Marketing Segmentation, Targeting and Positioning

by Mark Powell
One of the most important techniques in marketing is the concept of segmentation, targeting and positioning (STP). These three tools allow businesses to identify their most likely customers and tailor messages to these customers in order to increase their chances of offering the right product to the right customer.

Segmentation is the process of splitting up a huge group of all possible customers into meaningful sub groups. Segmentation is often done on demographic lines such as age, gender, income levels, family size, home address or work address. For example, a business may split its customers into male and female customers or into customers that are in their teens, 20-30, 30-40, 40-50 and over 50. Alternatively, a business may distinguish between customers that live within 10 miles of their store and those that live more than 10 miles from the store. In addition to these objective demographic categories, segmentation can also be carried out on a more subjective level, such as life stage, personality or behavioural characteristics. For example, life stages might include single, married with no kids, married with young children, etc. Although there is a correlation with age it is not fixed. For example a married couple in their forties may have no children, one young child or two teenage children. The key point of segmentation is to pick segmentation criteria that are relevant to the product or service you are offering.

Once you have chosen your segmentation criteria, the next step is to select various segmentation groups to target. For example in the video games market, age and gender are commonly used for segmentation. Early targeting strategies focused on males in their teens and early twenties. As a result games were developed that appealed to this target group. However, as the industry developed it was realized that there were other potential target groups. Older customers from both genders were targeted for a completely new genre of games involving brain training and female customers in their 30s and 40s were targeted for games such as the Sims and Farmville. By the use of suitable segmentation criteria, the games industry was able to hugely increase its potential market. It is only by the use of segmentation and targeting that this was possible. If they had tried to offer the same product to all groups they would have failed to expand beyond their initial market, however by realising that there were different segmentation groups the industry could offer a more suitable product to each of those groups.

This third stage is known as positioning. This involves offering a product that suits the target group and communicating with that target group in a suitable manner. In the video game example, positioning started with offering a radically different product to each target group. In other cases the same or very similar products can be positioned very differently by means of packaging and advertising. A good example of this is Diet Coke and Coke Zero. What is the difference between these two products? There are some minor differences in the recipe but ultimately they are almost identical in terms of the actual product. The real difference is that Diet Coke is aimed at women and Coke Zero is aimed at men. As a result, the product packaging for the two is very different and if you have ever seen a Diet Coke advert it is obvious that it is aimed at women while Coke Zero adverts are clearly aimed at younger men. In this way Coke can position their product specifically for the relevant target markets. Trying to come up with an advert that appealed to both men and women would be much less effective overall.

Positioning your scuba diving courses will also depend on your target group. One target group may prefer online training while another may prefer the face to face approach. One group may be attracted by action and adventure while another may be worried about the risks involved. One group may be interested in marine life and the environment while another may be more interested in exploring wrecks. One group may be interested in diving in far flung exotic places, while another maybe more interested in being able to train locally without the need to travel away from home. By coming up with an appropriate set of target groups you can put together a set of offerings that appeal to those target groups.

As well as product specification and product imagery, positioning can also affect your choice of advertising medium. National TV advertising on a major channel can have a huge reach but is a very expensive and an inefficient method of reaching a specific target group. If your target market lives within 10 miles of your dive centre then local advertising will be much more cost effective than national advertising. If you are targeting new divers, diving magazines or online forums are not the right place to look for those customers. However, if you are targeting experienced divers who are looking to get into technical diving then they are much more appropriate. If you are targeting inexperienced divers who want to gain more experience then your open water students over the last few years are the best starting point.

Segmentation, targeting and positioning is not a magic bullet but if used correctly it can help any business owner identify likely groups of potential customers and help you think about how best to position your offering to those customers.