In today’s information overload and user fragmentation, a set of useful market positioning models is not only theoretical, but also down-to-earth. This article will use the STP model as a tool, from how to cut the market, identify the target group, and then polish the precise positioning, and take you through a market strategy practical path of “a small team can also play”.
This article will help you solve the problem:
1. I know the STP theory and know that it is important, but I find that when I really want to implement it, I don’t know what to do at each stage.
2. There are several target markets to choose from, which one is the most suitable for us? I don’t feel like giving up on any of them.
3. I want to have a unique positioning for my product, but the opponent seems to have occupied all the positioning that can be done, do I still have a chance?
4. Are there any real cases of STP theory and practice? The theory of light listening is a bit boring, abstract, and difficult to really absorb.
Even the most significant theories can be worthless unless crystallized down to the smallest detail. ~anonymous
Recently, I found a common phenomenon while chatting with some entrepreneurs:
Almost everyone has heard of STP theory, but when the topic turns to how to implement it, many people start to frown and seem a little confused.Market Segmentation (S), Target Market Selection (T)andMarket Positioning (P)These three seemingly simple steps actually hide countless traps and misunderstandings.
B-end product manager’s ability model and learning improvement
The first challenge faced by B-end product managers is how to correctly analyze and diagnose business problems. This is also the most difficult part, product design knowledge is basically not helpful for this part of the work, if you want to do a good job in business analysis and diagnosis, you must have a solid …
View details >
Some friends are too subjective in market segmentation and ignore real consumer needs; some are too greedy when choosing the target market, trying to please everyone, but they lose their characteristics; Others are vague when positioning, leaving consumers scratching their heads. In response to this “pain point”, I want to write a detailed STP strategy, detailing the implementation steps of each stage of STP, and pointing out the mistakes that are easy to make at each stage, hoping to provide you with some useful reference.
What is STP?
If we use STP as an analogy for fishing,“S” market segmentationJust like anglers divide the lake into multiple different fishing areas according to the habits and activity areas of different fish, such as small fish areas in shallow water and large fish gathering areas in deep water.“T” target market selectionJust like anglers decide which areas to focus on fishing in many divided areas based on the performance of their fishing rods, the type of bait, and their own fishing experience.“P” market positioningJust like anglers choose the most suitable fishing rod, bait and exclusive fishing strategy after selecting the fishing area, to attract the most fish, and finally return with a full load.
The academic theory of STP strategy can be traced back to the 50s of the 20th century, when American marketing scholars were employedWendell R. SmithFirst proposedMarket SegmentationThe concept. Over time, this theory has evolved and improved, becoming one of the important cornerstones of modern marketing. The core concepts of STP strategy are elaborated in many marketing textbooks, such as:Philip KotlertargetMarketing ManagementWait.
“S” stands for Segmentation, that is, according to the different characteristics and needs of consumers, the whole market is divided into several sub-markets with similar needs;“T” refers to Targeting, is to evaluate the attractiveness of each market on the basis of market segments, and choose the target market suitable for the company’s own resources and capabilities;“P” is for market positioning, determine the unique position of the company’s products or services in the target market, and create a unique value image to attract consumers.
After understanding the framework of STP, I will explain these three parts in more detail below, so that you can implement this theoretical tool more effectively.
S: Segmentation
Market segmentation is the first step in STP theory, which aims to identify and analyze consumer groups with similar needs and characteristics, and segment the market into different segments based on these needs. The following are the specific steps of market segmentation, and the example of establishing a chain coffee brand is illustrated:
1. Confirm the segment dimension
Purpose: To determine the criteria used for market segmentation.
This is the starting point for market segmentation. Enterprises need to determine the appropriate segmentation dimensions based on the characteristics of products or services, consumer characteristics and market conditions. These dimensions can include three dimensions: demographics (e.g., age, gender, region, income, occupation), psychography (e.g., lifestyle, values, personality), and behavioral characteristics (e.g., purchase frequency, usage scenarios, brand loyalty). If you want to understand these three dimensions in more detail and how to implement them, I will write a feature article later to give you a deeper and more comprehensive understanding.
2. Collect and analyze market data
Purpose: To collect enough data for analysis of the market.
After clarifying the segmentation dimensions, companies need to collect relevant data, including through market research, questionnaires, consumer interviews, industry report analysis and other methods. By collecting detailed information about each segment, including market size, growth potential, competitive conditions, and consumer demand, this data is then sorted, categorized, and analyzed to identify potential market patterns and trends. It is important to emphasize that the comprehensiveness and accuracy of the collected data directly determine the accuracy of subsequent decisions, so please be sure to arrange sufficient time and resources in advance for this step.
