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STP Analysis:- The traditional view of the business process, is not going to work
in economies where people face abundant choices. There, the ‘Mass Market’
is actually splintering into numerous micro markets, each with its
own wants, perceptions, preferences, and buying criteria. The smart
competitor must design and deliver offerings for well-defined target markets.
This realization inspired a new view of business processes that places
marketing at the beginning of planning. Instead of emphasizing making
and selling, companies now see themselves as part of a value delivery
process.
The value creation and delivery sequence can be divided into
three phases. The first phase, choosing the value, represents the
‘homework’ marketing must do before any product exists. The marketing
staff must segment the market, select the appropriate market target, and
develop the offering’s value positioning. The formula ‘Segmentation,
Targeting, Positioning (STP)’ is the essence of strategic marketing. Once
the business unit has chosen the value, the second phase is providing the
value. Marketing must determine specific product features, prices, and
distribution. The task in the third phase is communicating the value by
utilizing the sales force, sales promotion, advertising and other
communication tools to announce and promote the product. Each of these
value phases has cost implications. It is also the case that the value delivery
process begins before there is a product and continues while it is being
developed and after it becomes available. Ex:- Nike, Toyota, etc. prices go up.
Concept of Market Segmentation:- A Market Segment consists of a
group of customers who share a similar set of needs and wants. The
marketer’s task is to identify them and decide which one(s) to target.
Segment marketing offers key benefits over mass marketing. A
flexible market offering consists of two parts: - a naked solution
containing the product and service elements that all segment
members value, and discretionary options that some segment
members value. Each option might offer carry an additional charge.
Ex:- Automobile companies in India offer different versions of the
same model with different features. Similarly in the case of Airlines
or Railways.
We can characterize market segments in different ways.
One way is to identify preference segments. Homogeneous
preferences exist when all consumers have roughly the same
preferences; the market shows no natural segments. At the other
extreme, consumers in diffused preferences vary greatly in their
preferences. If several brands are in the market, they are likely to
position themselves throughout the space and show real differences
to match differences in consumer preference. Finally, clustered
preferences result when natural market segments emerge from
groups of consumers with shared preferences.
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1.
Segmentation of Consumer Markets:- Some researchers try to define
segments by looking at descriptive characteristics: geographic,
demographic, and psychographic. Then they examine whether these
customer segments exhibit different needs or product responses. Ex:- What
is the different attitudes of ‘professionals, ‘ blue collars’ and other groups
towards say purchasing a new car.
Other researchers try to define segments by looking at
behavioral considerations, such as consumer responses to benefits,
use occasion, or brands. The researcher then sees whether different
characteristics are associated with each consumer-response segment. Ex:Do people who want ‘quality’ rather than ‘low price’ say in an automobile
purchase differ in their geographic, demographic and psychographic
makeup?
Regardless of which type of segmentation scheme we use, the
key is adjusting the marketing program to recognize customer differences.
Geographic Segmentation:- Calls for division of the market into
different geographical units such as nation, states, regions, countries,
cities, or neighborhoods. In the South Asian context, it assumes more
importance due to variations in consumer preferences and purchase habits
across different regions, across different countries and across different
states in these countries.
One of the major geographical segmentation variables
relevant for marketers in South Asia is the division of markets into
rural and urban areas, as they differ on a number of important
parameters such as literacy levels, income, spending power and
availability of infrastructure such as electricity, telephone network, and
roads as well as social and cultural orientations of people that affect the
market potential, and buying patterns and habits. The size of the
geographical markets is an important consideration while deciding
the concentration of marketing efforts.
The market potential values of India’s towns were calculated
on the five indicators such as number of consumers, the means these
consumers have, their consumption behavior, awareness levels and
the availability of marketing – support infrastructure. The findings
were that 16% of towns (out of 784 towns with a population of over 50,000
people which account for 77% of the urban population) account for 80% of
the market-potential value. These patterns suggest the need to prioritize
the geographical focus of marketing efforts.
