The STP Process

The below figure depicts the STP Process for a Skincare Product
 Bases of Segmentation
1. Demographic Segmentation: One reason demographic variables are so
popular with marketers is that they‘re often associated with consumer needs and
wants and they‘re easy to measure. They include:
• Age – Junior Horlicks for kids
• Occupation – HP business laptops
• Family Size – Toyota for LIVA for small family & INNOVA for large family
• Gender – Emami Natural Fairness Cream & Emami Fair n Handsome
• Income – HDFC Bank credit cards and limits according to salary/income
 Continued..
2. Geographic Segmentation: Divides the market into geographical units such as
nations, states, regions, counties, cities, or neighborhoods. The company can
operate in one or a few areas, or it can operate in all but pay attention to local
variations. In that way it can tailor marketing programs to the needs and wants of
local customer groups. Examples include:
• Tractor manufacturers – John Deere targeting rural areas
• KENT Air purifiers targeting metro cities
 Continued…
3. Psychographic Segmentation: In psychographic segmentation, buyers are
divided into groups on the basis of psychological/personality traits, lifestyle, or
values. People within the same demographic group can exhibit very different
psychographic profiles. Using the VALS segmentation framework to identify
consumer segments in the U.S. Example include:
The Innovators segment – Buyers of Hyundai Kona Electric Car
 Continued…
4. 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. These include:
• User and Usage-Related Variables – Occasional Segmentation such as air travel,
Usage Rate - Heavy vs. Light users, Loyalty Status – Hardcore vs. Split loyals
• Decision Roles – Influencer vs. Decider, e.g. buying a car for family
 Targeting
Having identified market segments, marketers must decide which of the
segments is most attractive and can hence be targeted. A marketing
programme which covers all elements of the marketing mix can then be
designed to suit the particular requirements of those segments targeted.

Evaluating Segment Attractiveness - Factors

Growth potential - Is the target market growing for the offering?
Segment profitability – Is the target market profitable?
Segment size – Does the target segment have a large customer base?
Competitive intensity within the segment – What is the intensity of competition among
rivals in the segment?
The cyclical nature of the industry - Whether or not the business is seasonal?
Segment stability – How stable are the segment’s needs over time?
 Targeting Approaches
1. The undifferentiated/mass targeting strategy:
The firm ignores segment differences and goes after the whole market with one
offering
It designs a marketing program for a product with that can be sold to the
broadest number of buyers
E.g. Frooti Mango Juice has only one product variety for the entire nation

2. The differentiated targeting strategy:

There are several market segments to target, each being attractive to the
marketing organization.
To exploit market segments, a marketing strategy is developed for each segment.
E.g. Nike shoes for Running, Golf, Aerobics, Cycling etc.
 Continued…
3. The concentrated/niche marketing strategy:
The firm markets to only one particular segment.
A niche is a more narrowly defined customer group seeking a distinctive mix of
benefits within a segment.
E.g. McLaren cars concentrates on the sports racing car enthusiasts ,Vegan food products

4. The customized/micro marketing targeting strategy:

Marketing strategy is developed for each customer as opposed to each market
segment.
This approach predominates in B2B markets or consumer markets with high-
value, highly customized products
E.g. Dell supplying customized laptops according to a government tender, DC cars
 Positioning
Positioning is the act of designing a company‘s offering and image to occupy a
distinctive place in the minds of the target market. The goal of positioning is to
locate the brand in the minds of consumers to maximize the potential benefit to
the firm.
Two fundamental elements of Positioning
(Blend of both these elements is crucial for successful positioning)
The physical attributes and the functionality offered by the brand
The brands communication and consumers perception of the brand relative to
other competing brands

