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Assignment: South Eastern University of Sri Lanka
Assignment: South Eastern University of Sri Lanka
NAME - R.M.I.W.MANIKE
REGISTRTION NO - SEU/IS/17/MG/090
DEPARTMENT - MANAGEMENT
SEMESTER - 2 ND YEAR 2ND SEMESTER
By segmenting your market into groups, targeting the right groups, and positioning your products and
services towards those groups, your marketing will be far more effective.
A current product should not target everyone as its customer. There is no such thing as one size fits all.
Even a company like Coca-Cola, which runs in more than 200 countries and sells well above one billion
people a day, provides multiple products to satisfy different groups of people.
Assuming that anyone can be a customer is a common mistake among many businesses. Going this route
can make selling your product or service challenging as no potential customers will feel like your product is
customized to them and their needs.
To make sales easier, you can employ the STP marketing model to classify your market into segments,
choose the most potential segments, and then be the most desirable to your target segments by
positioning your product or service.
Segmentation
The first step of the STP marketing model is the segmentation stage. The main goal here is to create
various customer segments based on specific criteria and traits that you choose. The four main types of
audience segmentation include:
1. Geographic segmentation: Diving your audience based on country, region, state, province, etc.
2. Demographic segmentation: Dividing your audience based on age, gender, education level, occupation,
gender, etc.
3. Behavioral segmentation: Dividing your audience based on how they interact with your business: What
they buy, how often they buy, what they browse, etc.
4. Psychographic segmentation: Dividing your audience based on “who” your potential customer is:
Lifestyle, hobbies, activities, opinions, etc.
Targeting
Step two of the STP marketing model is targeting. Your main goal here is to look at the segments you have
created before and determine which of those segments are most likely to generate desired conversions
(depending on your marketing campaign, those can range from product sales to micro conversions like
email signups).
Your ideal segment is one that is actively growing, has high profitability, and has a low cost of acquisition:
1. Size: Consider how large your segment is as well as its future growth potential.
2. Profitability: Consider which of your segments are willing to spend the most money on your product or
service. Determine the lifetime value of customers in each segment and compare.
3. Reachability: Consider how easy or difficult it will be for you to reach each segment with your marketing
efforts. Consider customer acquisition costs (CACs) for each segment. Higher CAC means lower profitability
.There are limitless factors to consider when selecting an audience to target – we’ll get into a few more
later on – so be sure that everything you consider fits with your target customer and their needs.
Positioning
The final step in this framework is positioning, which allows you to set your product or services apart from
the competition in the minds of your target audience. There are a lot of businesses that do something
similar to you, so you need to find what it is that makes you stand out.
All the different factors that you considered in the first two steps should have made it easy for you to
identify your niche. There are three positioning factors that can help you
gain a competitive edge:
1. Symbolic positioning: Enhance the self-image, belongingness, or even ego of your customers. The luxury
car industry is a great example of this – they serve the same purpose as any other car but they also boost
their customer’s self-esteem and image.
2. Functional positioning: Solve your customer’s problem and provide them with genuine benefits.
3. Experiential positioning: Focus on the emotional connection that your customers have with your brand.
The most successful product positioning is a combination of all three factors. One way to visualize this is by
creating a perceptual map for your industry. Focus on what is important for your target customers and see
where you and your competitors land on the map.
STP marketing is an acronym for Segmentation, Targeting, and Positioning – a three-step model that
examines your products or services as well as the way you communicate their benefits to specific customer
segment
The global market is far too big and far too vast for anyone – even the biggest corporation with the most
resources – to address. That’s why it’s important to break it down into smaller chunks and clearly define
the part you are going after.
Typically, to evaluate your business opportunity, you will need to define your TAM, SAM, and SOM: Total
Available Market, Serviceable Available Market, and Serviceable Obtainable Market.
Think of it as an iceberg. The very top peeking from under the water is your SOM – that’s the portion of the
market that you can effectively reach. SAM is is the portion of the total available market that fits your
product or service offering. Whereas TAM is the total available market, in other words, “the overall
revenue opportunity that is available to a product or service if 100% market share was achieved.
” For example, back when Airbnb was starting to pitch investors, they used the TAM, SAM, SOM model to
explain their business potential. Their total available market (TAM) then was valued at $1.9 billion dollars
and included any type of accommodation that travelers were booking worldwide.
Because their service offering was targeted more at the budget travelers who were using online booking
engines to find their stay. In this case, the SAM was valued at $532 million dollars. Lastly, their SOM came
in at $10.6 million dollars and signified the revenue obtainable for Airbnb.
Similarly with a consumer product, we can look at Diet Coke and say that its TAM would include the total
beverage market. Its SAM would narrow it down to soft drinks, and SOM would zero in on the carbonated
sugar-free drinkers out there.
There are several routes you can choose when defining a market. You can do so by:
• Industry classification (agriculture, retail, transportation, etc.
• Product category (apparel, health and beauty, food and beverage, etc.)
• Country (United States, United Kingdom, etc.)
Now that you’ve adequately defined your target market, it’s time to segment it using geographical,
demographic, behavioral, and psychographic variables.
Each segmentation variable helps you tap into a different aspect of your audience and when you use them
in unison you can create niche segments that really make an impact on your overall marketing effort.
For example, if you split your serviceable obtainable market into men vs women (demographic variables)
you are still left with a pretty broad audience segment. However, if you start layering other segmentation
variables on top, you can create a precise audience that you can make the biggest impact on.
Perhaps you go after women (demographics) in the United States (geographics) who prefer to spend
money on luxury products (psychographics) who follow you on social media or have visited your website in
the past (behavior).
As you can see, this layering method creates a hyper-focused audience segment that allows you to create
an extremely personalized experience. And as we mentioned before, personalization has a huge impact on
the success of your marketing efforts.
When you’ve landed on your viable market segments, it’s time to develop segment profiles. Segment
profiles are very similar to your ideal customer personas but they act as subsets of your main persona –
they are detailed descriptions of the people in each segment.
Describe their needs, behaviors, demographics, brand preferences, shopping traits, and any other
characteristics. Each profile should be as detailed as possible to give you and your business a good
understanding of the people within each segment. This will allow you to compare segments for strategy
purposes.
A marketing mix consists of the so-called 4 Ps: Product, Price, Place, and Promotion:
• Product takes into consideration factors like variety, quality, design, branding, features, packaging,
services, availability, convenience.
• Price takes into consideration factors like pricing strategy, list price, penetration price, premium,
discounting, payment methods, credit terms, payment period.
• Place takes into consideration factors like channels, coverage, location, inventory, logistics, trade
channels.
• Promotion takes into consideration factors like advertising, public relations, social media,
sponsorship, influencer marketing, content marketing, product placement, sales promotion.
A carefully-curated marketing mix will ensure business success. However, if you do leave gaps in it, all the
precious work you did at the previous stages might go to waste.
Here’s an example to illustrate a poor marketing mix: Let’s say you want to sell a luxury skincare product to
women in their 4ps..
Your goal is to position it as a high-end addition to their skincare routine that targets concerns related to
mature and aging skin. So you invest in print marketing and get your product featured in a couple of
popular women’s magazines that skew towards the 30+ audience. You also make sure to price the product
accordingly so it indicates the luxury category.
However, your packaging is cheap and poorly designed, while the product itself is sold in drugstores.
This inconsistency, which isn’t aligned with the overall positioning strategy, will prevent you from reaching
your target audience in the first place; those who get reached will experience dissatisfaction resulting in
negative word-of-mouth, which will eventually make your sales slumber.