STP Overview

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STP Overview

• Segmentation
• Identify segmentation bases (why consumers
  differ)
• Indentify the profiles of segments (how to reach
  them)
• Targeting
• Evaluate attractiveness of each segment
• Select target segments
• Positioning
• Identify possible positioning concepts for target
  segments
• Select, develop and communicate the chosen
  concepts

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How STP Adds Value To A Firm?
Segmentation Identify segments
Targeting Select segments
Positioning Create competitive advantage
Marketing resources are focused to better meet
customers needs and deliver more value to them
Customers develop preference for brands that
better meet their needs and deliver more value
Customers become brand/supplier loyal, repeat
purchase, communicate favorable experiences
Brand/supplier loyalty leads to increased market
share and creates a barrier to competition
Fewer marketing resources needed over time to
maintain share due to brand or supplier loyalty
Profitability (value to the firm) increases
3
Objectives of Segmentation

• Determine how much to charge (price
  discrimination) tickets, laptops, books...
• price sensitivity
• Design advertising images
• attitudes, lifestyles, media habits(cluster
  analysis)
• Identify targets for a direct promotion program
• choice probability(choice model)
• Help the design of new products cell phones
• utilities for different features/functions
  (conjoint analysis)

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Basic Segmentation Concepts

• Market Segmentation
• Sub-divide a market into distinct groups of
  homogenous customers
• Segments
• Members are different between segments but
  similar within segments
• How to define similarity?
• Segmentation Marketing
• Differentiate your product and marketing efforts
  to meet the needs of different segments

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Market Implications

• A market consists of consumers with similar
  needs, and products that can potentially satisfy
  these needs.
• The common needs may be satisfied by similar or
  dissimilar technologies, or have different
  solutions.
• The key is to identify the boundary market -gt
  submarkets -gt segments -gt individuals
• The traditional idea is that there is more
  competition within than across markets.

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Definition I (Electronic Typewriter)

• 1980 1981 1982 1983 1984 1985
• Shipments
• A (us) 403,027 495,192 548,905 550,351 541,388 515
  ,000B 369,916 388,520 349,396 323,005 342,197 297
  ,000Other 367,057 324,010 343,885 370,374 202,495
  129,070Total 1,140,000 1,207,722 1,242,186 1,243
  ,730 1,086,080 941,070
• Market Shares ()
• A (us) 35.4 41.0 44.2 44.2 49.8 54.7B 32.4 32.2 2
  8.1 26.0 31.5 31.6Other 32.2 26.8 27.7 29.8 18.6
  13.7

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Definition II (Word Processor)
1980 1981 1982 1983 1984 1985
Shipments A (us) 403,027 495,192 548,905 550,
351 541,388 515,000B 369,916 388,520 349,396 323,
005 342,197 297,000Other Electronic 367,057 324,0
10 343,885 370,374 202,495 129,070 Electronic
WordProcessors 60,040 112,220 209,800 392,352 733
,699 1,372,016 Total 1,200,040 1,319,942 1,451,986
1,636,082 1,819,778 2,313,086 Market Shares ()
A (us) 33.6 37.5 37.8 33.6 29.8 22.3B 30.8 29.
4 24.1 19.7 18.8 12.8Other Electronic
30.6 24.5 23.7 22.6 11.1 5.6 Electronic
WordProcessors 5.0 8.5 14.4 24.0 40.3 59.3
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Define Markets

• Customer Behavior
• Demand cross-elasticity
• Similarities in behavior
• Brand/product switching (flight vs. train)
• Perception/Judgment
• Perceptual mapping (chapter 4)
• Customer judgment of substitutability

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Define Markets by Brand Switching

• Current
  Purchase Occasion
• Diet Diet Diet Coke Coke Pepsi Pepsi Spr
  ite Sprite Total
• Coke 53 9 27 4 5 2 100Last Diet
  Coke 12 61 4 15 2 5 100Purchase Pepsi 24
  3 58 9 5 1 100Occasion Diet
  Pepsi 4 14 11 63 2 6 100 Sprite 21 2 17
  3 52 6 100 Diet Sprite 2 15 2 12 7 61
  100

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Segmentation Concepts

• Bases
• Latent customer characteristics that can explain
  why segments are different (e.g., needs, wants,
  attitudes, preferences, decision processes,
  behaviors, etc)
• Descriptors
• Addressable customer characteristics that help us
  find and reach the segments
• Correlate with the base variables
• Business markets
• Industry, size, location, organizational
  structure
• Consumer markets
• Age/income, education, profession, life
  styles, media habits

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Steps in Segmentation

• 1. Articulate a strategic rationale for
  segmentation (i.e., why are we segmenting this
  market?).
• 2. Select a set of base segmentation variables
  most useful for achieving the strategic goals.
• 3. Select a method (criteria) for aggregating (or
  disaggregating) customers into segments.
• 4. Group customers into a particular segment.
• 5. Choose the segments that will best serve the
  firms strategy, given its capabilities and the
  likely reactions of competitors.

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Segmentation Variable Checklist
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Segmentation in Action

• A Marriott Hotel used to be a Marriott Hotel An
  upscale hotel catering to business people,
  pleasure seekers and international and group
  travelers. Today, besides the Marriott Hotels
  (the companys major business), there are
  Marriott Suites, Residence Inns, Courtyards by
  Marriott and Fairfield Innseach serving a
  smaller, targeted segment of the market.
• Lenneman and Stanton, Mining forNiches,
  Business Horizons.

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Relevant Segmentation Descriptor
Variable A Climatic Region 1. Snow Belt
2. Moderate Belt 3. Sun Belt
Number of Customers
Segment 1
Segment 2
Segment 3
0
100
Base Likelihood of Purchasing Solar Water Heater
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Irrelevant Segmentation Descriptor
Variable B Education 1. Low Education
2. Moderate Education 3. High Education
Number of Customers
Segment 1
Segment 2
Segment 3
0
100
Base Likelihood of Purchasing Solar Water Heater
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Segmentation Carpet Fibers
Perceptions/Ratings for one respondent Customer
Values
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Strength (Importance)
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Distance between segments
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A,B,C,D Location of segment
centers. Typical members A schools B light
commercial C outdoorcarpeting D health
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Water Resistance (Importance)
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Targeting Carpet Fibers
Segment(s) to serve
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Strength(Importance)
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Water Resistance (Importance)
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Positioning Carpet Fibers
Product Positioning
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Comp 1
Comp 2
Strength(Importance)
Water Resistance (Importance)
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A Note on Positioning

• Positioning involves designing an offering so
  that the target segment members perceive it in a
  distinct and valued way relative to competitors.
• Three ways to position an offering
• 1.Unique (Only product/service with XXX)
• 2.Difference (More than twice the feature vs.
  competitor)
• 3.Similarities (Same functionality as
  competitor lower price)
• What are you telling your targeted segments?