The practice of Segmentation, Targeting and Positioning

Due to the globalization, the world is getting smaller and interconnected and this makes marketing a crucial ingredient for the success of the business and its survival (Schilke, Reimann and Thomas, 2009). In any organization, marketing segmentation plays an important role with an ability to recognize customer in matching with their products.

Acknowledging the fact that not every product fit all sorts of customers, the companies need to analyse diverse taste and preference of the customers and move away from the era of mass marketing or from the quote by Alfred sloan “a car for every purse and purpose” (Friedman, 2014). In this era, segmentation, targeting and positioning are the major three aspects significant for the decision planning process. These aspects help the business enterprise in identifying and selecting of the potential customers and assess the benefits linked to the products that need to offer in the market.

In this report, the first part is a critical analysis in relation to the various approaches and functions and importance of STP. In the second section, an exposure of these concepts is made on several organizations so as to gather better insight into the approaches. Moreover, the last section presents various generic recommendations that can be exploited by any organizations in relevancy with the concept of STP. 

The principle – segmentation, targeting, positioning (STP) – is the core of strategic marketing. One can see the outline of these elements in figure 1. STP position itself with key benefits as it helps in the marketing communication plans, development of personalized and important messages to various customers and giving the capability to the marketer to prioritize propositions.

In the process of segmentation, it includes massive data and customers ranging from customer demographics, profiles, incomes, preferences, and on the top – changing needs of the customers. Various challenges also having impact on the process, which impose restriction to have an effective marketing, mix in relation with product, price, place and promotion for the satisfaction of customer and the process (Keh, Nguyen and Ng, 2007). However, there are numbers of literature in relation to the marketing segmentation, which guide the manager to achieve its objectives and goals.

Positioning of a brand in accordance with the needs of the customers is crucial as of its unique characteristics, in shaping the customer preference and make the customer loyal towards the brand (Fuchs and Diamantopoulos, 2010). It side line the customer to what the customer really want as of any specific product or service, for example, if a car of the customer is nearly fuel empty, the customer will not consider which petrol station needed to be chosen for the purpose of refuel.

Segmentation is the procedure of assembling customers from a specific market having parallel purchase patterns, needs, expectations and lifestyle. According to Hassan and Craft, (2012), in various groups, customers are divided and in the same way, the market is also divided in order to serve their needs. The process of segmentation includes acknowledging the individual needs of the different groups of customers for the targeted product benefit. This enables the organization to attract customers with the help of those products that are meeting their necessary preference and needs while maintaining competitive edge in the market.

According to Hassan and Craft, (2012) market segmentation process is considered to be an effective strategic marketing tool. With the help of this tool, manager can benefit the organization by approaching with STP concept and understand the market in a better way as this will help him in developing effective marketing programmes as per the needs and expectations of the consumers. This will also enable them to offer products that are more relevant as per the customer needs and thus fulfil the sales objectives of the firm.

After identification of the market segments, management needs to finalize which market place they need to serve or offer their products. Upon acknowledging the targeted group, the business enterprise may select or apply single or combination of marketing strategies. For example, differentiated marketing strategy in single segment, undifferentiated marketing (mass marketing, or concentrated marketing (multi-segment). Below, in figure 2, the matrix shows how and when to apply which strategy.

However, the question remains intact that which strategy should be incorporated by the organization in respect with highly dependent on a number of markets, product offering and competitive factors. The factors are the following – customer needs, size of the segment, resources of corporation, business environment, trends prevailing in market, competitive environment nature, product homogeneity and existing market/share market homogeneity (Teece, 2007).

Considering all this, targeting of the specific population becomes more organized with increased in efficacy and efficiency of resources in the marketing efforts instead of proposing it to a mass market.

This is the final phase in the segmentation of the market. After the successful identification and choosing of the targeted segment, the next decision is related to how and where in targeted segments to pitch a product or a brand.

Brand positioning is an activity of creating a brand offer in a manner to occupy a distinctive place and value in the targeted customer segment. It also involves identifying and determining aspects of similarity and difference to ascertain the right brand identity and build a proper brand image (Sirianni, Bitner, Brown, and Mandel, 2013).

Targeting

Positioning is related to customer perception in order to define the maximum potential benefit to the organization. The outcome should be framed by an appealing statement of justification stating to the customers that why their purchasing decision is right towards the product.

In positioning, marketers consider aspects that make the product different from the competitors or analyse USP (unique selling proposition) in comparison with the other products available in the market. A customer will only buy the product if he perceives in the manner to be important and relevant to his/her needs rather than assuming the unique features. As per the above statement, it can be said that marketer needs to position their products on various competitive angle with the help of an effective marketing campaign referring to the needs and wants of the customers.

