Targeting and positioning – the second two parts of the STP model

September 2018

Last month I outlined the strategic marketing model of segmentation, targeting, positioning (STP), and went on to provide an overview of the principles of market segmentation. So this month I’m going to cover the other two elements of targeting and positioning, albeit only at a fairly top-line level, so if you want more detail then please contact me.

Targeting

The first thing to say is that, in the context of the STP model, targeting isn’t about the ‘how’ but about the ‘who’. How you target a segment is further down the strategy process, and actually ends in the tools and tactics you use (with different segments often requiring different tools and tactics to reach them). Deciding which of the market segments you target is what we’re concerned with in the model, which could be all of them of just one of many. Factors you might consider on which segments to target could include:

· The most profitable (perhaps because of the sheer volume of consumers, or because they spend more etc.)

· Easiest and most cost-effective to reach (no point targeting a segment if the cost of doing so is prohibitive)

· Better long-term prospects (perhaps because they’re younger and with plenty of repeat purchase potential)

That certainly isn’t an exhaustive list and there could be a host of other factors to consider, but you’ll get the idea. To illustrate the overall principle with an example …

Say you own and run an art gallery which also has a small coffee shop in it. The art you retail is relatively expensive, with the focused offer being contemporary work which typically sells for £350 for a print and £3,000 for an original. You’re located in a rural town which, along with being relatively affluent, also attracts a good number of tourists. You also have a website which has ecommerce functionality to allow you to sell works of art online – albeit in small volumes. Without too much trouble, you’ve worked out that your market segments are:

1. Local people only interested in the coffee shop – in part because they can’t afford the art

2. Local people mainly interested in the art but who also might buy a coffee while they’re browsing

3. Tourists who come in for a coffee and very occasionally buy art

4. Consumers across the globe interested in the contemporary art and who might buy online

For your targeting, segment one is important because there’s plenty of these people and they’re frequent customers, plus and crucially, the money they bring in really helps your cash-flow – which can be a big issue given the relatively infrequent art sales.

Segment two is super-important, because although not frequent customers – they might only come in once or twice a year – they’re big spenders when they do.

Segment three is okay, but not really worth targeting because a) the coffee is a one-off purchase only, b) they take up your valuable and limited seating in the summer months and so prevent your regular locals coming in (which might mean they go elsewhere and don’t come back), and c) the chances of them buying a print or original is slim.

Segment four you will target because it allows you to trade when the physical gallery is closed and to a far bigger audience. It also doesn’t require too much effort to market the product (you can rely on long-tailed phrases which include the artists’ name to get to your site from organic search), with the only real hassle being the shipping – but that’s all worth it given the value of a typical sale.

Positioning

This is all about how you position your offer to the segments you’re targeting. Positioning should very much be driven by your brand (e.g. its values and attributes), with this brand definition work always carried out ahead of embarking on the STP model.

In addition, it’s really useful to develop a simple two axis model. This allows you to not only plot where your own business and brand sits in the market, but also that of your competitors. The two variables you pick for your model will depend on the market you operate in, but taking our art gallery as an example:

The gallery only sells contemporary art so that determines that it’s right on the far side of that variable, whereas what it sells is relatively expensive but certainly not at the top of the market – so hence where I’ve placed the star. Imagine as well that the gallery owner could plot all of their regional competitors on the same model, which would also show where gaps in the market might be. So it’s a simple and neat model, and one that any business can use – the key thing being picking two variables which are most appropriate to the market you operate in.

I’ve rather over-simplified and summarised the approach to STP, but you’ll no doubt get the thrust of it anyway. However, if you’re an SME business owner and want some help and advice on properly nailing your own STP strategy, then please contact me.