Three Examples of the STP Process

Example One: GreenBloom Organics

Here’s an example of a business implementing the 9-step STP process for a fictional company, GreenBloom Organics, a natural skincare brand entering the market.

Step 1: Define the Market

GreenBloom Organics is a startup focused on natural, eco-friendly skincare products. Instead of targeting the entire beauty and skincare market, which includes everything from mass-market products to luxury cosmetics, GreenBloom defines its market as natural and organic skincare products in North America. This focused product-market definition helps GreenBloom stay aligned with its mission and focus on customers who prioritize sustainability and natural ingredients.

Step 2: Create Market Segments

Using segmentation bases, GreenBloom divides its market into distinct consumer groups:

• Demographic segmentation:
  • Age: 18–34, 35–54.
  • Income: Middle to high income, as natural products often have premium pricing.
  • Gender: Primarily female, with secondary consideration for male consumers.
• Psychographic segmentation:
  • Values: Environmental consciousness, interest in wellness and self-care.
  • Lifestyle: Busy professionals seeking convenient, effective products.
• Behavioral segmentation:
  • Purchase frequency: Regular skincare users vs. occasional buyers.
  • Brand loyalty: Consumers who switch brands vs. those loyal to eco-friendly options.
• Benefit segmentation:
  • Key benefits: Natural ingredients, sustainability, or skin sensitivity solutions.
• Hybrid segmentation:
  • Young urban professionals (18–34) who prioritize eco-conscious living and convenience.

Step 3: Evaluate the Segments for Viability

GreenBloom evaluates these segments using key criteria:

• Measurability: Data from market research indicates that the eco-conscious skincare segment represents 15% of the North American skincare market and is growing at 8% annually.
• Accessibility: Consumers can be reached through social media, influencers, and partnerships with eco-friendly retailers.
• Substantiality: The segments are large enough to support profitability, with young professionals and environmentally conscious buyers showing high willingness to pay for premium products.
• Differentiability: Needs differ significantly across segments. For example, young professionals prioritize convenience, while environmentally conscious buyers seek certifications like cruelty-free and organic.
• Actionability: GreenBloom’s team and resources can effectively target and market to these segments.

Step 4: Construct Segment Profiles

After identifying viable segments, GreenBloom creates detailed profiles:

1. Eco-Warrior Emma:
   • Demographics: Female, 25–40, urban, middle to high income.
   • Behavior: Loyal to eco-friendly brands, shops online, checks product certifications.
   • Psychographics: Values sustainability and transparency.
   • Key Needs: Cruelty-free, zero-waste packaging, and certified organic products.
2. Time-Saver Tom:
   • Demographics: Male, 30–45, urban professional.
   • Behavior: Buys skincare products occasionally but values multi-use items.
   • Psychographics: Seeks convenience and effective results.
   • Key Needs: All-in-one solutions and hassle-free routines.
3. Sensitive Sarah:
   • Demographics: Female, 18–34, suburban, middle income.
   • Behavior: Loyal to brands that cater to sensitive skin and natural ingredients.
   • Psychographics: Interested in self-care and beauty trends.
   • Key Needs: Hypoallergenic, fragrance-free, and gentle formulas.

Step 5: Evaluate the Attractiveness of Each Segment

GreenBloom evaluates these segments using a scoring model, considering size, growth, profitability, and alignment with the company’s strengths. The results show:

• Eco-Warrior Emma: High score for size, growth, and alignment with GreenBloom’s values.
• Time-Saver Tom: Moderate score due to smaller segment size but low competition.
• Sensitive Sarah: High score for growth and profitability potential, as sensitive skincare is a growing niche.

Based on these insights, GreenBloom prioritizes Eco-Warrior Emma and Sensitive Sarah while keeping Time-Saver Tom as a secondary segment.

Step 6: Select Target Market(s)

GreenBloom selects two primary target markets:

1. Eco-Warrior Emma: Represents the core customer base aligned with GreenBloom’s mission.
2. Sensitive Sarah: Offers high potential for growth and complements the brand’s product range.

