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Segmentation, Targeting & Positioning (STP)

Research · April 2021

DOI: 10.13140/RG.2.2.26266.16322/1

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 Student ID: 21400985

Segmentation, Targeting &

Positioning (STP)
Jan-Michael Romppanen

Dr Ivar Soone
MKTM028 Strategic Marketing at HELBUS
15 April 2021
Word count: 2322

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Table of Contents
Introduction ..................................................................................................................................... 3
Segmentation, Targeting and Positioning (STP) ............................................................................ 3
Segmentation............................................................................................................................... 3
Targeting ..................................................................................................................................... 4
Positioning .................................................................................................................................. 4
Analyzing product marketing using STP ........................................................................................ 5
Disney+ TV series: The Falcon and the Winter Soldier ............................................................. 5
Polestar car manufacturer ........................................................................................................... 6
Dr Pepper Ten ............................................................................................................................. 7
Burger King ................................................................................................................................ 7
Recommendations on using STP .................................................................................................... 8
Conclusions ..................................................................................................................................... 9
References ..................................................................................................................................... 10

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Introduction
Companies main purpose is to develop products that produce value for customers and they should be
profitable for the company. So, picking up the correct product development and marketing strategy is
vital for the company's success. Globalization has brought people together over centuries of
technological development and innovative products and services are part of that development.
Professor Theodore Levitt (1983) described in his Harvard Business Review article that similar features of
consumptions are likely to show up in different international markets by expanding his "Marketing
Myopia" (Levitt, 1960) manifesto. The thought process before Levitt's (1983) article was that companies
should customize products based on local preferences and by asking consumers what they wanted to
buy instead of selling them highly standardized products that they needed. Many companies still use
mass marketing strategies to reach customers and fail to succeed, instead, they should focus their
marketing efforts on targeting profitable customer segments. The purpose of this paper is to analyse
and explore the possibilities of the Segmentation, Targeting and Positioning (STP) marketing method
and give the reader tools to use this marketing strategy. The paper explores four marketing campaigns
in different industries to understand how the company applied the STP method. This paper aims to
produce generic best-practises of STP for companies to use.

Segmentation, Targeting and Positioning (STP)

Marketing strategies are essentially based on a mixture of human psychology, sociology and behavioural
economical thinking, then simplified for wider adaptation in daily use for managers (Samson, 2016;
Kotler and Armstrong, 2017). The process starts from understanding the current market situation and
competition, then by analyzing the most profitable customer groups and finally tailoring a unique value
proposition (UVP) for that selected target audience (Kotler and Armstrong, 2017). However, as markets
mature it becomes increasingly more difficult to create UVP for customers, therefore companies have
developed new engagement models to interact and engage with customers in digital channels (Kotler
and Armstrong, 2017).

Segmentation
The concept of market segmentation comes from economic theory where a company divides the market
into homogeneous segments using one or more attributes like age, income, geography, lifestyle or
behaviour essentially creating a total addressable market (TAM) (Blank and Dorf, 2020). The size of the
TAM defines the number of potential customers, but this does not mean they consume the same way
(Kotler and Armstrong, 2017). According to researchers (Hassan et al. 2000; Leonidou et al. (2002)
companies have adopted many strategies of segmentation from country-by-country to hybrid strategies,
essentially having parts of the segments globally defined and then having regional attributes for getting
the most out of the segments. The basis of identifying different segmentation strategy for a customer
group depends on the groups buying behaviour patterns and the company’s brand reputation within the
group (Hassan et al., 2003; Kotler and Armstrong, 2017). After analyzing the different segments using
tools like cluster analysis (trying to find similar groups based on characteristic and scoring them) or
segmentation trees (dividing an overall market into user types based on behaviour) the next step is to
decide the number of segments the company intends to pursue (Blank and Dorf, 2020). The research on
segmentation seems to rely on homogeneous ideology too much and the findings have similarities in the
trial and error method. If segmentation results keep changing by different markets and conditions then

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it can be only used as a framework and not as a repeatable method for success. There should be more
research on segmentation purchasing causality, why the consumers are buying that specific service and
belong to a specific customer segment.