Ernst, Hoyer and Rubsaamen (2010), state that there are various ways in order to achieve desired plan and product or service positioning, and listed –

• During the purchase decision, what are the expectations and priorities of the customers?
• Building products as per the expectations and needs of the customers.
• Measuring positioning, as per the perception of targeted customer in respect with the competing products in the selected market segment.
• Making of image differentiation from the competitor’s brands and products, on the basis of features of the brand or product, needs and expectations of the targeted customer and positioning and perception of the competitor brand in the market.
• The last step is communication (Ernst, Hoyer and Rubsaamen, 2010) as it is necessary for the marketing team to launch a communication plan for all the targeted customers in order to raise customer awareness.

If these necessary steps were not keenly assessed during the course of implementation, the credibility of the product may be at stake, such as exaggerating product qualities during positioning with a limited judgement about the product in the marketplace. This may lead to dissatisfaction with the needs of the product and the company can also lose their customer base. In addition, using incorrect positioning methods and channels also lead in false communication of the characteristics of a product in respect with the target market. Improper communication can also lead the customer to the competitors’ side as due to the fact of having a unclear picture of the organization products and having full understandings of the rivals (Sethi and Seth, 2009).

Therefore, it can be said that market positioning is a crucial aspect that enables customers to differentiate a product from competitors in the market. With the help of effective marketing positioning, an organization can retain their own customers while attracting pool of new customers. Moreover, successful positioning strategy incorporated by the company also indicates that the business has understood the needs and preferences of the customers and delivers products in accordance with their expectations (Ernst, Hoyer and Rubsaamen, 2010).

In the creation and expansion of the market, STP proved to be an effective strategy, however, it is also limited by the certain current economic trends. In the era og globalization, all marekts opened domestically and internationally and this also rise to the competition on a global-scale, making the customer demands easier to fulfill but posing challenge on marketers for bulding effective segementation and positioning strategy. Consequetly, as governmet  also adopt free-market economic systems, the compeition again increases due to the availability of high number of products and services providers avialable on both local and global scale (DeSarbo, Grewal and Scott, 2008).

Positioning

In addition, the emergence of the e-commerce channels also gives customers to new purchasing channels and this influence the customer as per the positioning amnd targeting strategy and this makes the customer buy online from another supplier in another region. Therefore, by assuming all the above statements, it can be said that STP nowdays can not be called as a spocific strategy as the customers also adopted the same concept in the process of decision making and purchasing in respect with price, reliability, availability and quality (Mihart, 2012).

Another criticism is that as the customer’s demands, preferences and expectations are changing, segmentation becomes outdated and also customer now belongs to more than one segment rather than one segment (Blocker and Flint, 2007). Moreover, it can not be said that profitable segment is that where the customer response is at higher rate because in most cases, segment outside the target group is not aware of the marketing mix.

According to Hassan & Craft (2012), the business strategy of targeting the market sometimes disregards the customers outside the segment and this can imply a lost to the opportunity by the business and may also lead to exploitation and discrimination in some instances.

Segmentation, Targeting & Positioning (STP) marketing approach is necessary for every organization ireespective of diverse economic sectors and geographical areas (Schweitzer and Lyons, 2008). In this section, it needs to analyze that how STP strategy has been applied to the above mentioned companies.

The company have over 150 years of history and they have made global presence with the three key product lines i.e. Customer, business, travel account and services. The company also positioned itself as an accessible, secure, convenient and trustworthy (Bhasin, 2018). It can be said that the success of corporation can be credited to its capability to define sustainable segments where they can earn more profits by meeting the needs and expectation of global marketplace across the ages of its service.

American Express primarily segment their market on basis of geographical location, psychographics and demographics. Psychographics segmentation includes various variables like attitude, lifestyle, values and social class (Bhasin, 2018).

American Express targets those individuals who are affluent professionals and business travelers who are seeking experience with a peace of mind. With the application of differentiated marketing, American express successfully extents to target groups as per their status, travel, lifestyle and shopping preference.

For instance, the company target early career graduates whose income bracket is between 800 to 1200 USD by the Bleu credit card and this gives them flexibility during the course of payment.

In addition, those individuals who are having high net worth are targeted by American express. The company offers premium services to them, which can meet their lifestyle and they can receive value for money. According to Jet (2017), the company also introduced an exclusive service to the selected individuals and this service gives access to the premium club with the help of invitation club.

