STP Analysis (Segmentation, Targeting, Positioning)

How and whom to Communicate to about a product/service?

When we start selling a product, we cannot communicate it individually to every single person on earth. Also, one product cannot cater to the needs of all the consumers. For example, youngsters prefer soft-drinks more but elderly rely more on fresh juices. So, we must have a particular target market to which we look to communicate the product.

For this problem, marketers use STP Modelling. STP is the process through which marketers get to know “where” & “how” the product must be communicated in order to get maximum sales. STP is the second most popular model (First is SWOT analysis) which is used in marketing.

STP is useful as it helps in identifying the most valuable types of customers, and then develop marketing messages that ideally suit them. It allows a marketer to engage with each group better, personalize the messages, and increase the sales.

Marketers need to cater to each group differently. We can take some examples, like, Thums up which targets adventurous people, Apple which targets rich customers and Royal Enfield which targets macho personalities. Also, Wheel, Rin and Surf-Excel: all three of them are washing powder brands of HUL. Yet they don’t compete with each other as all 3 are targeted to different segments of the population. Wheel targets those with low economic background who wash clothes with hands, Surf-Excel targets the premium population which uses a washing machine to wash its clothes, while Rin fits in somewhere between these two segments.

Every product passes through STP analysis and is only then launched into the market. Let us study this approach in detail. There are 3 stages in STP analysis, which are the following:

1. Segmentation

In this step, we divide the customers into different groups or segments with some common characteristics. There are mainly 4 variables on the basis of which market is segmented. These are the following:

Demographic: By personal attributes such as age, marital status, gender, ethnicity, sexuality, education, or occupation, income, education, household size, etc.

Demographics explain “Who our customer is”.

Ex – Sunsilk shampoo targets women while Head & Shoulders targets men.

Psychographic: It refers to personality and emotions which are linked to purchase choices, such as values, lifestyle, risk aversion, etc.

Psychographics explain “Why our customer buys”.

Ex – Both Dettol and Santoor target health-conscious people, while Hamam and Medimix target people who like herbal products.

Geographic: segmentation by country, state, region, area, metropolitan or rural location, population density or even climate, etc.

Ex – In African countries, soap bars are manufactured to be very large in size, due to the large body-sized African people. This is so that it fits in their hands properly.

·       Behavioral:  It refers to the nature of the purchase, brand loyalty, usage level,

the benefits that consumers are looking for, etc.

Ex – Multiple surveys have proved that elderly people are highly brand loyal. So, it is difficult to make elder people purchase and use a new product.

2. Targeting

The second step is targeting. We have to decide which segment (or segments) to target. There are multiple factors like segment size, profitability from each segment, potential growth in each segment, etc. After a detailed analysis, one, two or maximum three segments are chosen for targeting the product.

3. Positioning

This is the third and last step of STP analysis. Here, our goal is to identify how we want to position our product to the selected target groups. First, we consider the USP of the product: why would people buy our product among several competitive products? Then we write the positioning statement for the target group. We have to write a separate positioning statement for each target group. So, if we are targeting 3 segments, we have to write 3 different positioning statements.

We have multiple templates on how to write a statement. Some of them are the following:

Template 1

For (target audience), (brand) is the (frame of reference) that delivers (benefit/point of difference) because only (brand name) is (reason to believe).

Template 2

For (our target group) who wants/needs (reason to buy our product/service), the (our product or service) is a (category) that provides (our key benefits). Unlike (our main competitor), the (our product/service) (our key differentiators).

Template 3

(Brand Name) provides (Target group) with (unique values) than any other (frame of reference). We do this by (why should one believes us)

Example – Let us now try to do the STP of an iPhone. Here, the market can be segmented on the basis of income. Target market would be the young, tech-savvy generation with a premium economic background. So, we can write its positioning statement as,

“Apple iPhone provides the young tech-savvy generation with the newest technologically upgraded and inbuilt applications than any other cell phone. We do this by employing the best brains of the world and by providing them with the best resources to work.”

Now try & write positioning statements for the following brands:

• ·       Rolex
• ·       Patanjali Dant Kanti
• ·       DELL
• ·       Axe Deodorant