1-Explain the STP process highlighting the key challenges in each step.

(30 marks)

The Full STP Process

The market segmentation, targeting and positioning (STP) process is a fundamental concept in

understanding marketing and the strategies of firms. In most marketing textbooks, the STP

approach is presented as a simple three step process. While that approach provides a good

introduction to this marketing concept, it fails to adequately highlight the smaller steps of the

STP process that should also be understood.

The following diagram highlights the overall STP process in nine steps:

The following is a quick discussion of the full market segmentation, targeting and positioning

(STP) process, as shown above.

Step One – Define the market

In the first step in this more detailed model is to clearly define the market that the firm is

interested in. This may sound relatively straightforward but it is an important consideration. For

example, when Coca-Cola looks at market segmentation they would be unlikely to look at the

beverage market overall. Instead they would look at what is known as a sub-market (a more

product-market definition). A possible market definition that Coca-Cola could use might be diet

cola soft drinks in South America. It is this more precise market definition that is segmented, not

the overall beverage market, as it is far too generic and has too many diverse market segments.

Step Two – Create market segments

Once the market has been defined, the next step is to segment the market, using a variety of

different segmentation bases/variables in order to construct groups of consumer. In other words,

allocate the consumers in the defined market to similar groups (based on market needs, behavior

or other characteristics).

Step Three – Evaluate the segments for viability

After market segments have been developed they are then evaluated using a set criteria to ensure

that they are useable and logical. This requires the segments to be assessed against a checklist of

factors, such as: are the segments reachable, do they have different groups of needs, are they

large enough, and so on.

Step Four – Construct segment profiles

Once viable market segments have been determined, segment profiles are then developed.

Segment profiles are detailed descriptions of the consumers in the segments – describing their

needs, behaviors, preferences, demographics, shopping styles, and so on. Often a segment is
given a descriptive nickname by the organization. This is much in the same way that the age

cohorts of Baby Boomers, Generation X and Generation Y have a name.

Step Five – Evaluate the attractiveness of each segment

Available market data and consumer research findings are then are added to the description of

the segments (the profiles), such as segment size, growth rates, price sensitivity, brand loyalty,

and so on. Using this combined information, the firm will then evaluate each market segment on

its overall attractiveness. Some form of scoring model will probably be used for this task,

resulting in numerical and qualitative scores for each market segment.

Step Six – Select target market/s

With detailed information on each of the segments now available, the firm then decides which

ones are the most appropriate ones to be selected as target markets. There are many factors to

consider when choosing a target market. These factors include: firms strategy, the attractiveness

of the segment, the competitive rivalry of the segment, the firm’s ability to successfully compete

and so on.

Step Seven – Develop positioning strategy

The next step is to work out how to best compete in the selected target market. Firms need to

identify how to position their products/brands in the target market. As it is likely that there are

already competitive offerings in the market, the firm needs to work out how they can win market

share from established players. Typically this is achieved by being perceived by consumers as

being different, unique, superior, or as providing greater value.

Step Eight – Develop and implement the marketing mix

Once a positioning strategy has been developed, the firm moves to implementation. This is the

development of a marketing mix that will support the positioning in the marketplace. This
requires suitable products need to be designed and developed, at a suitable price, with suitable

distribution channels, and an effective promotional program.

Step Nine – Review performance

After a period of time, and on a regular basis, the firm needs to revisit the performance of various

products and may review their segmentation process in order to reassess their view of the market

and to look for new opportunities.

 2.Based on the case study explain how Virgin segments the market and assess how effective

this approach is.(20 marks)

Virgin America, an independent airline company, is owned by Richard Branson. Richard

Branson is also an owner of Virgin Company, comprising of four hundred companies globally.

The airline business is never easy to sustain, but the Virgin airline gained success because, from

day one, it focused on the target market. The basic assumption was to satisfy potential customers.

The airline appeals to the tech gurus with its uniquely designed airplanes having the facility of

wifi and entertainment during the flight. The tech-savvy, urban, and educated class is the target

audience. The latest hardware and software system is meant to attract the creative and young

generation who wants to stay connected through social media apps like Twitter, Facebook, and

so on. The tech gurus are motivated to pay a little bit more for the unique services offered by the

Virgin America airlines.

3.Based on the case study explain Virgin's targeting strategy the market and assess how

effective this approach is.(20 marks)

For Virgin America, the target audience is young, tech-savvy generation; the ideal way to reach

them is social media. The company uses social media to enhance awareness and emotional
bonding with the target audience. The company communicates with the audience through Twitter

and Facebook. Creative videos are shared on YouTube to educate consumers. Social media

campaigns aim to engage the target audience, create awareness about the airlines, and enhance

emotional connectivity. Virgin America does not utilize TV ads as the target audience utilizes

mobile phones and apps more often. The campaigns on social media are designed to enhance

customer loyalty. The benefit of reaching out to customers through social media is that it’s less

costly and attracts only the target market.

4. Write a positioning statement for Virgin and explain why you chose this.(15 marks)

Virgin America provides an innovative and comfortable experience for the customers. The

leather seats, along with in-flight wifi technology, are heaven for the tech-savvy generation. At

the back of the seat, a touch screen with Red system enables the user to get access to the wifi

system. The passengers can order from the menu with the help of a touch screen. The Red

system enables customers to watch movies, listen to songs and play games, and so on. The latest

system used by the touch screen in virgin America is the latest software used by the airline

industry. The airplanes have a USB port and Ethernet jacks with every seat, which enables

customers to use their phones during the flight. To enhance the productivity of the system, the

airline affiliated with Google to provide in-flight internet.

5.Based on the analysis of the case study what recommendations would you make to ensure

the long-term success of Virgin?(15 marks)

As the previously mentioned brand name is arguably one of the most important assets to the

Virgin group. In the United Kingdom, Richard Branson is a tycoon celebrity who brings instant

recognition and sway to any business venture he undertakes. One goal of Virgin moving forward

should be to relay this formidable power to the United States. If Branson can make the Virgin
name as respected and recognizable in the States as in the U.K., then his companies could

capitalize on a market that feeds on value. By pushing his brand as the “consumer champion”

Branson can expand recognition of the brand across the U.S. and gain consumer support for

other ventures. The Virgin name in the U.S. is currently dominated by differentiation-based air

travel, like Virgin Atlantic which flies trans-Atlantic. The next step is expanding consumer

knowledge of the brand into other Virgin competent business sectors such as entertainment and

financial services.

Part of expanding the brand name across the U.S. is expanding Virgin America, the domestic-

only airline that is “reinventing domestic travel” and has been rated the best business class airline

for three years running by Conde Nast Traveler magazine. By offering better in-flight amenities

at a lower cost than many domestic carriers, Virgin is creating strong brand loyalty for itself and

dollar value for its customers. With the long-term goal of Virgin in the U.S. being to establish its

brand as ubiquitous with consumer value in multiple industries, in short-term Virgin America

must succeed in offering this same value to consumers now in an industry riddled with

bankruptcy and high fixed costs. By acquiring small, regional airlines Virgin America must

expand its territory of coverage on domestic flights into and out of major cities.

References :

Segmentation Variables . (PDF).

Global Social Media Marketing.

Market Segmentation Study Guide.