Gone are the days when businesses assumed that all their potential customers had similar needs and implemented a one-size-fits-all marketing approach. Today’s marketplace is defined by fierce competition where customers are being bombarded with countless marketing messages. As a result, businesses are forced to adapt and evolve their strategies to stay ahead in the digital realm.
So, how can businesses develop a robust marketing strategy that enables them to reach the right audience and deliver value proposals?
The answer lies in Implementing STP marketing.
It is a robust framework that helps businesses define various customer segments, select target audiences, and strategically position their brand. Instead of catering to everyone, STP marketing ensures that brands focus on the groups most likely to convert, maximising their impact.
In this blog, we’ll delve into the concept of STP marketing and discuss each element of it in detail. By the end, you will also understand how implementing this framework into your businesses can yield high revenue.
So, let’s get started!
2. What is STP Marketing Model?
The STP marketing model, also known as Segmentation, Targeting, and Positioning, is strategic framework businesses use to identify the needs of their target audience effectively. This three-STEP model enables them to tailor their marketing efforts to specific segments and position their brand in a way that resonates with their potential customers.
Additionally, STP marketing is a customer-focused marketing that enables businesses to create a laser-focused and personalised marketing strategy that enhances customer engagement and ultimately drives higher revenue.
Now that we have some context, let’s take a closer look at Segmentation, Targeting & Positioning model.
3. Understanding Segmentation, Targeting, & Positioning with Examples
STP marketing helps businesses gain a better understanding of who their ideal customers are, how to reach them and align with their needs.
The STEP Formula:
Segmentation + Targeting Equals Positioning
Let’s take a closer look at these three elements with examples –
3.1 Segmentation
According to Notify Visitors, “Segmentation makes firms 60% more likely to understand customers’ challenges and concerns and 130% more likely to know their intentions.”
Market segmentation is the first step in the STP marketing model, which plays a significant role in crafting custom messaging. It is the process of segregating a broad market into distinct and homogenous segments by identifying the group of consumers with similar needs, preferences, behaviour, and characteristics.
Here are five common types of audience segmentation:
1. Demographic Segmentation:
This type of segmentation helps in understanding essential characteristics of the target audience, such as – gender, age, income, occupation, education, and family size. Hence, businesses can create the right message and allocate marketing resources based on the above factors. For example, a luxury car-selling company will segment the target audience based on their income level and show their ads to those who fall in the high-income bracket.
2. Firmographic Segmentation:
This segmentation involves categorising organisations based on industry, company size, location, revenue, number of employees, and ownership structure. For instance, a work management software firm may focus on two segments: multinational corporations and medium-scale businesses with 500+ employees. This approach enables them to tailor their software offerings and promotional messages accordingly.
3. Geographic Segmentation:
It involves dividing the target market based on geographical factors such as location, climate, population density, or regional preferences. This strategy is more helpful for larger companies looking to expand beyond their city or country. For example, a grocery-delivery company can group its audience based on location and show its ads to the urban population living in megacities and preferring online shopping.
4. Behavioural Segmentation:
This segmentation categorises the target market based on how they interact with the business or their product. It involves dividing customers based on their opinion and knowledge of your brand/product, product usage, and benefits sought. For example, a skincare brand can segregate customers based on benefits they are looking for – oily skin fix, dark circles removal, acne & blemishes removal, suitable for sensitive skin, etc. and accordingly promote their products.
5. Psychographic Segmentation:
It is a research methodology that involves studying consumer behaviour and categorising the market based on their lifestyles, personalities, values, and interests. It determines the motivations behind buying instead of tracking the buying behaviour itself. For example, a coffee company can segment its customers based on their lifestyle and daily habits. They can promote metabolism-boosting coffee products to active and health-conscious people.
Once you have identified market segments, the next step is to evaluate and select the most ideal segments to target. Let’s understand the audience targeting in detail.
3.2 Targeting
As per the study by Lyon University, “Targeted ads can help businesses increase the Click-Through-Rates (CTR) and enhance their top and bottom line.”
The next step in the STP marketing model is targeting. It is a process of identifying and selecting a specific segment or group of individuals most likely to be interested in products or services. These individuals or target audiences are analysed based on their size, profitability, growth potential, and compatibility with the business’s offerings.
The four main types of market targeting include:
1. Undifferentiated Targeting:
Undifferentiated targeting, or mass targeting, is a strategy where businesses create a single marketing mix that appeals to a broad audience without any specific segmentation. This approach assumes that all customers have similar preferences and needs; thus, the same marketing message will resonate with everyone. For example, a healthcare company can utilise undifferentiated targeting to build awareness, engage patients and connect with as many people as possible.
2. Differentiated Targeting:
In this case, businesses concentrate their resources on a niche segment they believe can convert instead of targeting a broad market or multiple segments. This strategy allows companies to deeply understand and cater to the needs of a specific group, potentially gaining a competitive advantage by becoming the go-to brand for that segment. For example, an IT company offering web and app development services can concentrate its offerings on e-commerce businesses and target them separately using different marketing initiatives.