3. Create a market segment
Purpose: To create various recognizable segments based on data analysis.
Based on the collected data, enterprises can create specific market segments, that is, preliminary divisions of the market, each market segment should have clear boundaries and clear characteristics. This step requires transforming abstract data into identifiable market segments, providing a clear framework for subsequent in-depth analysis and decision-making, and naming each segment based on segment characteristics and consumer needs. For example, in the field of clothing, it can be divided into market segments such as fashion trend seekers, quality-conscious consumers, and price-sensitive shoppers. Each segment has unique attributes.
4. Further segmentation and validation
Objective: To further segment and verify the effectiveness of the segments.
On the basis of initially creating market segments, companies need to conduct in-depth analysis to further segment and verify their effectiveness and feasibility, including assessing the stability, measurability, accessibility, and responsiveness of each segment, as well as its alignment with corporate resources and goals. This stage can be used to collect more feedback and optimize and adjust market segments through small-scale testing, focus group discussions, etc., to ensure that each segment is unique and meaningful.
5. Identify the characteristics of each market segment
Objective: To summarize the characteristics of each market segment.
Finally, companies need to clarify the specific characteristics of each market segment, including consumer behavior, core needs, purchase motivations, desired product or service characteristics, etc. This step requires an in-depth understanding of consumers in each segment to ensure that companies can accurately target and effectively meet the needs of each segment, and these characteristics will help companies better formulate marketing strategies in the future. For example, the “health-conscious, aged 25-35, middle-to-high-income” segment identifies the preference for natural ingredients, convenient packaging, and health information.
Take the example of creating a chain coffee brand
If you want to start a chain coffee brand for consumers in first- and second-tier cities, you can first choose demographic segmentation (age, occupation, income, etc.) and psychological segmentation (lifestyle, values, etc.) as the segmentation criteria.
Next, you can collect consumer information at the door of well-known chain coffee brands or Internet celebrity stores in first- and second-tier cities, or collect information online, read market research reports, etc., and find that young office workers and students are the most important groups of coffee consumption.
Next, these two groups are subdivided and named, such as “office workers who pay attention to taste”, “office workers who pay attention to cost-effectiveness” and “busy office workers”.
Next, the specific needs of these segments are further analyzed, and the effectiveness of these segments is verified through small-scale experiments (such as focus group discussions), and the boundaries and characteristics of the segments are adjusted according to the verification results.
After conducting all the research, confirm the characteristics of each market segment, for example, in all market segments, there may be a group called “busy office workers”, usually between the ages of 25-40, with a high income level, and the pursuit of efficient and convenient services, so they prefer quick pickup services and takeaway options.
T: Targeting
Target market selection is a key link in STP theory, which requires enterprises to select the most attractive and most in line with the strategic goals of the enterprise from the many market segments formed after market segmentation (S:Segmentation) for further cultivation. The following are the steps to execute the target market selection, and illustrate it using Lululemon target market selection as an example.
6. Evaluate the market segment
Objective: To evaluate each segment through various dimensions.
A comprehensive and in-depth assessment of the market segments is a crucial first step. This requires a combination of factors, including:market size, growth trend, competitive situation, stability of consumer demandandPotential profit marginsWait. The size of the market directly affects the sales potential and the likelihood of market share growth of the enterprise. A large and growing segment often has greater appeal, but it can also be accompanied by fierce competition.
Analysis of the competitive landscape helps to understand the strengths and weaknesses of competitors and the saturation of the market. The stability of consumer demand is crucial for long-term planning, and markets with large demand fluctuations may pose higher risks. At the same time, evaluate potential profit margins, considering cost structure, price sensitivity, and the feasibility of profit models.
7. Identify segment attractiveness
Purpose: Identify segment attractiveness and rank them.
Based on the evaluation, the attractiveness of each segment is further determined. This depends not only on the characteristics of the market itself, but also on the strategic goals and long-term vision of the enterprise. Attractiveness can be measured from multiple perspectives, such as market growth rate, barriers to entry, the level of substitute threat, and consumer bargaining power.
High-growth segments often mean more opportunities, but higher barriers to entry can limit entry for businesses. Markets with less threat of alternatives and lower bargaining power of consumers tend to be more conducive to maintaining high profit levels.
In addition, macro-environmental factors such as policies and regulations, economic conditions, and socio-cultural trends affect market segments. Finally, the above factors are combined to rank the attractiveness of the segments.