E.g. Claims made by advertisement of a shampoo brand that it will

remove dandruff will be rejected if the product itself fails to deliver.
 Identifying POP & POD
Points-of-Parity (POP) are attributes or benefits that are not necessarily unique
to the brand but may in fact be shared with other brands. These types of
associations come in three basic forms:
Category POP - Attributes or benefits that consumers view as essential to a
offering within a certain product or service category. E.g. online shopping &
refund
Correlational POP - Negative associations that arise from the existence of positive
associations for the brand. E.g. low price – high Quality?
Competitive POP - Associations designed to overcome perceived weaknesses of
the brand in light of competitors‘ points-of-difference. E.g. Maruti - Fuel
economy vs. Volkswagen – Quality & Safety
 Continued….
Points-of-difference (PODs) are attributes or benefits that consumers strongly
associate with a brand, positively evaluate, and believe they could not find to the
same extent with a competitive brand. Criteria which determine whether a brand
association can truly function as a point-of-difference include:
Desirable to consumer - Consumers must see the brand association as personally
relevant to them. E.g. L‘Oreal Skin perfect with UV filters
Deliverable by the company - The product design and marketing offering must
support the desired association. E.g. New Maruti Swift – stylish, modern &
young
Differentiating from competitors - Consumers must see the brand association as
distinctive and superior to relevant competitors. E.g. Coke sharing can
 Positioning and Value Proposition
One result of positioning is the successful creation of a customer-focused value
proposition, a convincing reason why the target market should buy a product or
service.
A value proposition refers to the value a company promises to deliver to its
customers.
 Concept of USP
A unique selling proposition (USP) refers to the unique benefit offered by a
company, service, product or brand through their attribute(s) that enables it to
stand out from competitor‘s.
The unique selling proposition must be a feature that highlights product benefits
that are meaningful to consumers.
Importance
Where the product category is characterized by high levels of technological
innovation – E.g. Mobile Phones
Helps consumers to understand differences between brand offerings in a
category – E.g. Swiggy having no minimum order deliver
Help consumers to form a positive attitude towards the brand – E.g. Coke
 Perceptual Mapping
Understanding the perception of consumers towards brand and their attributes
is complex in nature

This can be made easier by conducting a survey and representing the results in a
visual form.

 Perceptual mapping which represents a visual comparison of how competing

products are perceived by consumers

The closer products/brands are clustered together on a perceptual map, the

greater the competition

The further apart the positions, the greater the opportunity for new brands to
enter the market
Example
 Consumer Behavior
Consumer behavior is the study of how individual customers, groups or
organizations select, buy, use, and dispose ideas, goods, and services to satisfy
their needs and wants. It refers to the actions of the consumers in the
marketplace and the underlying motives for those actions.

Consumer Behavior attempts to answer some basic questions, like :

Why do consumers behave in a particular manner?

It is impossible to predict the consumers exact behavior in a given situation?
Are consumers are moved by complex set of deep & subtle emotions?
What do consumers think about our product & those of our competitors?
What do they think of possible improvements in our product?
How do they actually use our products?
 Continued…
Preparers: Family members who transform or prepare the product into the
form suitable for consumption. E.g. Father buying necessary accessories & preparing
necessary documents.

Users: Family members who use or consume a particular product or service.

E.g. Son & occasionally his father

Maintainers: Family member(s) who service or repair the product so that it will
provide continued satisfaction. E.g. Father or son doing the service

Disposers: Family member(s) who initiate or carry out the disposal or

discontinuation of a particular product or service. E.g. Son/Father selling the bike
on OLX
 Consumer Decision Making Process
1. Problem/Need Recognition (awareness of need)--difference between the
desired state and the actual condition.
2. Information search -- Internal search, memory. External search if you need
more information.
3. Evaluation of Alternatives--need to establish criteria for evaluation,
features the buyer wants or does not want. Rank/weight alternatives or
continue search.
4. Purchase decision--Choose buying alternative, includes product, package,
store, method of purchase etc.
5. Post-Purchase Evaluation--Satisfaction or Dissatisfaction
 Organizational Buying Behavior
An organization buys a variety of products and services. These may include: a)
Raw material: Steel, aluminum, iron ore, etc. b) Major capital items: Machinery, plant,
etc. c) Minor capital items: Pumps, valves. d) Office equipment: Paper, copier, type
writers. e) Services: Transport, travel, touring, etc.

