UNIT 2 (A)

STP
STP MODEL
 The Model
• The STP process is an important concept in the study and application of
marketing.
• The letters STP stand for segmentation, targeting, and positioning.
• The STP process demonstrates the links between an overall market and
how a company chooses to compete in that market.
• It is sometimes referred to as a process, with segmentation being
conducted first, then the selection of one or more target markets and then
finally the implementation of positioning.
• The goal of the STP process is to guide the organization to the
development and implementation of an appropriate marketing mix, as
highlighted in the diagram.
Step 1: Segment Your Market
• An organization, product or brand can't be all things to all people.
• This is why it needs to use market segmentation  to divide their customers
into groups of people with common characteristics and needs.
• This allows it to tailor their 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.
Step 2: Target Your Best Customers
• Next, we 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 the most ?
• 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?
• 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?
Step 3-Position Your Offering
• 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.
 Introduction to Segmentation
1. Mass Marketing:
• Unsegmented market in which products with mass appeal products
(aspirin, orange juice, soft drinks etc.) are offered to every customer
through mass retailers or independent stores, and promoted through
mass media.
• Mass Marketing was common in an era when differentiated marketing or
targeted marketing was NOT needed.
• Today, with so many brands that surround us, the brand needs to
connect with us on our level, so that we end up buying the brand.
• Even a small thing such as a Pen is branded (Parker, Mont Blanc) and it is
now being used as a gifting item or as an item which is bought when one
rises socially in their own life.
• This branding is possible only through differentiated marketing and
hence Mass marketing is seldom being used.
 Why Use of Mass Marketing has reduced?
1. Growth of Competition – There is so much noise out there that the
competition is left with no alternative but to differentiate to attract
customers..
2. Targeted segments give more profits – Over the years, it has been found
that targeted segments connect with the brand strongly and stay brand
loyal.. In contrast, if you use mass marketing and a competitor uses
targeted marketing, the competitor might get a niche but he will be the
King of that niche
3. Better ROI with market research – Market research has become really
simple over the years. A form on your website, or an emailer to your
existing clients with the CRM that you have, and half your market
research is done with low investment. Thus, you know what your
customers want in the future and what they are looking for in your brand
currently
4. Reduction in cost – As said before, Mass marketing is a scattergun
approach, only a few targets are hit. Naturally this involves a high cost and
expenditure in terms of buying media and executing the marketing plan.
Cost might not be necessarily low with a differentiated marketing effort,
but the conversions are high, therefore giving higher ROI in the end and
reducing the cost of advertising and marketing.
 Micro Marketing
1. Micromarketing is a marketing strategy in which advertising efforts are
focused on a small group of highly-targeted consumers.
2. Micromarketing requires a company to narrowly define a particular
audience by a particular characteristic, such as ZIP code or job title, and
tailor campaigns for that particular segment.
3. It can be a more expensive technique due to customization and lack of
an economy of scale.
4. 4 LEVELS OF MICRO MARKETING are:
• Niche
• Local area
• Individual
• Segment
 Niche Marketing
 Niche Marketing is a very concentrated form of marketing. Unlike some other
forms of marketing that target a broad range or large group of consumers, niche
marketing involves targeting a very specific, well defined segment of the market.
 Concentrating all marketing efforts on a small but specific and well defined
segment of the population.
 Niches do not 'exist' but are 'created' by identifying needs, wants, and
requirements that are being addressed poorly or not at all by other firms, and
developing and delivering goods or services to satisfy them.
 As a strategy, niche marketing is aimed at being a big fish in a small pond instead
of being a small fish in a big pond.
  For example, sports channels like STAR Sports, ESPN, STAR Cricket, and Fox
Sports target a niche of sports enthusiasts.
Indian Examples
 Local Area Marketing
• Tailoring brands and promotions to the needs and wants of local customer
groups- cities, neighborhoods, and even specific stores.
• Local marketing—also referred to as local store marketing or
neighborhood marketing—specifically targets the community around a
physical store or restaurant.
• Promotional messages are directed to the local population, rather than
the mass market.
• Local marketing is used primarily by small businesses—stores and
restaurants with a single location or outlet.
• Owners of franchised businesses may also employ local marketing to
promote their specific locations, supplementing the larger franchise’s
regional or national marketing campaigns (which promote the franchise’s
name and products, but not specific locations).
Indian Examples
 Individual Marketing
• Individual marketing is defined as tailoring products and marketing programs to
the needs and preferences of individual customers.
• In this marketing strategy, products are customized to suit each person. 
• Individual marketing also known as personalized marketing, involves –
1. flexibility in any organization
2. the ability of a brand to change its behavioral pattern for an individual
customer
3. to suit its marketing policy keeping in mind the wants of each individual
4. taking small baby steps along the way to make the consumer familiar with its
products
• In individual marketing, it is necessary to meet the demands of each person
successfully.
• Technology has made remarkable advances and has helped in the promotion of
individual marketing.
Indian Examples
 Segmentation
• The process of defining and subdividing a large homogenous market into
clearly identifiable segments having similar needs, wants, or demand
characteristics.
• Its objective is to design a marketing mix that precisely matches the
expectations of customers in the targeted segment.
• Few companies are big enough to supply the needs of an entire market;
most must breakdown the total demand into segments and choose those
that the company is best equipped to handle.
• Four basic factors that affect market segmentation are :
1. clear identification of the segment,
2. measurability of its effective size,
3. its accessibility through promotional efforts, and
4. its appropriateness to the policies and resources of the company.
 Importance of Segmentation
1) Customer needs
It is easier to understand the exact needs of the customer and target the