Targeting strategies for Air Arabia, Emirates and American Express

The American Express organization position itself as an ideal partner for customer and corporates with its range of payment products. The company also provides expense management solutions and bring financial peace to both merchants and card members (Sidi, 2015). From all the above statement, it can be said that American Express applies the consumer-benefit positioning and this cause challenge to the several competitors to replicate their strategy. As one can copy most the product features and benefits in the market. Consumers also tend to purchase brand products due to the benefits and relevancy provided, not features as they are product centric whereas benefits are customer centric (Fuchs and Diamantopoulos, 2010).

The advantage of positioning can be perceived when the product is positioned benefit based rather than feature based as the benefit based positioning solve the implicit needs and expectations of the consumers (Fuchs and Diamantopoulos, 2010).

American Express Saudi Arabia link the day to day consumer activities and potential preference in respect with the positioning of their products.

Unique selling proposition: A new airline Co-Brand card in the Saudi market is positioned by American Express so as to offer membership privileges, not available with any banking competitor.

Market segmentation plays an significant role in changing the way in which the corporations operate in the market (Hassan and Craft, 2012). The airline industry can be perceived as a typical example of market segmentation in approach with segmentation and positioning. With the rise in the customer choices and expectations, various number of companies are getting involved in the process of segmentation. In airline industry, the main areas of segmentation are luxury and budget flying. For instance, the airline industry in the UAE (United Arab Emirates) homes 4 airlines, of which 2 are covered, the Emirates airlines and Fly Dubai.

To segment and target their customers, Fly Dubai use two main aspects i.e. Accessibility and low-fare flying (Bhasin, 2018). On the other hand, Emirates airlines target those customers groups who expectation are met with luxurious experience and are middle to high level income groups (Bhasin, 2018).

In addition, price conscious passengers are targeted by the Fly Dubai who just wants to reach their respective destination at low prices. These travelers help the company in getting stable income and thus maintains its profitability. However, the risk will always be there, if the company focus on only one targeted segment as they can get in pressures if there is any shift or change in the targeted segment.

In Emirates, customer will always agreeable to pay a high amount for the products and amenities other the flight, but in flying Dubai, the customer will be price sensitive and thus not ready to pay any extra for amenities besides their air ticket.

Considering product, positioning is a vital aspect help in facilitating of the customer decision making and it is based on various important features and benefits perceived in relation to the product. Positioning generally covers quality aspect, price, product class and emotions. For instance, Fly Dubai positions itself in attracting of the low-income earners and immigrant groups across the GCC.

• In this digital era, business corporations need to split the target market into various types of homogenous groups and such includes, division of customers based on smart applications, technologies and social media sites.
• Analyze and measure each market segment that is ascertained. Each market has its own unique characteristics and it requires effective investigation of all necessary aspects having significant impact on the segment and the organization. There is also need of scanning of the markets in respect with emerging segments.
• For getting sustainable competitive advantage, the organization need to embed customer benefits in to every stage of the product life cycle. There is also need to engaging customers with the help of brand loyalty programs. There are competitors in every industry and the company need to identify them with a correct and suitable approach like SWOT.
• In the world of globalization, it is very necessary to diversify market segments, as the current market is dynamic in nature with having constant changes in PESTEL aspects having adverse effect on the organization. This strategy of diversification ensures that if one strategy fails, the company can rely on other business portfolios.
• In response with target consumers, effective positioning and communication are very important as it builds require interest, awareness, desire and mold consumer behavior to the purchase decisions.
• The consumer purchasing behavior is also affected by the technology evolution and due to his; the customers are applying reverse STP that includes researching of the companies in certain product segments and analyze which companies hold the best position, goodwill and customer satisfaction feedback in the market. However, this also makes some company evolve with their overall STP proposition and trying to expand their digital presence so that the customer can get the accurate and comprehensive information.
• Marketers in the company can also forecast and predict performance by using big data analytics and with the application of quantitative methods. This strategy can prove to be a game changer for any corporation.

Conclusion

In last, it can be concluded that STP plays an important role for any organization irrespective of industry, size or scale. An organization needs to effectively target the segmented market in order to achieve specific goals effectively. Moreover, there are many management practices and tools in relation with STP, that can be incorporate by the organization to deliver value to the final consumers.

In terms of STP applications, few big airline organizations are chosen out. For instance, it can be ascertained that how American Express position itself as an ideal partner for customer and business with its wide range of payment products. Like this, many organizations have distinctly setup themselves in various areas so as to achieve competitive advantage.

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