8. Analyze enterprise resources and capabilities
Objective: Analyze the matching ability of enterprises and market segments.
Understanding your own resources and capabilities is key to making informed choices about your target market. This includes:Financial resources, human resources, technical strength, brand image, production capacity, sales channelsandMarket experienceand other aspects.
Assess whether a business’s financial position can support investments and operations in a specific market segment. Whether HR’s expertise and skills match the needs of the target market. Whether the technical strength can meet the market’s innovation requirements for products or services. Whether the brand image is consistent with the positioning of the market segment. Whether the production capacity can meet the scale and quality standards of market demand. Whether the sales channel can effectively reach the target market. At the same time, consider the company’s past experience and lessons in similar markets, as well as the market insights and operational capabilities accumulated from it.
9. Choose your target market
Purpose: Select the most attractive market segments based on the evaluation results.
Comprehensively consider the evaluation results, attractiveness, and the company’s own resources and capabilities to make the final target market selection decision. There are three strategies for choosing a target market:
Centralized single market
Choose a specific market segment and focus resources on in-depth development. Enterprises will choose to use this strategy for three main reasons: enterprises in terms of capital, manpower, technology, etcResources are limited； Consumers in a certain market segment have veryClear and special needs, and requires deep investment to satisfy; Businesses are owned in this marketUnique skills, knowledge, or experience, to be able to stand out in this segment.
Multiple market segments
Pick a few attractive market segments and develop targeted strategies for each. Enterprises will choose to use this strategy for the following reasons: there are obvious differences in consumer demand and purchasing behavior in each market segment; enterprise resources have a certain scale but are not enough to cover them comprehensively; By selecting multiple market segments, business risks can be diversified and the fluctuations of a single market segment can be unduly impacted on the enterprise.
Full market coverage
If the enterprise has sufficient resources and the product is widely applicable, it can choose to cover multiple or even all market segments. Enterprises choose this strategy for the following reasons: the company has abundant resources to meet the needs of various market segments; The company’s products or services are highly versatile and can meet the basic needs of different consumer groups. Companies pursue market leadership and capture the largest market share by covering the market comprehensively.
When choosing, ensure that the target market is consistent with the strategic direction of the enterprise, and that the enterprise has sufficient ability to achieve competitive advantage and sustainable development in this market. At the same time, consider the risks and uncertainties of the market and develop corresponding risk management strategies.
Take the early stages of Lululemon’s business, for example
In the early days of Lululemon’s inception, the founding team evaluated different market segments, including yoga apparel, fitness apparel, sports accessories, and more. According to the evaluation results, the yoga clothing market has a high market size and growth rate, and has a low competitive situation.
Lululemon then analyzed its own resources and capabilities, including capital, manpower, technology, etc., and believed that the yoga clothing market matched the company’s resources and capabilities, because the company’s advantage is to have a strong design team and clothing supply chain production capacity.
According to the evaluation results and corporate resources and capabilities, Lululemon finally chose the yoga clothing market as the target market, and formulated marketing strategies and marketing activities for this target market, and slowly gained popularity with high-quality, comfortable and designed yoga clothing, and finally became a well-known professional yoga clothing brand.
P: Positioning
Market positioning is the third and final step in STP theory, which aims to determine the unique position of a product or brand in the target market and create a distinctive image in the minds of consumers. The following are the implementation steps of market positioning, each of which aims to help companies clarify their market positioning, effectively differentiate themselves from competitors, and enhance market competitiveness, and finally use the Patagonia brand as an example.
10. Identify differentiators
Purpose: Identify the core values and differentiators of the product or service.
This requires companies to conduct a comprehensive and in-depth analysis of themselves, not only to understand the inherent characteristics of the product or service, but also to gain insight into the potential value and possible development direction. From the internal quality and performance of products or services to the external packaging and after-sales support, we explore unique selling points. For example, the product may be better than competitors in the selection of raw materials, thus ensuring higher quality; Or the service has a faster response mechanism and can solve customer problems in the first time.
At the same time, it is necessary to take into account the needs and pain points of the target market, so that differentiated advantages can effectively meet the unmet needs of consumers. Through market research, competitive product analysis and other means, it is clear where it can surpass competitors, so as to attract the attention and choice of target customers. In addition, differentiation should not be limited to current performance, but should also be sustainable and scalable.
For example, enterprises have unique technology research and development capabilities, can continuously launch innovative product functions, or establish a strong supply chain system, which can maintain long-term advantages in cost control and delivery speed.
