The STP-Model – Segmentation, Targeting, Positioning done right

The STP model is a central concept in marketing that is absolute key to serving a market successfully. STP refers to three activities: segmentation, targeting, and positioning. Marketers segment markets and identify attractive segments to target, before developing suitable positioning strategies and allocating resources to prioritise marketing activities. The use of the STP model has become more and more popular because of the increasing prevalence of mature markets, greater diversity in customer needs, and the ability to reach niche segments.

Components of the STP Model

Segmentation

The STP model starts with dividing up the market, which is called market segmentation. Market segmentation refers to the division of a mass market into identifiable and distinct groups (segments). Each of these segments has common characteristics and needs, and displays similar responses to marketing actions. Various segmentation criteria can be used to divide up the market, including demographic, geographic, psychographic and behavioral variables.

Targeting

The second part of the STP model is targeting. This refers to determining which, if any, of the segments uncovered should be targeted and made the focus of a comprehensive marketing programme.

According to the popular “DAMP” approach to targeting, as defined by Philip Kotler (1984), for market segmentation to be effective, all segments must be:

• Distinct: each segment must clearly differ from other segments, which makes different marketing mixes necessary.
• Accessible: buyers must be able to be reached through appropriate promotional activities and distribution channels.
• Measurable: the segment must be easy to identify and measure.
• Profitable: the segment must be sufficiently large to provide a stream of constant future revenues and profits.

Positioning

The last part of the STP model is positioning, which means to ensure that a brand occupies the right spot in the mind of target consumers. Positioning is the means by which goods and services can be differentiated from one another and thereby give consumers a reason to buy. It encompasses two key elements. The first concerns the physical attributes, functionality, and capability that a brand offers, such as a car’s engine specification and design. The second element concerns the way in which a brand is communicated and how consumers perceive the brand relative to competing brands in the marketplace.

Benefits of using the STP Model

The key benefits of using the STP model include:

• enhancing a company’s competitive position
• providing direction and focus for marketing strategies (including targeted advertising, new product development, and brand differentiation) by allocating resources to target segments
• identifying market growth opportunities through identification of new customers or product uses
• effective and efficient matching of company resources to target market segments which promise the greatest return on marketing investment (ROMI)

Companies should thus always use the STP model as a starting point instead of simply developing a product and then finding the right customers to sell it to. By following the process of segmentation, targeting and positioning, a clear picture of the needs and wants of the customers is obtained, which serves as a foundation for developing suitable solutions to unique customer problems.