Issues relating to logistics for serving the diverse geographical
market segments also need attention from marketers. Many companies use
sophisticated models and software to plan physical distribution and to
develop route plans for their sales people to efficiently serve wide
geographical markets.
Geographical markets also vary in their product requirements.
Ex:- Air Coolers and Air Conditioners. Food habits. Etc.
2.
Demographic Segmentation:- We divide the market into groups on the
basis of variables such as age, family size, family life cycle, gender,
income, occupation, education, religion, race, generation,
nationality and social class. Demographic variables are highly popular
with the marketers as they are often associated with consumer needs and
wants and they are easy to measure.
a.
Age and Life-Cycle Stage:- Consumer wants and abilities change with age.
Hence, age and life-cycle stages are important variables to define segments.
Johnson & Johnson’s baby products , which are highly popular in almost all
the South Asian countries, are classic examples of products for infants and
children. Television channels in India indicate segmentation based on age
and life cycle.
Life Stage:- Persons in the same part of the life cycle may differ in their life
stage. Life stage defines a person’s major concern, such as getting married,
deciding to buy a home, sending the child to the school, taking care of
older family members, marrying off their children, planning for retirement,
and so on. These life stages presents opportunities for marketers who can
help people cope with their major concerns.
b.
c.
Gender:- Men & women have different attitudes and behave differently,
based partly on genetic makeup and partly on socialization.
A research study examining how men and women shop found that men
often need to be invited to touch a product, whereas women are likely to
pick it up without prompting. Men often like to read product information;
women may relate to a product on a more personal level.
Gender differentiation has long been applied to product
categories such as clothing, hairstyling, cosmetics and magazines. Some
products have been positioned as more masculine or feminine. Park
Avenue now known as Parks, the brand of ready-made apparel from
Raymond is positioned as a masculine brand, whereas the company
introduced a range of women’s apparel under the brand Be. Shopping
behavior of men and women also vary. Men prefer to drive motorcycles
whereas for women there are specific brands of scooters, like Hero Honda’s
Pleasure, Honda’s Activa etc.
But it’s not enough to tout a product as masculine or feminine.
Hyper-Segmentation is now occurring within both male and female
personal care segments.
Media have emerged to make gender targeting easier. A large
number of women’s magazines in various language make it easy for
marketers to reach the target customers more easily and vise versa.
c.
Income:- Income segmentation is a long-standing practice in
a variety of products and services. Income determines the ability
of consumers to participate in the market exchange and hence this is
a basic segmentation variable. However, income does not always
predict the best consumers for a given product. Even, if two
consumers have similar income levels, each may own different types
and brands of products based on a host of factors such as lifestyle,
attitudes, and values. Given the nature of income distribution in
India and South Asia, opportunities exist for companies to serve the
requirements of different income classes.
Ex:- the target segments of Surf and Nirma.
d.
Generation:- Each generation is profoundly influenced by the
times in which it grows up – the music, movies, politics, and
defining events of that period. Demographers call these
generational groups cohorts. Members share the same major
cultural, political, and economic experiences and have similar
outlooks and values. The younger generations play significant roles,
not only as consumers, but also as initiators and influencers of
buying decisions. A study reveals that 63% of the children in the age
group of 8 to 14 years, are involved in purchase decisions for a wide
range of product categories such as clothes, televisions, and
automobiles.
Different generational cohorts also influence each others. For
instance, parents are getting influenced by what demographers are
calling a “Boom - Boom effect’. The same products that appeal to 21 –
year – olds are appealing to youth – obsessed baby boomers.
e.
Social Class:- Social class has a strong influence on preferences
in cars, clothing, home furnishings, leisure activities, reading
habits, and retailers, and many companies design products
and services for specific social classes.
The concept of social class in India is influenced by the caste
system. This is a very unique system peculiar to India. The caste
system prevalent in India sometimes even transcends the income
level. As a consequence, market segmentation schemes become a
very complex process. This complexity of the Indian market has
prompted the development of ‘Socioeconomic classification’ or as
a viable method to segment markets.
