Speaker 1: Hi there. In this business topic video, we're going to introduce you to an important and widely used model of marketing strategy called STP, which is all about segmentation, targeting and positioning. Now, when businesses make decisions as to how to develop their marketing strategy and decide how to try to create value for customers, there are essentially two issues they have to consider. Firstly, of course, they have to choose which customers they want to target, which customers they want to sell to. And the challenge here is to segment the market, to find the different parts of the market that are most attractive, and then to target which segments do they want to focus on in order to have the best chance of success. And having identified the market segments and which are the ones they want to target, the next question is, how best to compete in that market? How to serve the customers in the target market segment? And the issue here is around market positioning. How do you identify the right positioning for your product in terms of the features that the target customers want? So, what we'll do is, we'll look very briefly at each of these things, market segmentation, targeting and positioning. We'll look in more detail at them in separate topic videos. But for now, let's just have an overview of each of the parts of this model. Segmentation, targeting, positioning, which is often shortened to STP. Market segmentation is about identifying the different parts of the market where customers have similar needs and wants. Of course, the segment can be very large, where nearly all the consumers in the market have similar needs and wants, or it could be very specialist, a niche segment. There are different ways, as we'll see in a later video, of segmenting a market, perhaps based around household income. So, income segmentation, perhaps based around age or gender, demographic segmentation, where people live, geographic segmentation, or the ways in which consumers behave, behavioral segmentation. We'll look at those in more detail in a later video. All you need to know for this stage, though, is that there are different ways of segmenting markets, not just one. The key benefit of segmenting a market is it enables a business to be much more focused around where it places its marketing efforts. And in particular, that's useful if you're developing new products and services designed to meet the specific needs and wants of the customers in that segment. Essentially, the most important benefit of market segmentation is it enables the marketing mix to be more accurate and to be better focused. One of the issues, of course, with segmentation is that this isn't a precise science. There's a lot of overlap between segments. And just because you can identify what you believe to be a group of customers with similar needs and wants, doesn't mean that you'll be able to reach those customers. And another issue with market segmentation is that these segments are fast changing and very dynamic. Whilst you might be using some reasonably up-to-date information about those segments, it could easily be out of date by the time you're able to action it. Market segmentation is all about identifying the different parts of the market. The next issue is, how do you target the customers in the segments that you want to compete in? There are three different ways of targeting a market. Let's just briefly look at those. Firstly, there's MASS MARKETING, which is sometimes known as UNDIFFERENTIATED TARGETING. And the strategy here is that you target the whole market. You don't spend too much time trying to break the market down into different segments. You try to find ways in which all customers needs and wants can be met and try to deliver a product that meets all of those needs and wants. However, very few businesses are able to do that successfully. And increasingly, of course, what they find themselves doing is trying to break the market down into segments and in some ways to differentiate their product. So the idea here, the strategy here is that you identify one or two or more target market segments within the broad market. And then you design products and services that hopefully will be hitting the needs of customers in each segment. One of the implications for this is that you're going to probably need a separate marketing plan and a separate marketing mix for each of those segments. And the third approach of targeting is to really focus and really concentrate your marketing, concentrate your products on a very small part of the overall market. It's called a NICHE or CONCENTRATED MARKETING. And the aim here, of course, is to try and identify a profitable niche where you can very quickly build a strong market position and hopefully maximize the returns. We've dealt with targeting now and we've dealt with market segmentation. Let's just spend a couple of minutes on what we mean by market positioning. Having chosen which segments we want to target and which customers are in those segments, what we now have to do is to decide how to compete effectively in that target market. And this concept is called the VALUE PROPOSITION. That's the essential part of market positioning. The important thing here is to always remember that market positioning and the value proposition should be from the customer point of view, not from the business's point of view. Because ultimately, it's customers who buy products and services. And if their view on what value is, is different from what yours is, that's tough. Those are the guys who are making the decisions. The value proposition is all about the position the product takes in the market, based around the dimensions that are important from the customer's point of view. And one way of mapping this position, particularly compared to the competition, is to put together what's known as a MARKET MAP or a POSITIONING MAP. Let's just briefly look at what we mean by a POSITIONING MAP. Markets, of course, in terms of what customers want, can be defined in various different dimensions. Obviously, the most obvious one, I guess, is LOW PRICE to HIGH PRICE. And similarly, customers also have different needs and wants based around their need for BASIC QUALITY all the way through to HIGH QUALITY. But there are lots of other dimensions. For example, a product could be a necessity or it could, at the other end of the scale, be a luxury. It could be a very low tech. It could be very high tech. So what a MARKET MAP or a POSITIONING MAP tries to do is to map the different positions or value propositions of products based around a selection of two dimensions. And clearly, the dimensions that are chosen are subjective as is the position of the product on the POSITIONING MAP. On the screen there is an example of how you might position a bunch of different chocolate products based around two traditional dimensions of QUALITY and PRICE. And you might argue as to whether we've put those products in the right position. But that's just one perspective on that product and that market from one customer's perspective. That's the idea of the POSITIONING MAP to try and identify where there may be some gaps in the market that may be successful. Now, don't forget with POSITIONING, the key issue here is it's from the POINT OF VIEW OF CUSTOMERS. And what a business needs to do is to try to find a value proposition that gives it a competitive advantage. What this means is that from the customer point of view, the product is perceived as being offering superior value. However, the customer determines value. But there are lots of different ways in which value can be delivered. Let's just have a look at four possible positioning strategies before we finish. One way, of course, is to offer much more value, but for a low price. Lots of businesses try to offer that good quality, acceptable quality, but for very low prices, where the perceived value is therefore high compared to the price. How about the third one down there? Offering more for the same. The price stays the same, but you reposition your product by maybe offering some new features or a better performance for the same price. That might be a successful positioning strategy. The key issue here is that there's more than one way of positioning a product for success. It's all about understanding how customers perceive value. What we've done is we've just looked briefly there at this concept, this marketing concept called STP, segmentation, targeting and positioning. And what we'll do is we'll look at each of those three elements of marketing strategy in more detail in a subsequent topic video.