Marketing Strategy (STP)

Question 1

The STP Process

Answer 1

It is very hard to build and sustain customer satisfaction and trust. In order to do this well, we use the STP process to get consumers products they actually want.

Not all customers are the same and everyone is not competing for the same customers. Different customers have different needs that need to be fulfilled.

The STP Process first segments the market, then finds the target market, after which it decides on its positioning.

Question 2

Market Segmentation

Answer 2

Consumers can have very detectable, distinctive patterns in behaviour. This is why it is important to distinguish and segment different types of customers.

Types of marketing strategies:
- Mass marketing strategy: very efficient, but not effective
- Customised strategy: very effective but not alway efficient
- Segmentation: balance between effectiveness and efficiency

Question 3

Why Segmentation?

Answer 3

1. Allows for competition: competing firms could be more capable in attracting certain groups of customers, segments, in the market, companies can coexist in the marketplace by competing in different segments
2. Caters different needs: when a retailer has only a certain product, it might be costly and difficult to satisfy with only that one product or service
3. Fallacy of aggregation: it may be impossible to satisfy different needs at once and may up not satisfying anyone
4. Limited resource: companies have to work with a restricted budget that must be spent in the most profitable way, they must invest in customers with the highest return on marketing investment

Thus organisations should identify the most attractive parts of the market that it should serve effectively.

Question 4

Segmentation Criteria

Answer 4

Geographic: location

Demographic: financial situation, education

Purchasing: frequency, centralised vs decentralised organisation

Situational: urgency of orders, order size, personal or gift

Beliefs, Attitudes: social context, innovativeness

Needs: inventory capabilities, technological requirements, willingness to pay

Furthermore, segmentation can be both vertical and horizontal. Vertical is the quality and specialisation aspect and horizontal is the range of customers. Combination of both is the best.

Three criteria for market segmentation:
1. distinctiveness: whether a product is different from similar offerings
2. operationality: whether a product is easily identifiable and reachable
3. substantiality: whether a product is large enough a segment to be profitable

Question 5

Trade-Off in Segmentation

Answer 5

There is one key trade-off in segmentation, between observability vs usefulness.

Often the characteristics that are most observable (e.g age) are also the characteristics that are the least useful.

Question 6

Segmentation Ideally Yield “Mutually Exclusive and Collectively Exhaustive” Segments

Answer 6

Segments should be sufficiently different from one another so that they don’t overlap.

Identified segments should include all customers in a given market.

Question 7

Market Targeting

Answer 7

Process of evaluating segments and selecting one or more segments as the focus of marketing mix offerings.

In order to target, one looks if the segment is worth it through the importance-performance model.

Question 8

Target Marketing Strategies

Answer 8

There are 4 target marketing strategies:
1. Undifferentiated marketing: targeting the whole market
2. Differentiated marketing: using different marketing mixes for different customer groups
3. Focused marketing: targeting one customer segment through one marketing mix
4. Customised marketing: specifying market to every single customer

Question 9

Importance-Performance Model (IPM)

Answer 9

According to the IPM, individuals who may want to buy the product should be targeted.

Companies need to know three things:
1. Customer focus: what their customer want
2. Company focus: how well they fulfil their customers
3. Competitor focus: how well their competitor fulfil customers wants

Identify the ability-to-satisfy-benefits score and the company should then invest in the customer segments in which it performs better than the competition and in which it is most profitable.
- if your score is lower than the competitor for all segments, then change the 4P’s to improve score

Question 10

Determining Segment Attractiveness

Answer 10

Once you get rid of all the segments for which IPM score is lower than the competitor, determine the general attractiveness of the remaining segments in terms of factors:
1. segment size: is it big enough to obtain profit?
2. segment growth: is the segment growing or shrinking?
3. seasonality: do people’s purchasing patterns change by season?
4. cost position
5. Technology
6. Cannibalisation, conflict and synergy between segments

Question 11

Cannibalisation

Answer 11

Occurs when, within one company, one product eats up revenue from another product.

To minimise cannibalisation, one should use differentiation between segments and price discrimination.

Question 12

Inter-Segment Conflict and Synergies

Answer 12

Firms should be careful because by targeting one group, they might be harming their targeting of another group (inter-segment conflict), on the other hand, in inter-segment synergies, the capabilities of each segment add value to each other.

Question 13

Key Takeaways for Targeting

Answer 13

It determines which segments you will invest your scarce resources in and which segments will yield that most bang for your buck. It provides answers to the questions whether customers want the company (Important-Performance), and whether the company wants the customers (general segment attractiveness).

Question 14

Positioning

Answer 14

Act of conceiving the company’s products so that it occupies a meaningful and distinct position in the target consumer’s mind.

Effective positioning is the act of linking products and services to the need that consumers want to fulfil.

Question 15

Developing a Positioning Strategy

Answer 15

Deciding what position to occupy in the market requires consider consideration of three variables:
1. The customers: what features of the product
2. The competitors: how to create a differential advantage that is hard to duplicate
3. The company: how to create unique and sustainable features

Question 16

5-Box Positioning Strategy

Answer 16

Current Behaviour <– Current Belief –> Consumer Proposition –> Desired Belief –> Desired Behaviour

Helps company determine its positioning.

Question 17

Repositioning

Answer 17

Involves changing the target markets, the differential advantage, or both. Some current beliefs/feelings that we might want to address are confusion about what the category was, the quality of good and the main benefit.

Four repositioning strategies:
1. Image repositioning: target market and the product stays the same

2. Product repositioning: only the product changes
3. Intangible repositioning: only the target market changes
4. Tangible repositioning: target market and product changes

Question 18

Perceptual Map

Answer 18

Useful tool for determining the position of a brand in the marketplace.

In order to create a perceptual map, one must first identify a set of competing brands and the important features consumers think of when choosing between brands.

After this, quantitative marketing research must be conducted, where consumers score each brand on all important features.

Finally, we can plot the outcomes by putting the brands on a two-dimensional map.

Question 18

How to Position?

Answer 18

Companies should consider the 4P’s.

Positioning Product: e.g. different brands for washing soap

Positioning Price: e.g. Lidl, Albert Heijn, Jumbo

Positioning Promotion: Volvo was promoting the safety, targeting mature people, whereas now they are focused on more active lifestyle, targeting the general population

Positioning Place: consideration of where the product should be available, and how it will be displayed

Question 19

Traditional Positioning Sentence Structure

Answer 19

Should include the target segment, competitive framework, point of differentiation and reasons for why the company is better than competitors and should look like:

‘To (target audience), (brand) is the brand of (competitive framework) that (point of differentiation) because (reason).

Positioning statements are not the same as tag lines.

Question 20

It is Hard to Move Beliefs

Answer 20

Even when provided with contradictory evidence, beliefs that people hold are difficult to change.

Phenomena of belief perseverance and the curse of knowledge take place.

Belief perseverance: when someone is given a complimentary belief, it is very difficult to change that, even when told that the complimentary belief is false.

Curse of Knowledge: cognitive bias where we incorrectly assume that everyone knows as much as we do on a given topic

Question 21

Summary of STP

Answer 21

Segmentation recognises diversity in the market place, involves identifying and understanding different groups of consumers.

Targeting involves selecting segments to pursue and considering target consumers’ perspectives.

Positioning is what do we need to say to induce the desired beliefs among our target audience?