Consumption behavior in India is found to be influenced by the
socioeconomic factors governed by the person’s educational as well
as occupation.
Ex:- Senior – level executives with higher educational
qualifications exhibit different purchase preferences and habits
compared to a person with a similar income level, but a different
occupation and lower education level.
3.
Psychographic Segmentation:- Psychographics is the science of
using psychology and demographics for better understanding of the
consumers. In psychographic segmentation buyers are divided into
different groups on the basis of psychological / personality
traits, lifestyle, or values. People within the same demographic
group can exhibit very different psychographic profiles. Values and
life styles significantly affect product and brand choice of consumers.
Religion has a significant influence on values and lifestyles. The
strict norms that consumers follow with respect to food habits or
even dress codes can be representative examples in this regard. Ex:A significant number of people in India are vegetarian.
And these things are so strong that McDonald’s has to change it’s
menu for the first time when they started their operation in India.
The market for wristwatches provides another illustration of
segmentation based on lifestyle parameters. Titan watches have a
wide range of sub – brands within their Titan range such as Edge,
Regalia, Nebula, and Raga, to appeal to different lifestyle
segments. The company’s range of watches under the ‘Fasttrack’
brand appeals to the youth segment. The company has another value
– for – money brand, ‘Sonata’, targeted at people who want to own
good – looking watches at affordable prices.
Behavioral Segmentation:- In behavioral segmentation, marketers
divide buyers into groups on the basis of their knowledge of, attitude
toward, use of or response to a product.
a. Decision Roles:- People play five roles in a buying decision:Initiator, Influencer, Decider, Buyer and User. Recognition of the
different buying roles and specification of the people who play these
roles for specific products and services are vital for marketers.
This is especially useful for designing the communication
strategy. Ex:- In pharmaceutical products, doctors prescribe
medicines and the pharmaceutical companies influence doctors’
prescription behavior by providing technical information about the
products; patients’ relatives buy medicines and the patient uses the
product. Men choose their shaving equipments and women their
cosmetics. Women, play a significant influencing and deciding role
for kitchen appliances.
b. Behavioral Variables:- Many marketers believe behavioral variables
– occasions, benefits, user status, usage rate, buyer – readiness
stage, loyalty status, and attitude – are the best starting points
for constructing market segments.
4.
I.
Occasions:- Greeting card brands such as Archies and Hallmark
make cards for different occasions. The Amul brand of chocolates is
promoted as ‘a gift for someone you love’. A number of durables are
heavily promoted during the festive occasions. Monaco biscuits
come with suggestions for toppings so that biscuits can be served as
snacks at parties, or when guests come home.
II. Benefits:- Buyers are classified according to the benefits they seek.
Many product categories offer different products targeted at people
who seek different sets of benefits. Ex:- Shampoos, offer benefits
such as basic cleaning of hair, conditioning effects, medicinal
properties, and suitability to hair types. Brands such as Clinic, Head
& Shoulders, Sunsilk offer different variants addressed to diverse
benefit segments.
Since benefits that consumers seek from the same product or
service category varies, this segmentation approach is a very useful
tool in identifying market opportunities and for deciding the value
proposition that can be offered.
III. User Status:- Every product has its nonusers, ex-users, potential
users, first – time users and regular users. Ex:- Blood banks
cannot rely only on regular donors to supply blood; they must also
recruit new first – time donors and contact ex – donors, each with a
different marketing strategy. The key to attracting potential users, or
even possibly nonusers, is understanding the reasons they are not
using. i.e. to find out that do they have deeply held attitudes, beliefs,
or behaviors or just lack knowledge of the product or brand benefits
and usage?
Included in the potential – user group are consumers who will
become users in connection with some life stage or life event. Ex:Mothers – to – be are potential users who will turn into heavy users
of the infant and child products.
Market share leaders tend to focus on attracting potential
users because they have the most to gain. Smaller firms focus on
trying to attract current users away from the market leader.
IV. Usage Rate:- Markets can be segmented into light, medium and
heavy product users. Heavy users are often a small percentage of
the market but account for a high percentage of total consumption.
