Glossary: Targeting and segmentation

The process STP (Segmentation, targeting and positioning) is the tool of 3 steps to propose a product to the public, in whom first there is defined that types of consumers exist on the market (segmentation), secondly, the best segments are chosen to act in them (targeting) and third party the products are optimized and one believes the communication of the product demonstrating his differences with other offers of the market (positioning).

The segmentation of market is a process that consists of dividing the total market of a product or service in several smaller and internally homogeneous groups. So it might say that the segmentation is to know really the consumers.

On the one hand, when sellers don’t have any strategy for theis consumers, all consumers are treated as the same without making any specific efforts to satisfy particular groups. Usually, this is the case only for commodities.

On the other hand, when you have a specific strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. When brands use this strategy, there may be a large number of variables that can be used to differentiate consumers of a given product category. Experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable.

segmentation

To achieve a segmentation of efficient market are necessary these characteristics:

  • Accessibility
  • Mensurability
  • Operation

The market segmentation  allows to identify the needs and the behavior of the different segments of the market to satisfy, in better form, his needs, in agreement to his preferences and achieving competitive advantages in the objective segments.

The most common are:

Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. It’s also possible to segment on lifestyle and values.

Geographic: The brand wants to divide the market in geographical zones that have sufficient similarities to apply the same action of marketing. This geographical division can be of level, internationally, nationally, regionally or locally.

→ Another basis for segmentation is behavior. Some consumers are “brand loyal”. They tend to stick with their preferred brands even when a competing one is on sale. Some consumers are “heavy” users while others are “light” users.

→ One can also segment on benefits sought, essentially bypassing demographic explanatory variables.

To sum up, the brands prefer attracting to a great market to dividing it in homogeneous subgroups and being orientated in one of them. Nevertheless, often the segmentation is used because a brand doesn’t have means to differ with his competition when it’s orientated to the massive market.

Targeting (objective)

The second step is to choose what segments we want to direct the offer. For it, the company can resort to four types of strategies:

Differentiated strategy: It consists on choosing several segments and of proposing an offer adapted to each of them. This strategy is preferred in case of high competition on the market because they can reach several types of consumers.

Undifferentiated strategy: This type of segmentation considers to satisfy needs different from each one of the segments with the only commercial offer. To obtain it, it is based on the common characteristics of the segments. It consists of focusing on all the segments of the same way, in other words, only to offer a type of product.

This strategy allows to sell more and to economize on costs of production, consequently, the prices they are less high. The undifferentiated marketing, it’s very rare nowadays, because of the multitude of offers, the companies meet obliged to adapt his products to differ from his competitors.

Concentrated strategy: It consists of focusing in an alone segment of the market exclusively. With this one seeks to be a specialist in a range of products, where there offers an offer well adapted to the needs of the segment. Brands as Ferrari, and other car manufacturers of luxury do a concentrated marketing strategy, this allows them to control better his channels of distribution and to create value towards the consumers, obtaining thus, profitability.

The micromarketing: This strategy differs from the previous ones already it’s directed for the individual clients, and not for groups of consumers. They adapt the offers according to the specific needs of each person; in order that this strategy works, it’s necessary that the clients represent an important turnover or that the costs of the customization are high.

By Júlia Llopis

 

 

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