marketing strategy at a particular group. It is much easier and more
successful to create and promote specific and customised products and
services.
2) Profit Potential
Mass marketing is a strategy of the past. Target marketing and
positioning creates new potential customers and new ideas for new
products and services. Companies can create better products and hence
maximise their potential profit.
3) Growth
Segmenting the markets creates further opportunities for business
growth. Specific groups require specific products.
4. Retaining Customer
It is a great way to retain customers. Firms can establish a life-long
relationship with their consumers via formulating an effective market
segmenting strategy.
5. Right Target Market
The company’s resources are utilized for producing the right product for
the right customer.
6. Market Share
Segmenting business and consumer markets is important to maintain
existing market share and expand it. A successful company needs to gain
competitive advantage by looking closely at the specific needs of
customers and devising strategies to provide maximum benefit and value.
Types/Bases of Segmentation
 Demographic Segmentation
• Demographic segmentation divides the markets into groups based on
variables such as age, gender, family size, income, occupation, education,
religion, race and nationality.
• Demographic factors are the most popular bases for segmenting the
consumer group.
• One reason is that consumer needs, wants, and usage rates often vary
closely with the demographic variables.
• Moreover, demographic factors are easier to measure than most other
type of variables. Sub variables of this category :
1. Age:
• It is one of the most common demographic variables used to segment
markets. Some companies offer different products, or use different
marketing approaches for different age groups.
• For example, McDonald’s targets children, teens, adults and seniors with
different ads and media.
• Markets that are commonly segmented by age includes clothing, toys, music,
automobiles, soaps, shampoos and foods.
2. Gender:
• Gender segmentation is used in clothing, cosmetics and magazines.
3. Income:
• Markets are also segmented on the basis of income.
• Income is used to divide the markets because it influences the people’s product
purchase.
• It affects a consumer’s buying power and style of living. Income includes housing,
furniture, automobile, clothing, alcoholic, beverages, food, sporting goods, luxury
goods, financial services and travel.
4. Family cycle:
• Product needs vary according to age, number of persons in the household, marital
status, and number and age of children.
• These variables can be combined into a single variable called family life cycle.
• Housing, home appliances, furniture, food and automobile are few of the numerous
product markets segmented by the family cycle stages.
• Social class can be divided into upper class, middle class and lower class. Many
companies deal in clothing, home furnishing, leisure activities, design products and
services for specific social classes.
5. Occupation and Education
• Today, more people are going to school at all levels that even before. They
are also attending school for longer periods. In fact, education has become
a lifelong process.
• School and businesses offer courses not only to improve job skills but also
for self-improvement.
• The increased interest in education may lead many people to higher
paying job positions.
• This means they will have more discretionary income to spend on goods
and services.
• People in certain occupation form ideal segments for related goods and
services. the marketers of career related goods and services target
possible customers according to their occupations.
• Eg Sonalika Tractor for farmers , SSC coaching for students.
Examples
 Geographic Segmentation
1. Geographic segmentation refers to dividing a market into different
geographical units such as nations, states, regions, cities, or
neighborhoods.
2. For example, national newspapers are published and distributed to
different cities in different languages to cater to the needs of the
consumers.
3. Geographic variables such as climate, terrain, natural resources, and
population density also influence consumer product needs.
4. Companies may divide markets into regions because the differences in
geographic variables can cause consumer needs and wants to differ from
one region to another.
5. Banking needs of people in rural areas differ from those of urban areas.
Even within a city, a bank branch located in the northern part of the city
may attract more clients than a branch located in eastern part of the city.
Examples
 Behavioural Segmentation:
• In behavioural segmentation, buyers are divided into groups on the basis
of their knowledge of, attitude towards, use of, or response to a product.
• Behavioural segmentation includes segmentation on the basis of
occasions, user status, usage rate loyalty status, buyer-readiness stage and
attitude.
1. Occasion:
• Buyers can be distinguished according to the occasions when they
purchase a product, use a product, or develop a need to use a product. It
helps the firm expand the product usage.
• For example, Cadbury’s advertising to promote the product during
wedding season is an example of occasion segmentation.
2. User status:
• Sometimes the markets are segmented on the basis of user status, that is,
on the basis of non-user, ex-user, potential user, first-time user and regular
user of the product.
• Large companies usually target potential users, whereas smaller firms
focus on current users.
3. Usage rate:
• Markets can be distinguished on the basis of usage rate, that is, on the
basis of light, medium and heavy users.
• Heavy users are often a small percentage of the market, but account for a
high percentage of the total consumption.
• Marketers usually prefer to attract a heavy user rather than several light
users, and vary their promotional efforts accordingly.
4. Loyalty status:
• Buyers can be divided on the basis of their loyalty status—hardcore loyal
(con­sumer who buy one brand all the time), split loyal (consumers who
are loyal to two or three brands), shifting loyal (consumers who shift from
one brand to another), and switchers (consumers who show no loyalty to
any brand).
5. Benefits Sought:
• The major benefit sought in a product is used as the basis of classify
consumers. High quality, low price, good taste, speed, sex appeal are
examples of benefits.
For example, some air travellers prefer economy class (low price), while
others seek executive class (status and comfort).
5. Buyer readiness stage:
• The six psychological stages through which a person passes when deciding
to purchase a product.
• The six stages are awareness of the product, knowledge of what it does,
interest in the product, preference over competing products, conviction of
the product’s suitability, and purchase.
• Marketing campaigns exist in large part to move the target audience
through the buyer readiness stages.
Examples
 Psychographic Segmentation