Ex:- In the mobile phone service market, heavy users account for a
significant proportion of the revenue earned by the service providers
and hence mobile service providers target this segment by giving
special packages or offers to retain their patronage.
V. Buyer – Readiness Stage:- Some people are unaware of the
product, some are aware, some are informed, some are interested,
some desire the product and some intend to buy. To help
characterize how many people are at different stages and how well
they have converted people from one stage to another, some
marketers employ a marketing funnel.
The relative numbers of consumers at different stages make
a big difference in designing the marketing program.
VI. Loyalty Status:- Marketers usually envision four groups based on
brand loyalty status:
Hard – Core Loyals:- Consumers who buy only one brand all the
time.
 Split Loyals:- Consumers who are loyal to two or three brands.
 Shifting Loyals:- Consumers who shift loyalty from one brand to
another.
 Switchers:- Consumers who show no loyalty to any brand.
A company can learn a great deal by analyzing the degrees
of brand loyalty. Hard – core – loyals can help identify the
products’ strengths; Split loyals can show the firm which brands are
most competitive with its own; and by looking at customers who are
shifting away from its brand, the company can learn about its
marketing weaknesses and attempt to correct them.
VII. Attitude:- Five attitudes about products are :- enthusiastic,
positive, indifferent, negative, and hostile. Door – to door
workers in a political campaign use voter attitude to determine how
much time to spend with that voter. They thank enthusiastic voters
and remind them to vote; they reinforce those who are positively
disposed; they try to win the votes of indifferent voters; they spend
no time trying to change the attitudes of negative and hostile voters.
Combining different behavioral bases can help to provide a
more comprehensive and cohesive view of a market and its
segments.
c.
The Conversion Model:- The Conversion Model measures the
strength of consumers’ psychological commitment to brands
and their openness to change. To determine how easily a
consumer can be converted to another choice, the model assesses
commitment based on factors such as consumer attitudes toward,
and satisfaction with current brand choices in a category and the
importance of the decision to select a brand in the category.
The model segments users of a brand into four groups based on strength of
commitment, from low to high, as follows:I. Convertible (most likely to defect).
II. Shallow (uncommitted to the brand and could switch – some are actively
considering alternatives).
III. Average (also committed to the brand they are using, but not as strongly –
they are unlikely to switch brands in the short term).
IV. Entrenched (strongly committed to the brand they are currently using –
they are highly unlikely to switch brands in the foreseeable future).
The model also classifies nonusers of a brand into four other groups
based on their ‘balance of disposition’ and openness to trying the
brand, from low to high, as follows:I. Strongly Unavailable (unlikely to switch to the brand – their preference
lies strongly with their current brands).
II. Weakly Unavailable (not available to the brand because their preference
lies with their current brand, although not strongly).
III. Ambivalent (as attracted to the brand as they are to their current brands).
IV. Available (most likely to be acquired in the short run).

Segmentation of Business Markets:- The Business Market can
also be segmented with some of the same variables we use in
consumer markets, such as geography, benefits sought, and
usage rate, but at the same time business marketers also use
other variables like operating variables and personal
characteristics of the buyers.
Some major questions are to be answered in determining the
segments and customers the business marketers want to serve.
Ex:- A rubber – tire company for instance can sell tires to
manufacturers of automobiles, trucks, farm tractors, or aircraft.
Within a chosen target industry, a company can further segment by
company size. The company might set up separate operations for
selling to large and small customers.
These questions can be as follows:
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Demographic:Industry: Which industries should we serve?
Company Size: What size companies should we serve?
Location: What geographical areas should we serve?
Operating Variables:Technology: What customer technologies should we focus on?
User or Nonuser Status: Should we serve heavy users, medium
users, light users or nonusers?
Customer Capabilities: Should we serve customers needing many
or few services?
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Purchasing Approaches:Purchasing – function Organization: Should we serve companies
with highly centralized or decentralized purchasing organization?