Targeting
According to Philip Kotler "There is only one winning strategy. It is to carefully define the target market
and direct a superior offering to that target market"

The purpose of targeting is to find out how many profitable customers segments a company can target
with the budget they have allocated into key marketing activities (Kotler and Armstrong, 2017; Hunt and
Arnett, 2004). Therefore, the company needs to evaluate the correct approach that yields the most
profit out of the targeted segments (Blank and Dorf, 2020). Companies can use a competitiveness matrix
(f.e. Gartner’s Magic Quadrant, G2 Crowd grid or create their matrix based on previous experiences) to
evaluate their offering (Hunt and Arnett, 2004). Applbaum (2003) highlighted that there are no real
formulas for evaluating target segment attractiveness, so the model that is selected needs to be
properly validated. According to Markey et al. (2007), companies should consider targeting customers
that are most likely to recommend the product or brand to their friends and they called this "Design
Target". The targeted segment might not be large enough to be profitable itself, but the word-of-mouth
(WOM) potential and loyalty towards the brand would make them brand ambassadors (Markey et al.,
2007). For this they also developed a tool for companies can evaluate the customers fit as a brand
ambassador called Net Promoter Score (NPS). The research on targeting requires previous sales data or
customer data and therefore is not reliable when accessing new markets. Calculating existing segment
profitability and using the data in a new market segment that has different needs is likely to fail or not
be as successful as the estimate. There should be more research on the conversion rates of targeted
groups in the segments companies have defined.

Positioning
Positioning is how to position the company’s product in the mind of the prospected buyer (Ries and
Trout, 2001; Kotler and Amstrong, 2017). To create a unique selling point (USP) the company needs to
understand how brands of that segment are positioned in the mind of the buyer (Keller, 2012). For this
Keller (2012) created a concept of "Brand Ladder", which consists of 3 levels and that was further
expanded by Bolden et al. from BCG (2011) with the fourth level:

1. Attributes, the actual features or specifications the product offers.

2. Functional benefits, what benefits does the product offer to the customer f.e. user experience,
speed or other unique selling points.
3. Emotional benefits, how the product connects to the customer's everyday life
4. Social benefits, how the product makes the customer a better member of the society

Companies need to evaluate their Points-of-difference (PODs) against their competition, which
separates the product brand from the competition (Keller and Kotler, 2016). Also, the Points-of-parity
(POPs), that customers expect the product brand to have in that category of products. To validate PODs
and POPs companies use positioning and perceptual maps of the market that they desire to enter
(Kotler and Armstrong, 2017). After the company has discovered the USP for the segment, they need to
choose the positioning strategy that best delivers the message to the customers (Hooley et al., 2016).
The research on positioning relies on understanding consumers daily life’s and is quantifying the brand

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acceptance of product features and benefits. This would likely require the company to have resources to
gather that information regularly. There should be more research done on how reliable are the brand
awareness statistics and benefit measurements.

So far, this paper has focused on providing a theoretical basis on modern marketing theory and different
focus areas, the following part is to analyze success and failure stories where companies have used
these theories.

Analyzing product marketing using STP

Disney+ TV series: The Falcon and the Winter Soldier
Since the launch of the Disney+ streaming service (Image 1) Disney has used its extensive catalogue of
content to bring new shows to the Disney+ service. The family-centred streaming service has capitalized
on the new acquirement of Marvel studios by creating an original tv-series, that appeals to the family
segment especially the members of the family who are interested in superhero entertainment. Image 2
gives the expression of heroism, patriotism and good versus bad setting. The TV series is a Disney+
exclusive to promote the streaming service and brand loyalty of Disney that has been at the forefront of
family entertainment for decades. Disney has used a multi-platform marketing strategy on promoting
the new TV series including Twitter, Instagram, Facebook, Youtube and traditional TV cable networks.
The Marvel catalogue of superheroes will guarantee that Disney has access to more similar exclusive TV
series in the future. Disney’s successful launch of the Disney+ service has used an exclusivity strategy to
drive up the streaming service subscriptions by launching new movie or TV series steadily all year-round.