Organizational buying can be defined as the decision-making process by which

formal organizations establish the need for purchased products and services and
identify, evaluate, and choose among alternative brands and suppliers.

The Business Market & The Consumer Market

In a consumer market (B2C) the final output (product/service) is consumed by
individual consumers e.g. soft drinks, toothpaste etc.
In a business market (B2B) organizations acquire goods and services used in the
production of other products or services that are sold, rented, or supplied to
others.
 Key Differences between CBB & OBB
1. Buying Objective – The objective is to enable/facilitate production for a
business.
2. Buying Motive – Strictly rational for organization
3. Order Size – Often large in case of organizations
4. Multiple buying influences – Buying committees, Technical experts, Sales
teams, Top management etc.
5. Closing the sale – Lengthy sales cycle
6. Direct purchasing - Business buyers often buy directly from manufacturers
7. Order-Routine Specification – Routine calculation of re-ordering points
8. Derived Demand - Demand for business goods is ultimately derived from
the demand for consumer goods
9. Inelastic demand – Demand for business goods is not much affected by
price changes.
10. Product and Market knowledge – Extensive in case of businesses
 Buying Situations
Straight rebuy: A straight rebuy is the purchasing or reordering of supplies on
a routine basis from a supplier who is on an approved list. E.g. straight rebuy
from the same supplier for purchase of office supplies or bulk chemicals.

Modified rebuy: The buyer in a modified rebuy wants to change product

specifications, prices, delivery requirements, or other terms. E.g. An automobile
company may prefer to use an updated version of bearings.

New task: A new-task purchaser buys a product or service for the first time so
the longer the time to a decision. E.g. Installation of security cameras in a
factory
 Product/Service and its Levels
Product: ―anything that can be offered to a market for attention,
acquisition, use, or consumption that might satisfy a want or need”.
Service: “an activity, benefit, or satisfaction offered for sale that is
essentially intangible and does not result in the ownership of anything”.

Product/Service Levels
While planning the market offering, the marketer needs to address five product levels,
where each level adds more customer value. Lets take the example of Coca-Cola:
a) Core Benefit: quench the thirst
b) Basic/Generic Product: black, carbonated, and fizzy drink
c) Expected Product: served chilled
d) Augmented Product: great taste of Coca-Cola, but with zero calories
e) Potential Product: Coca-Cola bottle made of paper
 The Pepsi & Coke Battle
Pepsi‘s battle with Coca-Cola during the 1960s and 1970s saw it gradually reduce
the latter‘s dominant market share. The battle ended in 1985 when Coca-Cola
abandoned its original recipe and introduced ‗new Coke‘, a sweeter formulation
designed to attract Pepsi‘s young market.

Coca-Cola‘s customers boycotted ‗new Coke‘; there was public outrage and Pepsi
became market leader—but only temporarily. New Coke was soon dropped, and
the original brought back and relaunched as ‗classic Cola‘, reestablishing its
credentials with its customers and retrieving number one spot in a couple of
months.

The sum of the core, expected, and augmented product, summarized as the brand
Coca-Cola, drew passion from its customers and was overlooked by the market
researchers when searching for a means to stop Pepsi‘s progress.
 Product Classifications
Products and services fall into two broad classes based on the types of consumers
who use them: consumer products and industrial products.