Power Structure: Should we serve companies that are engineering
dominated, financially dominated, and so on?
Nature of Existing Relationship: Should we serve companies with
which we have strong relationship or simply go after the most
desirable companies?
General Purchasing Policies: Should we serve companies that
prefer leasing? Service contract? Systems purchases? Sealed bidding?
Purchasing Criteria: Should we serve companies that are seeking
quality? Service? Price?
Situational Factors:Urgency: Should we serve companies that need quick and sudden
delivery or service?
Specific Application: Should we focus on certain application of our
product rather than all applications?
Size or Order: Should we focus on large or small orders?
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Personal Characteristics:Buyer – Seller Similarity: Should we serve companies whose people and
values are similar to ours?
Attitude Toward Risk: Should we serve risk – taking or risk – avoiding
customers?
Loyalty:- Should we serve companies that show high loyalty to their
suppliers?
Within a given target industry and customer size, a company can
segment further by purchase criteria. Ex:- Govt. laboratories need low
prices and service contracts for scientific equipment; university laboratories
need equipment that requires little service; and industrial laboratories
need equipment that is highly reliable and accurate.
Business marketers generally identify segments through a
sequential process. Ex:- Consider an aluminum company. The company
first undertook macro-segmentation. It looked at which end – use
market to serve: automobile, residential, or beverage containers. It has to
choose the best customer size and chose large customers. The second
stage consisted of micro-segmentation. The company distinguished
among customers buying on price, service, or quality.

Effective Segmentation Criteria:- To be useful, market segments
must rate favorably on five key criteria:-
I.
Measurable:- The size, purchasing power, and characteristics of the
segments can be measured.
Substantial:- The segments are large and profitable enough to
serve. A segment should be the largest possible homogeneous group
worth going after with a tailored marketing program. It would not
pay, for ex:- for an automobile manufacturer to develop cars for
people who are less than four feet tall.
Accessible:- The segments can be effectively reached and served.
Differentiable:- The segments are conceptually distinguishable and
respond differently to different marketing – mix elements and
programs. If married and unmarried women respond similarly to a
sale on perfume, they do not constitute separate segments.
Actionable:-Effective programs can be formulated for attracting and
serving the segments.
II.
III.
IV.
V.
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Additional Considerations:- Two other considerations should also be
considered in evaluating and selecting segments. These are:-
1.
Segment – By – Segment Invasion Plans:- A company would be wise to
enter one segment at a time and the competitors must not know to what
segment(s) the firm will move into next.
A company’s invasion plans can be thwarted when it confronts
blocked markets. The invader must then figure out a way to break in, which
usually calls for a megamarketing approach Megamarketing is the
strategic coordination of economic, psychological, political, and
public relations skills, to gain the cooperation of a number of parties
in order to enter or operate in a given market. Ex:- Entry of Pepsico in
India.
2.
Ethical Choice Of Market Targets:- Some consumers may resist being
labeled. Ex:- Elderly consumers who don’t feel their age, may not appreciate
products that identify them as “old”.
Marketers can also generate public controversy. The public is concerned
when marketers take unfair advantage of vulnerable groups (such as
children) or disadvantaged groups (such as inner – city poor people) or
promote potentially harmful products. Ex:- Toy companies, Child products
and chocolates through celebrities etc.
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1.
Target Market Identification:- Target marketing includes three
activities:- Market segmentation, Market targeting and Market
Positioning. We can target markets at four levels:- Segments,
Niches, Local Areas, and Individuals.
Segment Marketing:- A Market Segment consists of a group of
customers who share a similar set of needs and wants. The
marketer’s task is to identify them and decide which one(s) to
target. Segment marketing offers key benefits over mass marketing.
The company can offer better design, price, disclose and deliver the
product or service and also can fine-tune the marketing program and
activities to better reflect competitors’ marketing.
Business – to – business marketing suggests that the marketers
should offer flexible market offerings to all members of a
segment. A flexible market offering consists of two parts: - a
naked solution containing the product and service elements that all
segment members value, and discretionary options that some
segment members value. Each option might offer carry an additional
charge. Ex:- Automobile companies in India offer different versions
of the same model with different features. Similarly in the case of
Airlines or Railways.
