Chapter 4

Understanding the

Marketing Environment:

Segmentation, Targeting, and

Positioning

4-1

1. Explain the process of STP marketing.

2. Describe bases for identifying target

segments.

3. Discuss criteria for choosing a target

segment.

4. Identify the essentials of a positioning

strategy.

5. Review the necessary ingredients for

creating a brand’s value proposition.

4-2

STP Marketing

• STP marketing is the process of segmenting, targeting, and

positioning. Marketers pursue this set of activities to formulate

marketing strategies for their brands.

• STP marketing also provides a strong foundation for the

development of advertising campaigns.

• While no single approach can guarantee success in marketing and

advertising, STP marketing should be considered when customers

in a category have heterogeneous wants and needs.

4-3

STP Marketing, Continued

4-4

Exhibit 4.1 STP Marketing

STP Marketing, Continued

4-5

Exhibit 4.2 Something for Everyone from Estée Lauder

Segmenting—Identifying Target

Segments• In market segmentation, the goal is to break down a heterogeneous market into

more manageable subgroups or segments.

• Markets can be segmented on the basis of:

• Usage patterns and commitment levels—heavy users (primary target

segment), nonusers, brand-loyal users, switchers or variety seekers, and

emergent consumers (point-of-entry marketing).

• Demographics—age, gender, race, marital status, income, education, and

occupation

• Geography—geodemographics (PRIZM)

• Psychographics—activities, interests, and opinions (AIOs)

• Lifestyles—Pillsbury’s eating habits segmentation (chase and grabbits,

functional feeders, down-home stokers, careful cooks, and happy cookers);

VALS system (groups consumers by psychological characteristics—primary

motivation—and key demographics—resouces)

• Benefits sought—segmentation by benefit package

• Different bases are typically applied for segmenting consumer markets versus

business-to-business markets.

• Standard Industrial Classification Codes—SIC codes are commonly

used to identify categories of business and to locate them precisely.

4-6

Segmenting—Identifying Target Segments, Continued

4-7

The States in red have the highest consumption of Twinkies.

Segmenting—Identifying Target Segments, Continued

4-8

Exhibit 4.3 VALS™ Segments

Targeting—Prioritizing

Target Segments• In STP marketing, after segment identification, an organization must

settle on one or more segments as a target audience for its marketing

and advertising efforts.

• Several criteria are useful in establishing a target segment:

• The organization’s ability to serve the segment in question

• The size of the segment and its growth potential

• The intensity of the competition the firm is likely to face in the

segment.

• Often, small segments known as market niches can be quite

attractive because numerous competitors will not be hotly

contesting for the same market.

4-9

Positioning—Formulating the

Positioning Strategy• The P in STP marketing refers to the positioning strategy, which should

guide all marketing and advertising activities undertaken in pursuit of the

target segment.

• Effective positioning strategies should be linked to the substantive benefits

offered by the brand. The brand should then have no problems delivering on

its promises.

• Effective positioning strategies are also consistent internally and over time,

and they feature simple and distinctive themes.

• Options for positioning strategies include:

• benefit positioning—features a benefit or option of the brand

• user positioning—focuses on a target user

• competitive positioning—uses an explicit reference to a competitor

• Advertisers often opt to create a hybrid strategy by blending all or some of

the three positioning strategies. A frequent hybrid is benefit-plus-user

positioning.

4-10

Capturing Your Strategy in a

Value Proposition

• Many complex considerations underlie marketing and

advertising strategies, so it is useful to summarize the essence

of one’s strategy with a device such as a value proposition.

• A value proposition is a statement of the brand’s various

benefits (functional, emotional, and self-expressive) that create

value for the customer.

• These benefits as a set justify the price of the product or

service. Clear expression of the value proposition is critical for

developing advertising that sells.

4-11

Capturing Your Strategy in a Value Proposition, Continued

4-12

Exhibit 4.1 Value Propositions for Two Popular Brands

Capturing Your Strategy in a Value Proposition, Continued

4-13

Capturing Your Strategy in a Value Proposition, Continued

Thorson and Moore’s Strategic Planning Triangle

• Thorson and Moore’s Strategic Planning Triangle is a useful

tool in identifying and applying a brand’s overall IMC strategy.

The three apexes of the triangle are:

• Identify and profile target segments

• Specify the brand’s value proposition

• Select persuasion tools

4-14

Capturing Your Strategy in a Value Proposition, Continued

4-15

Exhibit 4.5 Thorson and Moore’s Strategic Planning Triangle