Market Segmentation, Targeting, Positioning & Product Strategy

Posted on Mar 1, 2025 in Marketing

Market Segmentation, Targeting, and Positioning (STP)

Customer demands encompass needs, attitudes, behaviors, tastes, and interests. The segmentation process involves these steps:

  1. Select the Market: Eliminate markets that have no need for the product or are inappropriate for other reasons (Market definition, situational analysis, SWOT).
  2. Apply Segmentation Variables:
    • Behavioral: Analyze the specific value that a particular group expects from the offering, usage occasion and status, loyalty status, technological orientation.
    • Demographics
    • Geography
    • Psychography
  3. Target Market: The segment of the overall market that a company chooses to pursue. Each potential segment must be evaluated based upon fit with the firm’s:
    • Resources
    • Goals
    • Mission
    • Priorities

Assessing Segment Attractiveness

  • Market factors
  • Economic & Technological factors
  • Competitive factors
  • Business environment factors

Difference between B2B and B2C

  • B2B markets have multiple decision-makers.
  • B2B products and services are often more complex.
  • B2B decision-makers go through a more rational process.
  • The buying cycle is different.
  • B2B target audiences are smaller.
  • Personal relationships matter more.

Marketing Approaches

  • Concentrated Marketing
  • Undifferentiated Marketing
  • Differentiated Marketing

Positioning

Differentiation on the basis of attributes that customers find meaningful:

  • Conveys the value that the brand provides and sets the brand apart.
  • Sets the tone for the marketing plan.
  • Should be reevaluated periodically.

STP Process:

  • Market Segmentation:
    1. Identify bases for segmenting the market.
    2. Develop profiles of resulting segments.
  • Market Targeting:
    1. Develop measures of segment attractiveness.
    2. Select the target segment.
  • Market Positioning:
    1. Develop the positioning for each target segment.
    2. Develop marketing mix for each segment.

Product Strategy

“Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, people, places, organizations, and ideas.”

Planning for Services

Services differ from products in four important ways:

  • Intangibility
  • Variability
  • Inseparability
  • Perishability

Three Levels of Products

  1. Core Product: Consists of the problem-solving benefits that satisfy customer needs.
  2. Actual Product: Convert the core benefits into a physical or actual product with attributes to satisfy customer needs (names, parts, packaging, features, and style).
  3. Augmented Product: Includes after-sales service, installation, or warranty.

Product Attributes

  • Features: Specific attributes that enable a product or service to perform its function.
  • Benefits: Need-satisfaction outcomes.
  • Quality: How well the product satisfies customers.
  • Design: Includes “emotional quality” – the impact of design on how it makes the customer feel.
  • Packaging: Keeps products safe. Helps companies burnish their brand imagery and highlight points of differentiation.
  • Labeling: Communicates product contents, uses, and warnings.

The Product Life Cycle

  1. Introduction
  2. Growth
  3. Maturity
  4. Decline

Steps in the Product Development Process

  1. Idea generation
  2. Screening of new ideas
  3. Initial concept testing
  4. Business analysis
  5. Prototype design
  6. Market testing
  7. Commercialization
  8. Monitoring of customer reaction

Cannibalization: What occurs when sales of a new product “eat into” sales of one or more existing products.

Product Mix and Lines

  • Product Mix Width
  • Product Line Depth
  • Line Extension: Putting an established brand on a new product and adding it to an existing product line.
  • Brand Extension: Putting an established brand on a new product in a different category for a new customer segment.

Branding

Brand Equity: The extra value customers perceive that enhances their long-term loyalty to a brand.

  • Boosts customer lifetime value.
  • Can insulate a company against competitive threats.
  • Can help new products achieve acceptance.

Brands Should Be:

  • Recognizable and memorable
  • Meaningful and appealing
  • Capable of being legally protected
  • Suitable for international markets

Branding not only identifies a particular product but also sets it apart from the competition (both direct and indirect). It can make the product both distinctive and competitively superior.

Positioning: What the target group perceives about your brand relative to how they perceive the competition.