3. Concentrated or Focused Targeting:
In this case, businesses concentrate their resources on a niche segment they believe can convert instead of targeting a broad market or multiple segments. This strategy allows companies to deeply understand and cater to the needs of a specific group, potentially gaining a competitive advantage by becoming the go-to brand for that segment. For example, an IT company offering web and app development services can concentrate its offerings on e-commerce businesses and target them separately using different marketing initiatives.
4. Customised Targeting:
Customised targeting is also known as one-to-one marketing or individual targeting. It involves gathering detailed data about prospects and using that information to create highly personalised recommendations and offers. This type of targeting aims to build long-term relationships by providing tailored solutions and enhancing customer experiences. For example, a maternity clothing brand will place ads and send emails to expected moms and new mothers who are looking for stylish and comfortable maternity wear.
Let’s dive deep into the final stage of the STP model and understand how the next step can help brands to position their product or services before prospective customers.
3.3 Positioning
The final stage of the STP model, positioning, involves establishing a unique and favourable impression of a brand or product in the target audience’s minds. It helps businesses create a value proposition that sets their brand apart from competitors and aligns with potential buyers.
“A successful positioning strategy helps shape customer perception, ultimately influencing their purchasing decisions and overall brand preference.”
Here are the different types of positioning:
1. Market Positioning:
It identifies a company’s unique space in the overall market and examines factors such as target audience and customer perceptions. It also includes understanding market dynamics, customer preferences, and requirements to effectively meet their needs and gain a competitive edge. For example, a retail brand- A, can position itself as a one-stop destination to buy all high-quality household necessities at low prices.
2. Product Positioning:
It incorporates factors such as product features, benefits, and target audience. It also highlights the unique attributes and benefits of the product to position it as the ideal solution for a particular customer segment. For example, an automotive company manufacturing electric cars can position its product as more environment friendly than petrol/diesel vehicles.
3. Brand Positioning:
In this type of positioning, businesses establish unique and favourable identities in the minds of consumers. Here, businesses craft compelling stories to position themselves as distinctive, trustworthy, and relevant to their target audience. For example, a cab-service provider company can position its brand as a safe, convenient, and affordable transportation solution, establishing the company as a go-to choice for reliable rides.
4. Price Positioning:
Price positioning analyses factors such as pricing levels, discounts, and perceived value for money. It ensures that the product’s cost aligns with its quality, hence attracting customers. For example, a luxury fashion brand can position itself as an exclusive and premium brand, reflecting the high perceived value of its product.
5. Competitor-Based Positioning:
Competitor-based positioning leverages market research to highlight the advantages, points of differentiation, or USPs that set the brand apart. For example, an ice cream brand can differ itself from its competitors by offering maximum and unique flavours for health-conscious consumers, such as sugar-free ice creams.
Now that you understand every element of STP marketing, let’s explore the benefits this marketing model offers. Read more –
4. Benefits of the STP Marketing Model
Here are the key advantages of implementing of STP marketing model:
4.1 Provides a Better Understanding of Customers
“Segmentation makes firms 60% more likely to understand customers.” (Source: Business Wire)
STP marketing enables businesses to segment their target market based on specific demographics, psychographics, behaviour, and more. This offers a deeper understanding of customer needs, preferences, and pain points, which further helps in boosting engagement and improving customer experience.
4.2 Promotes Hyper-personalised Messaging
STP marketing provides insights into the unique characteristics and preferences of different audience segments, which enables the creation of highly targeted and personalised marketing plan that resonates with them. Additionally, this custom messaging and email marketing campaign increases the chances of capturing customers’ attention, leading to higher conversion rates.
4.3 Optimizes Marketing Efforts and Budget
By identifying and prioritizing the most promising customer segments, businesses can focus their marketing efforts and budget on prospective customers with the highest conversion potential. This resource optimisation helps companies achieve better results with limited marketing budgets.
4.4 Avoids Unnecessary Spamming with Emails and Advertisements
Within the STP model, businesses segment their audience and analyse the specific challenges each segment faces. This approach helps them avoid spamming users with generic marketing messages. Instead, they can deliver targeted communications to the right customers at the right time.
4.5. Expands Market Reach and Streamlines Targeting
According to Canon’s case study, “Segmentation helps businesses access new markets and seize unconventional opportunities.”
Through audience segmentation, businesses can identify and reach an untapped market they may not have previously considered. Additionally, with the precise knowledge of audience groups, companies can evaluate the potential results drawn from different segments and streamline targeting methods.
4.6. Facilitates Data-driven Decision Making
STP marketing relies on gathering and analysing data that informs you about customers’ interests. This helps make informed decisions about market opportunities, product development, and campaign strategies, allowing for more effective and targeted marketing efforts.
4.7. Fosters Innovation in Product/Service Offerings
By better understanding customer segments, businesses can identify opportunities for innovation. This enables organisations to develop offerings that address customers’ unique requirements and preferences. Moreover, the customer-centric approach to innovation helps businesses stay ahead of the competition.
4.8 Improves Productivity of the Team and Boosts ROI
The DMA National Client Email Report suggests that “77% of ROI comes from segmented, targeted, and triggered campaigns.”