• Psychographic segmentation is dividing your market based upon

consumer personality traits, values, attitudes, interests, and lifestyles.
• This Segmentation will allow you to better develop and market your
products because there will be a more precise match between the product
and each segment's needs and wants.
• People have different interests, attitudes, and traits.
• For example, some people really care about the environment, while other
people don't. Some people are very fitness and health conscious while
others are foodies. Some people take sports very seriously, while some
just want to have some fun on the weekends.
• Psychographic segmentation occurs when you break your market down
along these interests and attitudes so you can market the appropriate
product to each segment of the market.
• Here are some factors which help divide a population based on
psychographic segmentation :

1. PERSONALITY 
• End consumer's personalities may effect the purchase of your product or
service. Many companies try to develop a personality for their product
that compares to the personality of a large segment of the market (IE
their target market).
• Such product personalities are communicated to end consumers through
promotional campaigns.
• Many brands of perfumes, cigarettes, colognes, liquor, cars, and even
computers have been given personalities similar to target markets in
order to stimulate sales.
• Personality - Introvert, extravert, highly determined, authoritarian,
sociable, motivated, powerful, etc...
2. Lifestyle:
• It is the manner in which people live and spend their time and money.
• Lifestyle analysis provides marketers with a broad view of consumers
because it segments the markets into groups on the basis of activities,
interests, beliefs and opinions.
• Companies making cosmetics, alcoholic beverages and furniture’s segment
market according to the lifestyle.

