What Is Segmentation, Targeting and Positioning

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  • Topic: Marketing, Product differentiation, Strategic management
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Text 6. “STP (What is segmentation, targeting and positioning)?” Pre-reading discussion:
1. Why has segmentation become one of the leading concepts in marketing? 2. Can STP process be separated or is it a three-step inseparable process? 3. Can positioning be undertaken before targeting?

4. Do you know marketers well-known or even famous for their ideas about STP?

Smith (1957) provided an early definition of segmentation:

“Segmentation is based on the observation of evolution in demand and represents a more precise and rational adaptation of the product and the marketing effort to meet customer or user demands”.

Everyone is prepared to purchase products and services (depending on their financial status) as long as the products or services meet a particular need or desire. As Wright (2004) suggests, segmentation is thus the ability to 'divide the markets into groups, or clusters, of customers based upon realistic and meaningful criteria so as to offer clear, targeted benefits to every customer'. Kotler (2000) suggests that market segmentation is:

“The subdividing of a market into homogeneous (or similar) subsets of customers, where any subset may conceivably be selected as a target market to be reached with a distinct marketing mix.” The STP is schematic. This is based upon the work of Dibb (1998) but a feedback loop has been added. While STP is portrayed as top-down model, it is important to consider feedback to the point of origin. Information learnt in positioning a product or a service in the minds of consumers could provide valuable insight into the segmenting of particular groups.

It is clear from both Kotler and Wright's definitions that in order to deliver real value to both their customers and the organisation, marketers must seek effective and efficient segmentation. Figure 4.2 illustrates in broad terms how a mass market needs to be subdivided, and that this subdivision can be at many levels. The degree of subdivision will depend on the product or service on offer and the dynamic of the market itself. In order to gain a better understanding of the segmentation processes it is worth briefly considering the scope and scale of markets. These are outlined in Table 4. 3. They are broad definitions, but they are important in creating the platform for segmenting markets. The rationale for, and structure of, B2B and B2C segmented markets are different.

Figure 4.1

Source: adapted from Dibb (1998)
Figure 4.2

“A diagrammic representation of how mass market can be divided into several sections or segments”


Figure 4.3 “The Scope and Scale of Markets”

|Broad market type | | | |Description | |Undifferentiated mass |The organisation seeks to market a single mass-produced, mass-distributed and mass-promoted item to all buyers. A | |market |classic example of this is the launch of the Model T Ford car in 1908. Ford himself referred to it as 'the universal'| | |car (Ford and Crowther 1926), implying that it had to meet mass-market conditions, or in other words appeal to the | | |greater American population without any customization. However with increasing fragmentation of markets, distribution| | |channels and promotion, the 'one size fits all' approach is difficult to maintain within the majority of markets. | |Segments |Kotler (2000) suggests that this 'consists of a large identifiable...
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