11. Create a Positioning Statement
Purpose: To convey core values through a concise and clear positioning statement.
A positioning statement is a concise, clear, and attractive language that describes the unique positioning of a company’s products or services in the target market. It should accurately communicate the core values and differentiating benefits of the product and resonate with the target consumers. A good positioning statement usually has:
- Be concise and clear:The positioning statement should be specific and clear, avoiding vague and generic descriptions, usually no more than one or two sentences, and quickly convey the brand’s core values
- Engaging Resonance:It requires a deep understanding of the psychology and needs of the target customer, expressing it in language that resonates with consumers, and ensuring that it is easy to use in various marketing materials and communication channels to maximize the effectiveness of communication.
- Prompting action:The positioning statement should use attractive and appealing language that excites consumers and inspires them to take action and learn about the brand or purchase the product.
12. Develop a targeting strategy
Objective: To formulate specific positioning strategies through the 4P marketing theory. The Marketing Theory of 4PsBorn in the United States in the 60s of the 20th century, it was first proposed by Neil Borden, and Professor Jerome McCarthy summarized these elements into 4 categories in the book “Basic Marketing”, namelyProduct, Price, Place, PromotionIn 1967, Philip Kotler further confirmed the marketing mix approach with 4Ps as the core in the first edition of his best-selling book “Marketing Management” and carried it forward. Here are some of the key takeaways from the 4Ps:
- Product Strategy:Including product design, functional planning, packaging style, etc. must be consistent with the positioning. For example, if the positioning is high-end quality, the product design should pursue refinement and elegance, the function should be leading and innovative, and the packaging should reflect luxury and taste.
- Price Strategy:To match the positioning, high-end positioning usually corresponds to a higher price, reflecting the scarcity and high quality of the product; The pursuit of cost-effective positioning requires setting competitive prices to attract price-sensitive consumers.
- Channel Strategy:Consider the purchasing habits of your target customers and the image of your channels. For high-end products, choosing to sell them in high-end shopping malls or specialty stores can enhance the brand image; For mass consumer goods, extensive retail networks and e-commerce platforms may be more suitable.
- Promotion strategy: It should revolve around positioning, and the theme, content and style of advertising should be able to strengthen positioning. For example, emphasizing the high-end quality of products can be achieved through celebrity endorsements and high-end media advertisements.
After the 4Ps theory, there are many theories such as 4Cs, 7Ps, 4Ps+3Rs, etc., although they are all valuable and innovative, but I personally think that the structure of 4Ps is relatively simple and comprehensive enough, so I use the classic architecture of 4P theory here.
13. Monitoring and adjustment
Objective: To evaluate and adjust strategies by monitoring market feedback.
Continuous monitoring of market dynamics is crucial, including new actions by competitors, changing trends in consumer demand, macroeconomic environment, and adjustments in policies and regulations. Through regular market research, sales data analysis and customer feedback collection, we can keep abreast of market changes in time. Conduct an in-depth analysis and evaluation of the collected information to determine whether the current positioning is still valid and whether adjustments are needed. If competitors find similar differentiations or a significant shift in consumer demand, they need to revisit their positioning strategy.
Be very cautious when adjusting your positioning to ensure that the new positioning can adapt to market changes while maintaining the core values of the original brand. At the same time, it is necessary to do a good job of internal communication and coordination to ensure that the entire organization can understand and support the adjustment of positioning and implement it effectively in operations.
Take the outdoor brand Patagonia, for example
Patagonia isYvon Chouinard Founded in 1973 and ranked No. 1 in the Axios Harris Poll 100 in 2021, the brand is a globally renowned outdoor gear and apparel brand known for its commitment to environmental protection and high-quality products.
First, Patagonia’s emphasis on the eco-friendly nature of its products and commitment to environmental protection has become its unique core value proposition, and it has successfully identified its differentiation by using recyclable materials to make products and launching product recycling programs such as “Worn Wear” and “Garment Repair and Recycling Program”, which stands out from other brands. In addition, Patagonia through“We’re in business to save our home planet.” – Save our earth home with business” clearly conveys the brand’s core pursuit and mission.
Patagonia also implements its precise positioning through various strategies and marketing methods, including using environmentally friendly materials to make products, setting higher prices to reflect the environmental value of products, establishing a sustainable symbiotic supply chain, and paying attention to the carbon footprint of the supply chain to achieve its product strategy. In terms of promotion strategies, Patagonia deepens consumer awareness of the brand through partnerships with environmental protection organizations and environmentally-related activities, most notably taking the lead in imposing an earth tax on itself, committing 1% of its total sales to local planet conservation through the One Percent for the Planet organization.