These segments allow GreenBloom to focus on sustainability and natural ingredients while addressing specific consumer needs like sensitivity.

Step 7: Develop Positioning Strategy

GreenBloom crafts unique positioning for each target market:

• Eco-Warrior Emma:
  Positioning statement: “GreenBloom – The ultimate natural skincare choice for a sustainable future.”
  Value proposition: Products are eco-friendly, cruelty-free, and zero-waste.
• Sensitive Sarah:
  Positioning statement: “Gentle on your skin, gentle on the planet.”
  Value proposition: Hypoallergenic formulas designed for sensitive skin with natural, effective ingredients.

Step 8: Develop and Implement the Marketing Mix

To support the positioning strategies, GreenBloom develops a tailored marketing mix:

1. Product:
   • Eco-Warrior Emma: Certified organic, zero-waste packaging, and cruelty-free products.
   • Sensitive Sarah: Hypoallergenic, fragrance-free products with dermatologist approval.
2. Price:
   • Premium pricing for both segments, reflecting quality and eco-conscious values.
3. Place:
   • Online store with a focus on DTC (direct-to-consumer) sales.
   • Partnerships with eco-friendly retailers and dermatology clinics.
4. Promotion:
   • For Eco-Warrior Emma: Influencer partnerships, eco-living blogs, and Instagram ads.
   • For Sensitive Sarah: Educational content on skincare routines and dermatologist endorsements.

Step 9: Review Performance

GreenBloom sets KPIs to track the success of its STP strategy, including:

• Sales growth in each segment.
• Customer satisfaction ratings and product reviews.
• Social media engagement and brand awareness metrics.
• Sustainability goals, such as reductions in carbon footprint and waste.

After six months, GreenBloom reviews its performance and finds strong engagement from Eco-Warrior Emma but slower adoption from Sensitive Sarah. This prompts adjustments in the marketing mix, including a focus on digital promotions for Sarah and expanding hypoallergenic product lines.

Example Two: A Classic Example of the STP Process: The Cola Wars

A good example of the STP process (segmentation, targeting, positioning) can be found during the Cola Wars in the 1980s between Coca-Cola and Pepsi-Cola. As you may be aware, Coca-Cola eventually took the dramatic act of reformulating their flagship Coca-Cola product and withdrawing it from the market to replace it with “new” Coke.

For more details on the background factors that led to the development and launch of New Coke, please refer to the aricle on the background factors that resulted in the development and launch of New Coke.

Understanding Pepsi’s Segmentation Strategy

During this intense period, Pepsi was particularly aggressive with its marketing strategies. They launched initiatives like the Pepsi Challenge taste test advertising and adopted the “Choice of a New Generation” positioning.

Pepsi approached market segmentation in a straightforward manner, focusing on attitude and loyalty segmentation . Here’s how they segmented the market:

Consumers Loyal to Coca-Cola

• Description: Individuals with a positive attitude towards the Coke brand and 100% loyalty to Coca-Cola.

Consumers Loyal to Pepsi

• Description: Individuals with a positive attitude towards the Pepsi brand and 100% loyalty to Pepsi-Cola.

Switchers Between Coke and Pepsi

• Description: Consumers who have a positive attitude towards both Coke and Pepsi. They show loyalty to both brands but switch their purchases between the two from time to time.

The Battle for Market Leadership

The fierce competition primarily took place within the third segment—the switchers. This group was highly responsive to various sales promotions, including:

• Point-of-Purchase Displays: Eye-catching displays at the retail level to encourage immediate purchases.
• Discounts: Price reductions and special offers to entice switchers.
• General Advertising: Broad campaigns to maintain brand visibility and appeal.
• Personal Factors: Elements such as consumer mood, social situations, and taste preferences played significant roles in influencing their purchasing decisions.

