Marketing, The STP Way

Achieving market leadership requires more than a great product. Read on for the STP approach.

So, your company has developed this great product with lots of cool features and great styling. Before you put it on store shelves, there are a few more actions to take for achieving success. The STP approach integrates time-tested marketing basics to get you there – Segmentation, Targeting and Positioning. In fact, STP necessarily comes before developing the marketing mix!

Segmentation:

Begin by gathering formal and structured insights into the market for your product. What is the universe of users? What is the total addressable market, and is access to any part of the market restricted? What are the needs of users, particularly unmet needs? When, how, why do they buy and use products to fulfil their needs?

The key questions to ask yourself while developing a segmentation model are:

1. Is each segment defined by grouping similar needs or characteristics?
2. Is each segment distinct from every other segment?
3. Do the segments collectively define the whole market?
4. Are the segments accessible?
5. Are the segment sizes measurable, and is each segment of material size?

Once you have a picture of the universe, you should be able to cluster groups of customers based on common themes. These may be as basic as geographic, demographic, psychographic, or perhaps by usage occasion, product category or behaviours.

The output from the segmentation exercise should be a unique list of customer segments with a brief description of the profiles for each segment. The profile may include some or all the following information:

1. Consumer needs and gaps, their buying and usage behaviour, preferred brands.
2. Segment size and growth rate, in the context of the total addressable market.
3. Price points in the market and for the segment.
4. Route to market.
5. Media consumption.

The purpose of segmentation is to provide marketers with a meaningful way to structure the way that businesses view markets.

Targeting:

Now that you have a granular view of the market that you will compete in, the next question to answer is whether to compete in some or all those segments.

Targeting seeks to avoid wastage of effort and resources by focusing on the most desirable segments. The desirable set of segments may be unique to the company and may cover all or only some of the identified segments, depending on its strategy. Over time, the company is likely to make substantial investments in building its presence in the selected segments, therefore significant analysis, management discussion and commitment should go into making this decision.

The key factors to consider while identifying target segments are:

1. Strategic fit: Is there a fit with the company’s strategic direction, including synergies, resources, capability, capacity, priorities, expertise, systems?
2. Financial attractiveness: Are margins attractive in the context of costs and investments? Will the company be able to command a premium for its brand or innovativeness? Do business cycles have a role?
3. Competitive intensity: Are there any dominant competitors, which may demand excessive investments in marketing, or lead to unhealthy price competition in the long term? Are there indirect competitors or substitute products?
4. Segment size: Will the scale of operations justify investments? Are there important niches?
5. Growth rates: What is the outlook for the segment in the context of the typical life cycle of the product?
6. Route to market: Can the company leverage existing channels, or does it require establishing new distribution channels or new supply chain costs?
7. Brand: Is there a good fit with the company’s existing brand(s), or will it require fresh and sustained investments in creating a new brand? Does brand play a role?

Positioning:

At this stage you know what market to compete in. The next question is “how to compete”? In a competitive market, companies will rapidly develop competing products with similar or superior features. In most cases, product differentiation or superiority is short lived. This is where the concept of Positioning comes in.

Positioning is the battle for the mind of the consumer, based on the associations that they perceive the product to represent. It inherently becomes a more sustainable source of differentiation than product features. For instance, does that sticky black liquid that a company sells, stand for quenching thirst? Meal occasions? Youth, action and adventure? Happiness? Do you see a difference between the popular brands of cola’s based on their product features or their positioning?

Successfully positioning your product demands the following:

1. Differentiation: Is your positioning unique versus the competition, and diverts consumer attention towards a new solution for their need fulfilment?
2. Defensibility: Does your positioning associate exclusively with your product or brand? What prevents competitors from replicating your successful position – both in a legal and non-legal sense?
3. Distinctiveness: Can you build visual and non-visual cues for recognisability of your offer?
4. Communication: Do you have a clear short-term and long-term plan to communicate the positioning to the target audience(s) and build the desired perception? Do you have clear measures of the frequency and reach required for registering the position in the minds of the target audience(s)?
5. Consistency: Once you have defined the position, you need to be consistent at every touch point and over extended durations.
6. Relevance: Is the chosen position relevant to your selected target segments, based on the insights from the segmentation exercise?
7. Single Minded Proposition: Avoid the temptation to mean everything to everybody – far from garnering higher market share, it will dilute what your product stands for and alienate your target segments. A clear position conveys single minded benefits, and typically goes beyond functional benefits to emotional benefits where relevant.

Congratulations, you are now equipped to take a leading position in your chosen market!

About the author:

Ashish Kothari has over three decades of experience in Marketing & Sales in industry sectors ranging from transport fuels, lubricants, entertainment and FMCG. He has worked in global markets across 5 continents, and currently works as a Senior Vice President in India. The opinions expressed here are his own.