In today’s globalized world, businesses are finding it hard to survive for a long period because of competition: As a result, it is increasingly becoming important for businesses to find the best marketing strategy that will ensure a stable ROI and that will help a business achieve a competitive edge over its competitors.
A successful marketing strategy is enhanced through the use of Segmentation, Targeting and Positioning (STP): STP suggest that a market is made up homogeneous groups that have distinct needs and desires called segments: The purpose of segmentation is to concentrate the marketing energy force into those segments which the marketer believes that he can satisfy better than the competitors; he then position the products to the targeted markets. However, it is worth noting that the segments chosen should:
- Differ in ways that allows their size and accessibility to be easily measured.
- Be large enough to justify their separate targeting efforts.
- Be uniquely reachable through communication media and marketing channels.
- Be relatively stable and not diminishing over time.
Steps in STP:
- Identify the needs of the segments: Involves answering the questions on what are the needs of the customers.
- Develop segment profile: Use different segmentation variables to create segments e.g. age, gender, attitude.
- Develop a measure of segment attractiveness. This is done through evaluation of the descriptions of the segments that you have identified e.g. size, growth rates, brand loyalty etc., e.g. scoring.
- Select target segments: A business decides on which segments are most appropriate. This is based on firm’s strategy, attractiveness of the segments and competition.
- Develop a positioning for target segments: A firm identify how to position their products/brands in the target market. Positioning helps want to provide value to customers.
- Develop a marketing mix for each segment: What is the design? suitable price? distribution channel? promotional program?.
- Review performance: Revisit the performance of various products in order to reassess their view in the market and look for new opportunities.
Basis of market segmentation
Market segments can be based on:
- Demographic variables: Demographic variables may include age, gender, education and income.
- Geographic variables: Mostly based on the region, climate, population density and neighborhood.
- Psychographic variables: Include attitude, opinion, interest and values.
- Behavioral variables: Include purchase habits, purchase frequency, brand loyalty and channel usage.
After segmentation, a company need to direct marketing energy to particular consumers: The strategies employed can be in the basis of:
- Aggregation strategy: Where a company treats its total market as a single segment.
- Concentration strategy: Where a company focuses on one segment within the total market.
- Multiple segment strategy: Where a company focuses on two or more segments of potential customers.
A company then decide on how to position itself in the market; this can be in the basis of.
- Value proposition.
- Product design.
- Distribution channels.
- Segmenting and Targeting Your Market: Strategies and Limitations
2. The Marketing Process