Understanding the Basic STP model
Most marketing textbooks will show the STP as three broad steps. In the below diagram, the three foundation stages of segmentation, targeting and positioning are shown, along with a final implementation stage of marketing mix development.
It is important to understand that the STP process (the first three stages) is always followed by the development and implementation of a marketing mix. And the additional of the fourth stage in the diagram simply highlights the need to effectively execute these strategic decisions.
In other words, the purpose of working through segmentation, targeting and positioning is to decide how to best compete in the market and how to effectively design the marketing mix.
Please note that STP is presented in marketing textbooks as a simple summary model to help recall its three key components. However, there are other elements to also address, which are covered in the article on the full/complete STP process.
STP helps answer key marketing questions
A good way to think about the STP process is that it is a analytical approach that helps the firm make two important marketing strategy decisions:
- ‘where to compete‘ (segmentation and target market selection) and
- ‘how to compete‘ (product positioning and marketing mix design)
You should note the use of the arrow in the above model, which indicates that STP is a sequential process. The starting point is always market segmentation, which allows the marketer to view different consumer needs and categories in the overall market.
Implementing the STP process
Start with market segmentation
Typically a marketer would look between three to ten market segments when dividing up one particular market. The marketer can then assess which segments best fit with the firm’s strategy and resources, as well as assessing the current and future attractiveness of each segment. (Please see ‘how target markets are selected’.)
It is important that the segments consist of consumers that have common needs, behaviors, or profiles that are relevant to the brand/products, for them to be considered suitable as market segments. And please remember that there is NO one best way to segment the market – unique approach to segmentation may create competitive advantages and generate market insights.
Move to selecting one or more target markets
Based on this market segment analysis and evaluation, the firm will select one or more of the market segments to form part of their marketing program. The market segment that they select is then referred to as a target market. Therefore, a target market is simply one of the many market segments available to the company that the firm has deliberately selected for the purposes of their marketing programs.
Determine a competitive positioning
After selecting a target market, the organization needs to consider how it will construct its marketing program to achieve success. There are two parts to this as shown in the diagram above.
The first is positioning, which is how the firm wants its products to be perceived (understood) by consumers in that particular market. (For more details, please refer to What is positioning?). A key component of positioning is ensuring that the brand/product has some points of differentiation = something unique that it offers to the marketplace.
Differentiation provides an incentive for consumers to buy – as it offers a benefit that they cannot get from a competing brand – and allows the brand to charge a price premium.
Please note that some marketing textbooks split the STP process further into STDP by adding differentiation as its own component, which is covered in this article on the website.
Design the marketing mix
Once the desired positioning has been determined an appropriate and supportive marketing mix then needs to be developed and implemented by the firm.
Keep in mind that positioning is executed through the full 4P’s (or 7P’ for a service firm). It is not simply part of the promotional/communication mix. If a product is positioned as “a refreshing beverage”, then it is critical that the beverage (i.e. the product itself) be refreshing.
For a greater understanding of the STP model, you should review the Full STP Process.