Chapter 4

1. 4-1 Chapter 4 Understanding the Marketing Environment: Segmentation, Targeting, and Positioning

2. 4-2 • Explain the process of STP marketing. • Describe bases for identifying target segments. • Discuss criteria for choosing a target segment. • Identify the essentials of a positioning strategy. • Review the necessary ingredients for creating a brand’s value proposition.

3. 4-3 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. 4-4 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) • Benefitssought—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.

5. 4-5 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.

6. 4-6 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.

7. 4-7 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. • Thorson and Moore’s Strategic Planning Triangle is a useful tool in identifying and applying a brand strategy. The three apexes of the triangle are: • Identify and profile target segments • Specify the brand’s value proposition • Select persuasion tools