3. SOCIAL CLASS 
• The social class in which consumers are grouped will dictate, in general,
the products and services they buy.
• Moreover, each social class has their own preference when purchasing,
cars, boats, clothes, education, homes, furniture, reading materials and
the list goes on and on.
 Targeting
• Target Marketing involves breaking a market into segments and then
concentrating the marketing efforts on one or a few key segments
consisting of the customers whose needs and desires most closely match
an organization's product or service offerings.
• A target market refers to a group of individuals who are inclined towards
similar products and respond to similar marketing techniques and
promotional schemes.
•  It can be the key to attracting new business, increasing sales, and making
the business a success.
• The beauty of target marketing is that by aiming marketing efforts at
specific groups of consumers it makes the promotion, pricing, and
distribution of products and/or services easier and more cost-effective.
 Examples
• Kellogg’s K Special mainly targets individuals who want to cut down on
their calorie intake. The target market in such a case would be individuals
who are obese. The strategies designed to promote K Special would not be
the same in case of any other brand say Complan or Boost which majorly
cater to teenagers and kids to help them in their overall development. The
target market for Kellogg’s K Special would absolutely be different from
Boost or Complan.
• The target market for Zodiac Clothing Company Limited or Louis Philippe
would be the office goers whereas the target market for Levi’s would be
the school and college kids.
 Positioning
• The process of creating an image of a product in the minds of the consumers is
called as positioning.
• Positioning helps to create first impression of brands in the minds of target
audience.
• In simpler words positioning helps in creating a perception of a product or service
amongst the consumers.
• Example
 The brand “Bisleri” stands for purity.
 The brand “Ceat Tyre” stands for better grip.
•  Positioning defines where your product (item or service) stands in relation to
others offering similar products and services in the marketplace as well as the mind
of the consumer. 
•  Good positioning makes a product unique and makes the users consider using it as
a distinct benefit to them. A good position gives the product a USP (Unique selling
proposition). 
• In a market place cluttered with lots of products and brands offering
similar benefits, a good positioning makes a brand or product stand out
from the rest, confers it the ability to charge a higher price and ward off
competition from the others.
• A good position in the market also allows a product and its company to
ride out bad times more easily.
• A good position is also one which allows flexibility to the brand or product
in extensions, changes, distribution and advertising. 
 Benefits of Product Positioning

1. To Make Entire Organisation Market-oriented:

• Product positioning is a part of the broader marketing philosophy. It
concerns with identifying superior aspects of product and matching them
with consumers more effectively than competitions. This philosophy
makes the entire organisation market oriented.
2. To Cope with Market Changes:
• Once the product is positioned successfully doesn’t mean the task of
manager is over. He has to constantly watch the market. As per new
developments in the market place, new competitive advantages should be
identified, discovered or developed to suit the changing expectations of
the market. It makes the manager active, alert and dynamic.
3. To Meet Expectation of Buyers:
• Generally, the advantages to be communicated are decided on the basis of
expectations of the target buyers. So, product positioning can help realize
consumers’ expectations.
4. To Promote Consumer Goodwill and Loyalty:
• Systematic product positioning reinforces the company’s name, its
product and brand. It popularizes the brand. The company can create
goodwill and can win customer loyalty.
5. To Design Promotional Strategy:
• More meaningful promotional programme can be designed. Based on
what advantages are to be communicated, appropriate means are
selected to promote the product.
6. To Win Attention and Interest of Consumers:
• Product positioning signifies those advantages that are significant to
consumers. When such benefits are promoted through suitable means of
advertising, it definitely catches the interest and attention of consumers.
7. To Attract Different Types of Consumers:
• Consumers differ in terms of their expectations from the product. Some
want durability; some want unique features; some want novelty; some
wants safety; some want low price; and so on. A company, by promoting
different types of competitive advantages, can attract different types of
buyers.
8. To Face Competition:
• This is the fundamental use of product positioning. Company can respond
strongly to the competitors. It can improve its competitive strength.
9. To Introduce New Product Successfully:
• Product positioning can assist a company in introducing a new product in
the market. It can position new and superior advantages of the product
and can penetrate the market easily.
 Basis of Positioning
POSITIONING DESCRIPTION
CATEGORY
By product attribute A product attribute is a specific feature or benefit of the product.
Positioning in this way focuses on one or two of the product’s best
features/benefits, relative to the competitive offerings.
For example, Mahindra & Mahindra Scorpio was positioned as both
reliable and trendy MUV.
By user This positioning approach highlights the user (the ideal or representative
target consumer) and suggests that the product is the ideal solution for
that type of person and may even contribute to their social self-identity.
Example-Cosmetics brands like Revlon, L’Oreal or Lakme position
themselves targeting fashion-conscious women.
By product class This positioning strategy tends to take a leadership position in the overall
market. Statements with the general message of “we are the best in our
field” are common.
For example, Nescafe Bru positioned itself as instant coffee.
 POSITIONING CATEGORY DESCRIPTION

