STP:
Segmentation, targeting, and positioning (STP) is a marketing strategy in that chronological order which makes your products/services more focused, relevant, and personalised for your customers. It is one of the marketing techniques that are most commonly in practice today. Simply said, STP is an approach in which you Segment your audience, Target the audience groups that are most appropriate for your product, and Position your product to reach your target segment successfully.
STEP Formula:
To summarise the concept, the acronym STEP is
"Segmentation + Targetting Equals Positioning"
Segmentation:
Segmentation is dividing a broad population into various customer segments based on specific variables and criteria. It can be done on multiple factors of our choice. Some of the main types of customer segmentation are:
1. Demographic Segmentation: It is audience based on age, gender, education level, occupation, gender, etc.
2. Geographic Segmentation: It is based on audience location such as city, state, region, or country. etc.,
3. Psychographic Segmentation: It is based on personality, lifestyle, social status, activities, interests, opinions, and attitudes
4. Behavioral Segmentation: It is based on consumer behaviours, patterns, usage level, brand loyalty and nature of the purchase.
Other types of segmentation can also be done based on family size, occupation, income, marital status, etc., Companies selling products like salt, sugar or generic items use mass marketing to sell their products to everyone. They don't use segmentation specifically.
Targeting:
Targeting is determining those specific segments you created during the segmentation which are your potential customers and can get desired conversions. The segment you are targetting should be growing and profitable mainly. Marketing and advertising efforts can be more concentrated and personalised to these segments.
The below criteria can be considered while targeting the segment:
1. Size: The segment should be large enough and should have active growth potential in future.
2. Accessibility: The segment chosen should be more accessible and reachable by sales and marketing teams
3. Profitability: The audience must be willing to spend money on your product so that customer acquisition cost (CAC) is low while generating high returns.
Positioning:
This is the final step in the STP framework. Positioning is enabling you to distinguish your goods or services in the eyes of your target market from those of the competition. It is basically the customer's perception of your company. It acts as the bridge that connects your product with the audience. You can position your product in several ways like economical, luxury/premium, eco-friendly or healthy product, etc., Positioning provides better value than competitors and communicate this differentiation in an effective way to the consumer.
Using STP one can improve customer engagement and reduce marketing costs
Example:
Let's say you start a company which sells plant-based meat and want to cater to different cities in India.
Segmentation:
You segment the population of the country into different categories based on their age say 18-29, 30-45, 46-60, 60+ (Demographic segmentation) as your product acts as a substitute for health-conscious people who are looking for actual meat alternatives and cruelty-free meat.
Targeting:
Once the segmentation is done, you conduct surveys and observe that people aged category 18-29 who are health conscious and who want to avoid actual meat are willing to buy vegan meat products. And also, people in the age category of 46-60 wanted to use vegan meat due to existing health issues. So both categories are your target segments where there are more potential customers. By targeting these segments you could engage more with customers.
Positioning: Once your segmentation and targeting are done, now you want people to see your brand as a plant-based and eco-friendly brand. So, this is your differentiator from your competitors and you want to communicate this proposition effectively to your customers
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