SEGMENTATION, TARGETING, AND POSITIONING 1

Segmentation, Targeting and Positioning

Reflection and Discussion Week 2

Dina Berhanu

Marketing Management (BADM 533-A03), University of the Cumberlands

Dr. Veronica Ramsundar

January 13, 2022

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Segmentation, Targeting and Positioning

The STP marketing model is also known as segmentation, targeting, and positioning.

The process of incorporating three different significant marketing approaches into one

becomes an essential tool used by marketers worldwide to analyze the product being offered,

how product benefits are communicated, and the significance to that specific group.

“Segmentation is the process of grouping customers with similar needs together and

then determining the characteristics of those customers” (Corporate Finance Institute, 2020).

Market segmentation is an essential aspect of marketing because it enables you to “define and

better understand your target audience and ideal customers.” “If you’re a marketer, this

allows you to identify the right market for your products and then target your marketing more

effectively” (D, 2021).

Mass marketing, Marketing segmentation, and one-to-one marketing are all ways to

approach the customer. Still, as studies have shown, there are advantages and disadvantages

to some of these approaches. Mass marketing can be identified as handling customers the

same way, which is easier for the company but has low customer satisfaction. One-to-one

marketing may sound attractive to the consumer, but not so much for the business itself as it

may not prove profitable. Lastly, market segmentation checks all the boxes both for the

consumer and the company as it is a well-balanced approach, which is mutually beneficial

(Iacobucci,2022).

The four bases or the standard way to segment consumers is by using demographic,

geographic, behavioral, and psychographic approaches. The demographic method is also

known as “the who,” which can be defined as personal characteristics such as age, gender,

income, education, marital status, and ethnicity. An example would be targeting potential

customers based on their income; that way, you can focus on individuals who can afford the

product or service. Geographic segment, also known as “the where,” are grouping customers
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according to their location. An example of this can be targeting customers in a specific state

within a certain mile radius who will be able to experience a promotional campaign in that

area. The psychographic segmentation is “the why,” which can better define your customer’s

personalities and interests, giving us a more profound and targeted view.

An example would be the social status of individuals who purchase high-end products

like Louis Vuitton, would be very different from those who are not brand conscious. Lastly,

behavioral segmentation is “the how,” which can be understood as to how and when

consumers decide to purchase. A great example will be if individuals plan to buy a car.

Expensive purchases require a lot of research and involvement.

Targeting is the selection process of which segments you’ve identified are most

appealing. The size of a segment is very critical because that will be the determining factor of

whether it should be pursued. There are two perspectives that marketers need to understand

when considering who to target. The first is the “top-down approach, which is the who are we

and what customers make sense for us,” while the other is the bottom-up, which focuses on

size and profitability” (Iacobucci, 2022, p.55). Targeting an individual segment allows

measurable strategies and results. To estimate the size of a target segment that we are focused

on, we need to multiply the target market by the penetration rate to get the market size. Then

the value we get from the market size will then be multiplied by the average value to get the

market value.

Positioning is the final and essential step of the STP model. It consists of designing

and pricing your product, then building a distribution channel to sell it, and communicating

this through a range of promotional activities and campaigns (Iacobucci,2022). On the other

hand, the positioning map provides a visual demonstration of how your product is positioned

in the market on a matrix with your competitors.

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In conclusion, the STP model helps companies effectively position their product or

service to target different consumers.

Question 1

The manufacturer wants to know the potential market for the number of pairs of

football pants sold in the city. The top-down approach would determine how many high

schools there are, which helps us figure out the total market you could theoretically sell. After

research, we have 50 high schools in Addis Ababa. An estimate of 75 players per school is

inclusive of both varsity and junior varsity. Fifty high schools will be multiplied by 90%,

giving us an estimate of 45 high schools that we can target. Assuming each player has two

pairs, that would be 150 pairs in total, resulting in 6,750. This assumption is based on if 90%

of the high schools were targeted, excluding variables such as your competitors.

Question 2

The firm should not change its positioning in the market because the numbers

mentioned are realistic and a good start for the manufacturer. The manufacturer's advantages

would ideally be the market research conducted to understand whom to target. On the other

hand, the disadvantage would be the other manufacturing companies who are also targeting

the same audience and the frequency of purchase from the high schools.

Question 2

A firm should only consider changing its positioning in the market if the process

doesn’t distinguish the firm from its competitors. When a company has strong brand

positioning, the business will ultimately succeed. The ability to project what you offer, the
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delivery, and what your consumers perceive is the ultimate goal of success in market

positioning.

Question 3

Market segmentation is important because it can help you define and better understand your

target market and consumers. It enables you to identify the right market for your product. In

other words, companies can learn more about their customer's needs and wants, allowing

them to find strategic ways to approach their customers through suitable mediums. If a

company does not understand its customer, its marketing strategy fails, and it can lose

millions on promotional campaigns that would not reach its target audience. All companies

require market segmentation to stay in business successfully.

To market alcohol, demographic segmentation is essential as you won't want to

market your product to anyone under 21. Due to legal regulations, companies need to be very

cautious of the demographic audience. Regarding the geographic segmentation, Toyota

targets Africa as a continent when it comes to vehicles because they are specifically built for

the rough landscapes. Nike utilizes psychographic segmentation to target consumers who

participate in physical activities and are generally passionate about sports. Lastly, Apple

dominates the market with brand loyalty on their behavioral segmentation, providing trust

and a set of shared beliefs.

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References

Corporate Finance Institute. (2020, June 26). Market Segmentation and Targeting.

https://corporatefinanceinstitute.com/resources/knowledge/strategy/market-segmentation-

and-targeting/

D. (2021, December 14). What is Market Segmentation? 4 Types & 5 Benefits. Lotame.

https://www.lotame.com/what-is-market-segmentation/#benefits

Iacobucci, D. (2022). Marketing Management. Cengage Learning (6th ed).