Image 1: Disney+ Twitter announcement (Twitter, 2019) Image 2:Marvel TV-Series poster (imdb.com, 2021)

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Polestar car manufacturer

Polestar is a Swedish electric car manufacturer using safety technology created by Volvo engineers and
Swedish minimalistic design. They are using a similar marketing strategy to Tesla by first releasing
concept pictures (Image 3) and videos in their social media channels that promote the idea of a futuristic
ideal car that would appeal to the customers' emotional benefits. Targeting segments of customers that
are aware of sustainability, ecological and safe driving experience. They are promoting the cars in high-
end showrooms where customer can see how the car is manufactured and information about the
technological advancements. Promotion videos include the feeling of safety, futuristic vibe and beautiful
interior design inside the car. The company is an active user of their social media channel and the street
advertisements have been also using the clean design emphasizing the futuristic features of the car like
blockchain delivery network and sustainable materials used. They have identified Tesla as the main
competitor and market leader that they are competing against in the high-end electric car segment.
Their first mass-market electric vehicle Polestar 2 was positioned against Tesla model 3 in the marketing
and marketed similar features to the customers. They also use similar design pictures of the car as Apple
is using about their devices, so simplicity and high-quality pictures that trigger the wow effect.

Image 3: Precept concept design promotion in Polestar Facebook group (Polestar, 2020)

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Dr Pepper Ten
Dr Pepper is an iconic brand that has competed in the soft drink markets for over a hundred year now
and in 2011 it decided to bring a new low calory product to the market by promoting it as a healthy
drink also for men. Dr Pepper did a market analysis of the current market of diet soda drinks and saw an
opportunity to sell diet soft drink to the male audience. However, they did not consider that the
promotion of “It’s not for women” could backlash the promotion as offensive towards women. By doing
this it alienated the other half of the customers that are women, this marketing campaign was soon
cancelled and never tried again. Based on Image 4 below the pictures show wilderness, signs from
mancave and expression of exclusivity for the male audience. The fonts indicate strong manly typefaces
and the text specifies the target audience. These were used to promote the new Dr Pepper Ten on social
media sites.

Image 4: Dr Pepper advertisement promotions in the social media (17blue, 2019)

Burger King
Burger King is an iconic fast-food brand that has used social media in recent years successfully by using
meme marketing which is then replicated by customers and shared on social media. Recently Burger
King in France started to make fun of the artist called Maurizio Cattelan’s artwork which has taped a
banana to the wall. Burger King created a meme where they taped a French fry to the wall with a tape
and then used a hashtag to spread the image on social media. This type of marketing strategy is
becoming more popular among the cool kids’ segment and it goes easily viral on social media if it’s
funny. This also creates a community experience with the brand and loyalty that is an inexpensive
guerilla tactic. Social media considers memes plagiarism-free, so other brands can then jump on the
bandwagon to piggy-bag on the popularity of the campaign and this can cause the effect of the
campaign to fade from the original brand to another brand. Meme marketing is likely to be considered

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more a cultural phenomenon, so brand using it should not extend the idea too much by creating a
promotion around. The idea is to give social media users fresh images that can be easily shared between
their friends, logos in memes can be easily removed when it is reshared. Using meme’s as a
complementary marketing tactic can be successful when the promoted product is intended for the same
segment. So, using memes to promote a product to a non-social media audience would not make sense.

Image 5: Burger King meme marketing image (Burger King, 2019)

Recommendations on using STP

The research shows that following these best practices management can get better results when
deciding the correct STP marketing strategy:

• Know what business your company is in, if the company operates trains then it’s in the business of
transportation not train business (Levitt, 2006).
• Brand building is a long-term value creation process, where the company builds relationships with
the customers and provide them with long-lasting value, not a short-term profit-making machine
(Kotler and Armstrong, 2017).
• Using exclusivity as a marketing strategy works, if the product is something that the segment
desires (Disney+)
• Building upon social media channels and using a multi-channel marketing strategy the company
needs to produce high-quality material to the audience or easily shareable meme’s that gain
attraction in the targeted segment (Polestar; Burger King).
• When considering targeting the company needs to evaluate that the segments are distinct,
accessible, measurable and profitable (Kotler and Armstrong, 2017; Hunt and Arnett, 2004).
• Using a "Brand Ladder" the company can evaluate the evolution of the brand in the eyes of the
customer.

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Conclusions

Creating a profitable STP strategy involves an active understanding of the market and management
needs to be aware of the competition and trends. The paper has shown the theoretical basis for STP and
provided evidence from different marketing strategies on different industries that have succeeded or
failed in creating products for the markets. Using the management recommendations company can
overcome the clearest cases of failures on their journey of building profitable brands.

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