example: LBC reposition their brand by making it sound globally competitive. So they
changed ―Hari ng Padala‖ to ―We like to move it‖.

2. Changing consumer perception of competitors.

Example: In 1998, Tide released a commercial on their Double Action Tide white bar comparing
it to a cheap detergent bar.

Let’s Apply!
Now, let’s progress ourselves by expanding our knowledge on market segmentation which allows
a business to precisely reach a consumer with specific needs and wants.

Direction: Read and classify the market segmentation mentioned in the statement below whether it is
Geographic, Demographic, Psychographic or Behavioral Segmentation. (5x3=15/15)
STATEMENT MARKET SEGMENTATION

1. Enfapro by Mead Johnson for six to eighteen-month-old babies.

2. Mcdonalds already introduced the Majaraha Mac Burger in

India. Their burger does not have any meat or beef due to their
religious belief.

3. Nike Inc. design, develop and sell athletic footwear, apparel,

and accessories. They target consumers who are sport-lover and
fashionable.

4. Shopwise Hypermart has a check-out lane for elite cardholders

who regularly purchased food, dry goods and groceries over
P15,000 a month.

5. Johnson & Johnson focuses to the product related to human

health and well being such as baby care, oral care, skin care, etc.

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 Let’s Analyze!

To position your brand in your customer’s mind, you must start from within your business. Every
member of your organization that touches the customer has to be the perfect expression of your position.
And, since everyone touches the customer in some way, everyone should be the best expression of your
position. Let’s increase our knowledge on brand positioning by responding on the activity below.

Direction: Based on your market segmentation, select your target market. You have to think of a product
that you want to offer in the future. You are to create a brand positioning for that product following the
steps you have learned today. Write down your answer below.

Example:

I. Target Market – ―A Male, Female, and In-Between residing in Metro Manila who
belong to income classes A, B, and C, Single and Married, are between the ages of 21-40,
who are health conscious but loves to eat burger.
II. Product: Viggier Burger
III. Brand Positioning: Step 1 - 6 (Refer to the examples given on the previous page)

BRAND POSITIONING ACTIVITY

I. Target Market:

II. Product:

III. Brand (Note: You can just write down the name of the brand, no need to
Positioning illustrate the logo).

STEP 1:

STEP 2:

STEP 3:

STEP 4:

STEP 5:

STEP 6:

Let’s Evaluate!

Let’s get ourselves evaluated from the context we have read regarding market segmentation,
market targeting and market positioning.

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Direction: Read the questions carefully. Write the letter of the correct answer on the space provided.
(10x2=20/20)

______1. If a consumer describes a joy dishwashing liquid as being the ―number one dishwashing liquid
in the Philippines‖, then this descriptor is a result of _____.
A. Differentiation C. Positioning
B. Market Targeting D. Promotion

______2. How Gardenia positions its high fiber wheat bread?

A. Diet Bread C. Filled Bread
B. Healthy Bread D. Sweet Bread

______3. If Maria Maganda selected a health-conscious adult as a target market, she focused on what
type of Psychographics segmentation variables?
A. Issues C. Specific Product Attributes
B. Personal Interest D. Price

______4. What type of human needs does Maria Maganda’s Viggier Burger wanted to cater?
A. Physiological Needs C. Safety and Security
B. Esteem Needs D. Social Needs

______5. ―Ito ang tama!‖ is associated of what brand of beer?

A. San Miguel Pale Pilsen C. Red Horse
B. San Mig Light D. Tiger

______6. What is the importance of developing a unique selling proposition?

A. It will give distinction from competitors product.
B. You will be aware of your competitor’s position in the marketplace.
C. It will develop a strong marketing competition.
D. You will be adequately meeting the defined marketing objectives.

______7. Which of the following brand exhibits experience/feeling elements in their selling proposition?
A. Del Monte: Natural Pineapple Juice and Vitamin C
B. Nido: Nutritious Milk for Growing Kids
C. Angel’s Burger: Ang Burger ng Bayan
D. Palawa Pawnshop: Mura, Mabilis, Walang Kuskos-Balungos!

______8. Why do you need to understand your target market?

A. It ensures that all brand activity has a common aim.
B. It creates distinctive place in the market.
C. To develop a positioning that can satisfy a larger group of customers.
D. To employ the best ways to reach them instead of trying to serve all.

______9. The changing of the past perceptions of the target consumer on a certain product to create a new
brand image is known as _______.
A. Brand Positioning C. Repositioning
B. Target Marketing D. Market Segmentation

______10. If you were to have a better understanding of your target market and employ the best ways to
reach them instead of trying to serve all at the same time, which of the following company do you think
cater its target market way better?

I. Toyota introduces Hi-Ace for big families and Vios for the more price-conscious.
II. Competing with multinationals, ACS Manufacturing concentrated on their ―Pride‖ detergent
in the washing machine segment.
III. Ice cream used to be a staple just for birthdays but Selecta has transcended this to include
other family events.
IV. San Miguel has the San Miguel Grande size for the heavy drinkers and Pale Pilsen for the
regular drinkers

A. I, III and IV C. I, II and III

B. I and IV D. All of the Above