I) Consumer products are products and services bought by final consumers for
personal consumption, these include:
Convenience products – e.g. toothpaste, detergent
Shopping products – e.g. furniture, electric appliances
Specialty products – e.g. luxury cars, wrist-watches
Unsought products – e.g. fire extinguishers, smoke detectors
 Continued…
II) Industrial products are those products purchased for further processing or
for use in conducting a business, these include:
Materials and parts
a) Raw materials – i) farm products (e.g. wheat) ii) natural products (e.g. iron
ore)
b) Manufactured materials – i) component materials (e.g. cement) and ii)
component parts (tyres).
Capital items
a) Installations – i) buildings (e.g. offices) ii) heavy equipment (e.g. generators)
b) Equipment – i) portable factory equipment (e.g. hand tools) ii) office
equipment (desks)
Supplies and business services
a) Supplies – i) maintenance and repair items (e.g. paint) ii) operating supplies
(e.g. lubricants).
b) Business – i) maintenance and repair services (e.g. copier repair) ii) business
advisory services (e.g. legal)
 New Product Development
The development of original products, product improvements, product
modifications, and new brands through the firm‘s own product development
efforts.
Q. Why Develop a New Product?
Google Glass
One of Google‘s most ambitious new products is Google Glass, a computer worn
like eyewear with an optical display that allows the user to answer calls, record
video, and take photos with voice activation, connect to a smart phone, post to
social media, and perform Google searches, among other things.
 The Categories of New Products
Student Activity:
Conduct a search in groups and provide examples of the below mentioned
categories of new products.

1. New-to-the-world Products
2. New-to-the-firm Products
3. Additions to existing Product Lines
4. Improvements and Revisions to existing Products
5. Repositioning's
The NPD Process
 Continued…
Idea Generation - systematic search for new product ideas a)internal search e.g.
LinkedIn InCubator program b) external search e.g. Cisco Systems I-Prize
Idea screening - screening new product ideas to spot good ones and drop poor
ones through the R-W-W (―real, win, worth doing) approach
Concept Development and Testing - idea must then be developed into a
product concept a) concept development e.g. Tesla‘s initial all-electric full-size
sedan b) concept testing e.g. exposing consumers to the concept
Marketing strategy development - designing an initial marketing strategy
for a new product (target market, price/place/marketing budget, long term)
Business analysis - review of the sales, costs, and profit projections for a new
product
Product development - developing the product concept into a physical product
Test marketing - the product and its proposed marketing program are tested in
realistic market settings e.g. Starbucks VIA instant coffee tested in outlets
Commercialization - introducing a new product into the market e.g. For
Surface tablet, Microsoft spent close to $400 million on an advertising
 Product Life Cycle (PLC)
A product life cycle (PLC) depicts the course that a product‘s sales and profits take
over its lifetime. The PLC concept can apply to class (computers), form (a laptop), or
brand (Dell) of offering. The PLC does not apply to all offerings in the same
way. The PLC has five distinct stages:
PLC Stages – Characteristics & Objectives
 PLC for Styles, fashions, and fads
A style is a basic and distinctive mode of expression. For example, styles appear
in clothing (formal, casual).
A fashion is a currently accepted or popular style in a given field. For example,
the more formal ―business attire‖ has changed to the ―business casual‖ look.
Fads are temporary periods of unusually high sales. For example selfie sticks.
Strategies Across Stages of the PLC
 Product Decisions
These include the specific decisions that companies must make when
designing and marketing products/services.

Marketers make product decisions at three levels:

a) Individual product decisions
b) Product line decisions
c) Product mix decisions
a) Individual product decisions:
Product Attributes (product quality, product features, product style & design)
Branding (identify products, product consistency, provide legal protection)
Packaging (product safety, avoid over-packaging, promotional medium)
Labeling (description)
Product Support Services (customer service, role of technology)
 Continued…
b) Product line*decisions
Product line length (number of items in the product line)
Product line filling (adding more items within the present range of the line)
Product line stretching (lengthens its product line beyond its current range)

c) Product mix* decisions

Product mix width (number of different product lines)
Product mix length (total number of items in a company‘s product line)
Product line depth (number of versions offered of each product in the line)
Product mix consistency (how closely related the various product lines are in
end use, production requirements, distribution channels)

*Group of products that are closely related because they function in a similar manner, are
sold to the same customer groups, are marketed through the same types of outlets, or fall
within given price ranges
*The set of all product lines and items that a particular seller offers for sale.