Allocating Promotional Budgets Effectively

To target the 50% of cola drinkers who were likely to switch between Coke and Pepsi, both companies allocated substantial portions of their promotional budgets:

• Coca-Cola: $200 million per annum
• Pepsi-Cola: $150 million per annum
• Total Combined Budget: Approximately $350 million annually

This strategic allocation focused on the switcher segment because investing in brand-loyal customers yielded lower returns. Loyal customers were less likely to change their purchasing habits, making them a less attractive target for aggressive marketing spend.

Key Takeaways

• Segmentation: Pepsi identified three distinct consumer segments based on brand loyalty and attitude.
• Targeting: Both Coca-Cola and Pepsi focused their promotional efforts on the switchers, who represented the majority of the market.
• Positioning: Pepsi positioned itself as the choice for a new generation, appealing directly to consumers open to switching brands.

As a result of this shift in target market selection, Pepsi positioned their product as the main reason that Coca-Cola replaced their classic Coca-Cola with New Coke. This positioning change is demonstrated in the following TV commercial that Pepsi ran at the time.

The TV commercial shows an older demographic of very traditional and loyal Coke drinkers. It is tapping in nicely into the dissatisfaction among Coke drinkers. This is particularly highlighted in a line in the Pepsi TV commercial where Wilbur says “they changed my Coke”. The key word here is the word “my”– which demonstrates the mood of the time that Coca-Cola belonged to the consumer market, not to the company. Following this decision, and the relaunch of “classic” Coca-Cola, Coca-Cola’s management did recognize that they were caretakers of an American icon.

This change in marketing strategy by Pepsi in response to the competitive action by Coke, clearly highlights the three steps of segmentation – targeting – positioning. By a change in the segmentation view, and the selection of a new target market, the company is enabled to construct a modified market positioning, which should have the effect of increasing market share.

Related topics

The positioning of Coke and Pepsi during the Cola Wars
The positioning goals of New Coke
The background factors to the New Coke decision

Example 3: VeggieFresh Frozen Vegetables

Here’s an example of a business implementing the 9-step STP process for VeggieFresh, a manufacturer and brand of frozen vegetables sold in supermarkets.

Step 1: Define the Market

VeggieFresh is a well-established company specializing in high-quality frozen vegetables. Instead of targeting the entire frozen food market—which includes frozen meals, desserts, and snacks—VeggieFresh defines its market specifically as premium frozen vegetables in North America. This focused definition allows VeggieFresh to concentrate on consumers who prioritize convenience without compromising on nutrition and quality.

Step 2: Create Market Segments

Using various segmentation bases, VeggieFresh divides its market into distinct consumer groups:

Demographic Segmentation:

• Age: 25–45, 46–65
• Income: Middle to high income, as premium products often carry higher price points
• Household Size: Singles and families with children

Psychographic Segmentation:

• Values: Health-conscious, environmentally aware, interest in sustainable living
• Lifestyle: Busy professionals, active families, individuals seeking convenient meal solutions

Behavioral Segmentation:

• Purchase Frequency: Regular grocery shoppers vs. occasional buyers
• Usage Rate: Daily meal preparers vs. weekend cooks
• Brand Loyalty: Loyal to specific brands vs. open to trying new products

Benefit Segmentation:

• Key Benefits: Nutritional value, convenience, variety of options (e.g., organic, non-GMO)

Hybrid Segmentation:

• Health-Conscious Hannah: Young professionals (25–35) who prioritize healthy eating and sustainability
• Busy Brenda: Families with children (30–45) seeking convenient and nutritious meal options
• Eco-Eric: Middle-aged individuals (46–65) who value environmentally friendly products and practices

Step 3: Evaluate the Segments for Viability

VeggieFresh assesses these segments using key criteria:

• Measurability: Market research indicates that the health-conscious and busy family segments represent 25% and 35% of the North American frozen vegetable market, respectively, with both segments growing at 10% annually.
• Accessibility: These consumers can be effectively reached through digital marketing, in-store promotions, partnerships with health food stores, and social media influencers.
• Substantiality: Both segments are large enough to support profitability, with a significant number of households seeking premium frozen vegetable options.
• Differentiability: Needs vary across segments—for example, health-conscious consumers seek organic and non-GMO options, while busy families prioritize convenience and variety.
• Actionability: VeggieFresh has the resources and capabilities to target these segments through tailored marketing campaigns and product offerings.