STP marketing help streamline the marketing process by focusing on specific customer segments. Hence, businesses can achieve higher conversion rates and ROI by delivering personalised messages and offerings to the right customers and achieve overall success.
In short, the STP marketing model helps you associate with your customer and develop solutions that they desire. However, you must know how to integrate the STP model into your marketing strategy to leverage the benefits. Let us know in detail.
5. How to Create STP Model-based Marketing Strategy for Business Growth?
Creating an STP (Segmentation, Targeting, Positioning) marketing strategy involves several key steps to effectively reach and engage your target audience. Here is an explanation of each step:
5.1 Define the Target Market
While defining your target market, you can divide it into three significant subsets – TAM (Total Addressable Market or Total Available Market), SAM (Serviceable Addressable Market), and SOM (Serviceable Obtainable Market or Share of Market). Let’s understand each of these markets in detail –
- TAM or Total Addressable Market
How big is the total market for a particular product or service?
TAM shows the total market demand for a particular product or service. It denotes the highest potential revenue a business can attain by capturing 100% of the market.
- SAM or Serviceable Addressable Market
How big is the market that you can reach?
SAM is the percentage of the Total Addressable Market that fits your product or services. SAM can be defined based on limitations related to geographical reach or product specialisation.
- SOM or Serviceable Obtainable Market
What is the market size that you can reach at the present time?
SOM is the share of the Serviceable Addressable Market you can reach after considering factors like budget, location, product differentiation, and competition.
5.2 Segment Audience into Groups
Now that you know the market you should focus on, you can segment your overall target market into smaller segments based on geography, demography, psychography, or behaviour. This kind of segmentation helps create focused groups you can target using hyper-personalised messaging.
5.3 Identify the Relevant Segments
Once you have segmented the audience into groups, you can evaluate the segmented groups and identify which ones are most relevant to your business and align with your marketing objectives. Here, it is vital to consider factors such as segment size, growth potential, profitability, and how they fit with your products or services.
5.4 Develop Market Positioning Strategies
You can develop market positioning strategies based on the identified segments that resonate with the target segments. The “4Ps” of creating the right marketing mix are as follows –
- Product
Here, businesses need to ensure that their product meets the needs and desires of their target audience, provides value to them and differentiates itself from competitors. It includes considering factors such as the features, design, quality, and packaging of the product.
- Price
Price positioning can influence the perceived value of the product and directly impact purchasing behaviour of customers. It involves determining the right pricing strategy based on production costs, customer perceptions of value, desired profit margins and competitor pricing.
- Place
In this case, businesses make decisions related to selecting the right distribution channels, determining the appropriate locations for product availability, ensuring efficient logistics, and managing inventors. The goal is to make the product readily available to the target market through physical stores, online platforms, or a combination of both.
- Promotion
It comprises various activities to communicate and promote the product to the target market. Promotional strategies aim to create awareness, generate interest, and persuade customers to purchase the product. It includes channels like advertising, public relations, direct marketing, and personal selling.
By effectively managing the 4 Ps, businesses can meet customer needs, gain a competitive advantage, and achieve marketing goals.
5.5 Determine the Proper Marketing Channels
After determining the right marketing mix, select the most effective marketing channels to reach your target segments. Consider various mediums such as digital advertising, social media, email marketing, content marketing, or traditional advertising. It is suggested to choose channels that are popular among your target segments and align with their preferences and behaviours.
5.6 Implement the Marketing Strategy
Now, you can execute your marketing strategy by creating and delivering targeted campaigns through the chosen marketing channels. While implementing the marketing strategy, it is vital to ensure that you have developed tailored messaging and content that speaks directly to each segment’s needs and interests.
5.7 Evaluate the Results and Refine
The last step is to evaluate the effectiveness of your marketing efforts by measuring key performance indicators (KPIs) and assessing the goals you have set for the strategy. You can analyse data, such as awareness generated, quality leads received, conversion rate recorded, and traffic and sales figures to gauge the success of your campaigns. This information helps to refine the strategy, make data-driven decisions, and continuously improve your marketing efforts.
By following these steps, you can create an effective STP marketing strategy that aligns with your target audience, positions your business uniquely, drives engagement, and boost sales.
6. How Can a Digital Marketing Company Help Integrate the STP Model?
A digital marketing company can bring its expertise in market research, audience segmentation, and designing highly targeted campaigns with the right marketing mix. The knowledge and experience of digital marketing professionals can help you effectively reach your target market, engage prospects, and turn them into customers, ultimately boosting business revenue and driving growth.
Growth Ganik is a full-stack digital marketing agency that assists businesses in effectively connecting with their target audience, capturing their attention, fostering meaningful engagement, and ultimately accomplishing their marketing objectives
through our results-driven approach. Moreover, we understand that every business has unique needs. Hence our team crafts campaigns tailored to your specific business and industry.
If you are looking for a reliable digital marketing agency to help you brainstorm the right marketing ideas and develop STP integrated digital strategy, contact Growth Ganik.
