The letters "STP" in STP marketing stand for segmentation, targeting and positioning. The STP method is a strategic concept in the discipline and application of marketing. The STP strategy shows the connections between the marketplace and the methods a company selects to contend in that marketplace. The objective of the STP method is to help the company in its creation and execution of an advantageous marketing mix by learning precisely which benefits the product provides and which customers desire those benefits.
Think about your product or service for a moment. Who's your target market? You may be tempted to answer "everyone" because doesn't every company want everyone to buy their product? But the reality is, you can't be all things to all people. It's simply not possible to offer everything that everyone wants all the time. Your goal, then, is to get really specific about who your customers are and how you can serve their needs. That's where STP marketing comes in.
TL;DR (Too Long; Didn't Read)
STP stands for segmentation, targeting and positioning. As a marketing strategy, it plays an important role in aligning your products to the right customers.
What's STP Marketing?
STP is a three-step marketing model that helps you identify your most valuable type of customer and then develop strategies for marketing your products directly to that group. STP stands for:
- Segment the market.
- Target your ideal customers.
- Position your offering to the needs of the target group.
The model is useful because you can't sell your products to everyone. The same people who choose to eat at a fast-food joint, for example, aren't the same people who choose to eat at a gourmet burger restaurant, even though the product offering is essentially the same. Businesses who know their target customer tend to be much more profitable since they can provide the exact solutions and messaging the target group wants to hear.
Examples of the STP Method in Marketing
Global hospitality giant Marriott operates around 30 hotel brands, and each one is designed and positioned to meet the unique needs of a specific group. TownePlace Suites, for example, appeals to business and leisure travelers who need a functional space for living and working during an extended stay, Courtyard provides no-frills, no-nonsense accommodation for the transient business traveler and Ritz-Carlton targets guests who are willing to pay a premium for luxury.
As you might imagine, Marriott doesn't communicate the same marketing message to all its guests. Each hotel is designed, decorated, located and positioned to appeal to the unique needs of a specific customer group.
What's Target Market Segmentation?
Segmentation involves finding out what types of customers with different needs exist in the market. In the sunglasses market, for example, some customers demand style and are willing to pay for brand names, while others are concerned about eye health and product durability. If you were segmenting the sunglasses market, you'd need to come up with some variables that would differentiate these different consumer groups. Generally, you're looking at the following types of segmentation:
- Demographic variables such as age, gender, income, education, location, ethnicity, language and family size.
- Psychographic variables such as lifestyle, social status and personality type – does this consumer want to fit in or stand out from the crowd?
- Behavioral variables – is the consumer a light, medium or heavy user of the product; also, does she stick with her preferred brand even when a competing one is on sale?
- Distribution variables such as how the consumer buys the product: in store, online or through a subscription service?
You can also segment on product-specific variables, which is what Marriott does with its 30 specific hotel brands.
Once you've identified the customer segments, you should see fairly quickly that not every segment is equally attractive to your business. If you made budget sunglasses, for example, you wouldn't be interested in the "cool crowd" who only wanted to be seen in the latest designer brands. Targeting, the second phase of STP, is the act of figuring out which customer segment it's in your best interest to serve. The choice will depend on several factors:
- How well are the needs of this group being met already? It will be much harder to appeal to a group that's already being well served by your competitors.
- How large is the group? The market must be large enough to warrant segmenting. Your business won't be sustainable if you slice an already-small customer base into something even smaller since you're not allowing any room for growth.
- Do you have strengths as a business that will help you appeal to one particular consumer segment over another? For example, do you already have a reputation in a particular market?
- How accessible is the target group? Realistically, how much will you have to spend on marketing and advertising to reach this customer segment? Anticipated profits must exceed the costs involved or you'll be putting yourself out of business.
There are no hard-and-fast rules here. For example, you can concentrate on only one narrow customer segment and pursue the strategy of a niche business. Or, you can target two or three of the most profitable groups based on the size of the market and projected revenues. It's up to you.
Positioning is the last and some say the hardest part of STP analysis since you now have to figure out the best ways to brand yourself to appeal to the target customer. The goal is to create a clear and positive image in the minds of consumers as to what the product is all about, its value and its usefulness. For example, you may position your sunglasses as reliable and long-lasting or you may position them as a luxury status symbol. A burger joint may position itself as a provider of cheap and quick lunches or it may position itself as a source of premium upscale meals.
The position you adopt will stay with you for the life of the product. It lays the foundation for your value proposition statement that you'll use to develop the right marketing tactics for reinforcing the customer's perception of your brand.
How Do You Create a Positioning Map?
One way to approach positioning is through a positioning map. This document is a visual tool that shows how each customer segment perceives your brand versus those of your competitors. To create the map, begin by gathering all the information you have about the market, for example:
- What's important to your target market? What are their pain points? Which features of your brand or product press all their hot buttons? Which features are they prepared to pay for?
- How do your customers rate your product versus the products of your competitors? What are the results of your market research?
- Who are your competitors? What do customers say about them?
The next step is to plot two key product benefits on the horizontal and vertical axes of a graph. These benefits are based on what's important to the consumer. If you were selling a new energy snack bar, for example, you might label your horizontal axis low price-high price and your vertical axis high protein-low protein. Now, place all of your competitors on the map based on the benefits their competing products offer. So, if competitor A sold a high-price, low-protein snack, you'd place it in the bottom right quadrant of the graph. If competitor B sold a low-price, low-protein snack, you'd place it in the bottom left quadrant.
With all the competitors mapped, you should be able to see where there are gaps in the market. In this example, you may discover that you can differentiate your product by having both the lowest price and the highest protein bar. Your positioning might be, "The bar with the highest protein at the lowest price on the market."