We can characterize market segments in different ways.
One way is to identify preference segments. Homogeneous
preferences exist when all consumers have roughly the same
preferences; the market shows no natural segments. At the other
extreme, consumers in diffused preferences vary greatly in their
preferences. If several brands are in the market, they are likely to
position themselves throughout the space and show real differences
to match differences in consumer preference. Finally, clustered
preferences result when natural market segments emerge from
groups of consumers with shared preferences.
2.
Niche Marketing:- A niche is a more narrowly defined customer
group seeking a distinctive mix of benefits. Marketers usually
identify niches by dividing a segment into a subsegment. Ex:- Ezee,
from Godrej, is a fabric-washing product for woolen clothes. Because
of its mildness, customers use this detergent to wash delicate clothes
that could get damaged if harsh and strong detergents are used
instead. Crack Cream, Neem toothpaste, etc.
Several television channels today are niche focused. Ex:Aastha and QTV, that focus on religion and spirituality. STAR
Cricket, directed exclusively at cricket lovers in South Asia.
Niche marketers aim to understand their customers’ needs
so well that the customers willingly pay a premium. Ex:Ayurvedic products and ‘all-natural’ products usually command a
premium.
As marketing efficiency increases, niches that were
seemingly too small may become more profitable. Ex:- when
every apparel company in India was classifying women’s clothing
into L, XL and XXL sizes, it was Revolution Clothing Pvt. Ltd. that
pioneered the concept of ‘plus sized fashion’ in India. The idea not
only forced the established players to follow suit, but also gave
women pride and self – confidence, while helping Revolution notch
up millions in revenue.
The low cost of setting up shop on the internet has led to many
small business start –ups aimed at niches. These firms have realized
that the best recipe for internet success is to choose a hard – to – find
product that customers don’t need to see and touch.
3.
Local Marketing:- Target marketing is leading to marketing
programs tailored to the needs and wants of local customer
groups. In trading areas, neighborhoods, even individual stores.
Many banks in India have specialized branches that exclusively cater
to the to the corporate customers and some branches to the NRI
customers.
There are some ‘In – City’ courier companies in many cities that
specialize in delivering mail and packets on the same day within a
specified geographical area, usually within the city. The movie
Spiderman 3 was released in India in five different languages,
including Bhojpuri and owing to such local marketing, the movie
broke a number of collection records for a foreign movie released in
India.
Local marketing reflects a growing trend called grassroots
marketing, as the marketing activities concentrate on getting as
close and personally relevant to the individual customers as possible.
Ex:- Big giants like Nike also initially targeted customers through
grassroots marketing such as by sponsoring local school teams.
4.
Individual Marketing:- The ultimate level of segmentation and
targeting leads to “Segment in One”, “Customized Marketing” or
“One – to – One Marketing.” Now a days, customers are taking
more individual initiative in determining what and how to buy.
Customerization combines operationally driven mass
customization with customized marketing in a way that empowers
consumers to design the product and service offering of their choice.
The firm no longer requires prior information about the customer,
nor does the firm need to own manufacturing. The firm provides a
platform and tools and ‘rents’ out to customers the means to design
their own products. A company is customerized when it is able to
respond to individual customers by customizing its products,
services, and messages on a one-to-one basis.
Customization is certainly not the cup of tea for every company. It
may be very difficult to implement for complex products such as
automobiles. Exception is BMW. Customization can also raise the
cost of the goods by more than the customer is willing to pay. Some
customers don’t know what they want until they see the actual
products. At the same time they also cannot cancel the order after
the company has started to work on the product. More over these
type of products may be hard to repair and have a little resale value.
In spite of this, customization has worked well for some of the
product. Ex:- Paint companies Asian Paints, Nerolac, Jenson &
Necholson, and Berger Paints, follow the mass-customization
strategy in paint retailing which is pretty successful.