Patagonia also conducts regular market research, collects consumer feedback, and makes necessary adjustments based on market feedback, such as launching more products made from sustainable materials, to ensure that its market positioning strategy remains in line with the needs of the target market. Through such a market positioning process, Patagonia has successfully established a unique image in the minds of consumers and differentiated it from competitors.
Common STP misconceptions
When implementing STP theory, enterprises may fall into some common misunderstandings or make some mistakes. Here are some common misconceptions about market segmentation, target market selection, and market positioning:
Common misconceptions about market segmentation
- Lack of data to support it:Market segmentation is only based on the subjective judgment of management, such as intuition and preference, and lacks objective market research and data analysis, resulting in inaccurate segmentation results.
- Improper selection of subdivision variables:The selected segmentation variables are poorly correlated with consumers’ purchasing behavior or demand, or are not pain points, resulting in segmentation results that cannot effectively reflect market differences. For example, the shampoo market is segmented only by consumers’ hair color, ignoring more critical factors such as hair quality and efficacy needs.
- Too narrow segmentation:Businesses may segment the market too narrowly, resulting in each segment being too small and the potential benefits insufficient to support the company’s operating costs.
- Too broad segmentation:The market segment is too broad, so that the consumer needs within the market segment vary too much, and the product is difficult to meet all market groups.
- Ignoring Market Dynamics:The market is dynamically changing, and fixed segmentation standards may no longer meet the actual needs of consumers and the latest trends in the market.
Common misconceptions about targeting
- Select the wrong segment:A business may choose a market segment that, although it is large enough, may not succeed if the competition is too fierce or the company’s resources are not enough to support it.
- Choose too many target markets:Trying to cover multiple target markets without considering the company’s own resources and capabilities distracts resources and attention, reducing marketing effectiveness.
- Ignoring the Competitive Situation:Without fully considering the products, capabilities and resources of competitors in the industry, they choose market segments that are too competitive and have no advantages.
- Neglecting Market Accessibility:The selected target market may be difficult to reach through existing distribution channels or marketing methods, making it difficult to implement market strategies.
- Market segment instability:Segmentation based on transient or variable factors leads to market instability and difficulty for companies to meet their needs sustainably. For example, a market segmented based on a pop culture phenomenon may shrink rapidly as the trend disappears.
- Insufficient understanding of market segments:Businesses may not fully understand the specific needs and preferences of their target market, leading to marketing messages that do not align with consumer expectations.
Common misunderstandings of market positioning
- Imitate competitors:Businesses may try to replicate competitors’ market positioning rather than creating a differentiated market position based on their unique strengths and resources.
- Blurred positioning:If the market positioning is not clear enough, consumers may not be able to understand the difference between the company’s products or brands and other competitors, thus affecting the brand’s market perception.
- Lack of Consistency:The positioning is inconsistent with the product characteristics, or the brand advertising, marketing activities are inconsistent with the positioning statement, and the corporate values, resulting in confusion in the conveyed information, leading to confusion among consumers and affecting the brand image.
- Positioning does not match resources and capabilities:Enterprises may choose a market positioning but lack the resources and capabilities needed to achieve it, resulting in effective execution of market strategies.
In practice, enterprises should avoid these misunderstandings and ensure that market segmentation, target market selection, and market positioning strategies are both practical and can effectively utilize the company’s resources and capabilities. Through continuous market research and strategy adjustments, companies can better adapt to market changes and achieve long-term market success.
Make good use of STP to create a unique enterprise
STP (Market Segmentation, Target Market Selection, Market Positioning) theoryIt provides a clear direction for enterprises to find their place in a complex and ever-changing market environment. Through nuanced market segmentation, businesses can identify multiple market segments with common needs and preferences; Wise target market selection helps enterprises focus resources on serving the most potential market segments; Finally, precise market positioning not only strengthens the brand image, but also builds a unique and memorable brand impression in the minds of consumers.
However, in the process of implementing STP, enterprises also need to be wary of common misunderstandings, such as lack of data support, too narrow segmentation, too many target market selections, vague positioning, etc., to avoid failure due to wrong positioning.
A successful STP 3-step can differentiate a company in the market, achieve business goals while creating value for consumers. True market success comes from thoughtful consideration and careful execution of every aspect of STP.
Resources
1. Philip Kotler. Marketing Management[M]. Chinese Minmin University Press.
2. [US] Ai Reese. Positioning[M]. Machinery Industry Press.