Against competition With this approach the firm would directly

compare (or sometimes just imply), a
comparison against certain well-known
competitors (but not generally not the whole
product class as above).

Example-Pepsi v/s Coke

By quality or value Some firms will position products based on
relative high quality, or based on the claim that
they represent significant value.

By using a combination of the above options
Some products/brands are positioned using a
combination of the above positioning options.
However, care needs to be taken not to clutter
and confuse the message by trying to connect
with too many competitive advantages.
 Product Differentiation
• Product differentiation is a marketing strategy whereby businesses
attempt to make their product unique to stand out from competitors.
• Businesses do this to gain an edge in industries where multiple
competitors produce similar products.
• There are other methods businesses can employ to gain that edge, like
pursuing a low-cost strategy and advertising, but while those are
legitimate marketing strategies, they are different from product
differentiation.
• Product differentiation means that some feature, physical attribute, or
substantive difference exists between a product and all other alternatives.
• Product differentiation is simply the characteristics that define your
product and make it unique to customers. You may hear it called the
unique selling proposition or abbreviated as the USP.
 Ways to achieve product differentiation.

1. Form –  A product can be differentiated based on the form of the

product. The physical structure, size and shape of the product can be
used to differentiate it from others.
• Take an example of any medicine. A medicine can be differentiated from
that of its competition by the means of its potency, its usability, the way
it can be taken (intravenous or oral) so on and so forth. Thus the way the
product is made can be a type of product differentiation.
2. Features –  Any additional features being offered on top of the product
becomes a plus point for the customer.
• The best example for differentiation based on features is Mobile phones,
handsets or any technology product. They are differentiated mainly by
the number of customizations or the additional features that they offer.
Thus features can be a form of Product differentiation.
3. Performance quality –  Why is a BMW costlier than other cars? Because it has
superior performance. Why is a formula 1 racing car costlier than a BMW?
Because an F1 car has an even higher performance as compared to a BMW.
• Thus performance increases price. Similarly, competition can present a product
which does not perform as well but is available at half the price. Naturally, some
of the customers might shift to the competition. This is not true for all
customers. Some customers will be looking out for the superior quality products
only. Thus one can do product differentiation on the basis of the performance of
your product.

4. Durability –  In the tough and competitive laptop market, there are some
laptops which stand out. These are the ones made for mountaineers and
harsh environment researcher. Their cost is very high as compared to normal
laptops. But by producing such a product, they have completely differentiated
themselves from the market.
• Kitchen equipment’s, vehicles, sometimes even the shoes you wear, people
want things which are durable and can be used for a long term.
5. Reliability: Volvo manufactures the most safe and reliable vehicles in the
world. That is why their buses are so famous. Therefore it is not surprising
that Volvo also sells at a premium. This is because, here the product
differentiation is on the basis of Reliability, one of the most valued assets a
brand can have.
6. Style: Some good brands are- Harley Davidson. Gucci. Tommy hilfiger,
Lamborghini,Ferrari,Longines,Omega. Each brand has a style of its own
and that is why each brand has a differentiation of its own. 
7. Customer service- Your product may be similar to others in many ways.
However, you can differentiate your whole offering — and build your
competitive advantage — by assembling a stand-out support team and
earning a reputation for being ultra-responsive to customers' needs.
8. Price-Is your product priced lower or higher than your competitors'
products and other products you offer? Your price should reflect the
overall value that you are offering in the product.
• For example, you can justify a higher price if customers recognize that
the product offers unsurpassed quality. This is how a luxury brand like
Ferrari can command a top asking price for their cars. Ask too low of a
price, however, and customers may not see your product as truly