Market Segmentation & Positioning

STP is the process by which whole markets are subdivided into various segments. Here STP
refers to Segmentation (identifying similar groups of customers), Targeting (selecting the
groups to aim for) and Positioning (creating a specific image in the minds of the target
customers). For example, for skin-care products, the customers could be segmented based on
age and gender, following which young female customers could be targeted, and the products
could be positioned as necessary for self-respect.

Market segmentation and product differentiation approaches are different. In market

segmentation, a customer segment is identified and the marketing mix (4Ps) are designed to
serve that target segment, whereas in product differentiation approach, new offerings and their
marketing mix create new customer segments. For example, Amway used product
differentiation by producing a whole new range of products called Satinique, wherein they
created a segment of professional women who want to look their best, while Nivea used market
segmentation approach wherein they found based on their market research that men prefer
convenience while women enjoy luxury, and developed products accordingly.

Consumer markets can be segmented based on profile (demographics, lifestage, geographic,

etc), psychological criteria (lifestyles, benefits sought) and behavioural criteria ( usage,
transaction and purchase). Similarly, the business markets can be segmented based on
organizational characteristics ( organizational size, geographical location, etc) and buyer
characteristics (DMU, choice criteria, purchase situation).

A target market is chosen such that it is distinct, accessible, measurable and profitable. There
are four different approaches of targeting. These are undifferentiated approach ( no delineation
between market segments), differentiated targeting approach (several market segments to
target), niche marketing (one or few market segments to target) and customized targeting
strategy (marketing strategy developed for each customer).
Segmentation process has various limitations. The offerings are approximated to groups
(segments) and not individuals. Moreover, it is not well linked to competitive advantage. There
are various barriers to segmentation, including infrastructure barriers, process issues and
implementation barriers.

Positioning basically means differentiating the perception of your product from others, so as to
give the target customers a motive to buy the product. A perceptual map is used to create a
geometric comparision of how various competing products are perceived. Markets change and
hence the products need to be repositioned. This can be done in various ways, such as changing
tangible attributes, target market or both.