How do companies position and differentiate themselves from others? A company does not simply position its product without prior planning. Marketers use the STP(D) process, a planning tool, which mnemonic stands for segmenting, targeting, positioning, and differentiation.
It all starts with the proper segmentation variables. There are four variables which are widely used and all of them have different characteristics. First, the variable and then several corresponding characteristics are presented: 1. Geographic: nation, region, states cities, neighbourhoods, population density (urban, suburban, rural), climate 2. Demographic: age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation 3. Psychographic: social class, lifestyle, personality 4. Behavioral: occasions, benefit, user status, usage rate, loyalty status.
For example, segments for a high-end technological device could use all four variables (although, it always depends on the product, company, and finally on the marketer). The geographic variable is important to know in which language to market the device but also to know the population density. An urban citizen might have to be targeted differently than a rural citizen. The demographic variable might appear with its characteristics of age, income, and education. For example, a high-end technological company might target for its new device young adults aged between 18 and 35 who own a bachelor’s degree and earn around 40,000 Euros. The psychographic variable might appear with its characteristic of lifestyle. The AIO model (short for activities, interests, and opinions) tells a marketer what activities the consumer likes, his interests, and how he generally thinks about his world. If a marketer wants to know more about the consumer’s usage rate or loyalty status, then he will use the behavioural variable. One should use several criteria to decide whether a segment is useful or not. The following criteria are the most commonly used: 1. Measurable 2. Accessible 3. Substantial 4. Differentiable 5. Actionable.
This section introduces the art of targeting. After having constructed several segments that satisfy the above mentioned criteria, one has to choose which segment is the most attractive one for the fictional high-end technological company. Three factors play a role when deciding which segments to target: 1. Segment size and growth 2. Segment structural attractiveness and 3. Company objectives and resources. As a result, the fictional segment consists of urban citizens, aged between 18 and 35 with an income of around 40,000 Euros who are interested in high-end technological devices and who already are current loyal customers.
Positioning and differentiation
After having decided that the segment satisfies the preceding three factors one arrives at the decision making of positioning and differentiation. There are seven different ways to position a product: 1. Product attributes 2. Competitors 3. Use or application 4. Price-quality relationship, 5. Product use 6. Product class 7. Cultural symbol. The fictional high-end technological company will use the following ways of positioning as they seem most appropriate: Product attributes, competitors, use or application. The fictional company has to have product traits that sets the brand apart from others, has to establish a position that can be used to contrast the company’s product against others, and has to create a memorable set of uses for its product. A perceptual map assists in the process of finding a different position.
Lastly, after having found the perfect positioning and differentiation strategy for the company one has to develop the 4Ps of marketing. It is important that the positioning and differentiation strategy should emphasise the competitive advantage of the company to maintain a sustainable position in the consumer’s mind.
The STP(D) process offers a comprehensive planning method. It is a creative and well structured process but requires a sound knowledge of various marketing theories.