Step 4: Construct Segment Profiles

After identifying viable segments, VeggieFresh creates detailed profiles:

Health-Conscious Hannah:

• Demographics: Female, 25–35, urban, middle to high income
• Behavior: Regularly purchases organic and non-GMO products, shops at health food stores, follows nutrition trends
• Psychographics: Values health, sustainability, and transparency in product sourcing
• Key Needs: Organic certification, nutrient-rich options, transparency about sourcing and ingredients

Busy Brenda:

• Demographics: Female, 30–45, suburban, middle income, with children
• Behavior: Shops for groceries weekly, seeks convenient meal solutions, prefers versatile ingredients
• Psychographics: Values family health, time-saving products, and reliability
• Key Needs: Pre-cut and ready-to-cook vegetables, variety packs, affordable premium options

Eco-Eric:

• Demographics: Male, 46–65, suburban/rural, middle to high income
• Behavior: Prefers products with minimal environmental impact, supports sustainable brands, shops at both mainstream and specialty stores
• Psychographics: Values environmental sustainability, quality, and ethical business practices
• Key Needs: Eco-friendly packaging, sustainably sourced vegetables, brands with strong environmental commitments

Step 5: Evaluate the Attractiveness of Each Segment

VeggieFresh uses a scoring model to evaluate each segment based on size, growth, profitability, and alignment with the company’s strengths:

Health-Conscious Hannah:

• Size: Large and growing
• Growth: High annual growth rate
• Profitability: High willingness to pay for premium products
• Alignment: Strong alignment with VeggieFresh’s focus on quality and nutrition
• Score: High

Busy Brenda:

• Size: Largest segment
• Growth: Steady growth due to increasing demand for convenience
• Profitability: Moderate to high, with potential for repeat purchases
• Alignment: Excellent fit with VeggieFresh’s convenient product offerings
• Score: High

Eco-Eric:

• Size: Moderate
• Growth: Growing interest in sustainable products
• Profitability: High, as eco-friendly products can command premium prices
• Alignment: Good fit with VeggieFresh’s sustainability initiatives
• Score: Moderate to High

Based on these evaluations, VeggieFresh prioritizes Health-Conscious Hannah and Busy Brenda as primary target segments, with Eco-Eric as a secondary focus.

Step 6: Select Target Market(s)

VeggieFresh selects two primary target markets:

Health-Conscious Hannah:

• Represents consumers who prioritize health, nutrition, and sustainability.
• Aligns closely with VeggieFresh’s mission to provide high-quality, nutritious frozen vegetables.

Busy Brenda:

• Represents families seeking convenient and reliable meal solutions.
• Complements VeggieFresh’s range of pre-cut and easy-to-prepare vegetable options.

These segments allow VeggieFresh to focus on both health-oriented and convenience-seeking consumers, maximizing market reach and profitability.

Step 7: Develop Positioning Strategy

VeggieFresh crafts unique positioning for each target market:

Health-Conscious Hannah:

• Positioning Statement: “VeggieFresh – Nourishing your health with organic, nutrient-packed frozen vegetables.”
• Value Proposition: Our vegetables are organically sourced, packed with essential nutrients, and free from GMOs, ensuring you receive the healthiest options available.

Busy Brenda:

• Positioning Statement: “VeggieFresh – Making family meals easy and nutritious with convenient frozen vegetables.”
• Value Proposition: Our pre-cut and ready-to-cook vegetables save you time in the kitchen without compromising on nutrition, helping you prepare healthy meals effortlessly.

Step 8: Develop and Implement the Marketing Mix

To support the positioning strategies, VeggieFresh develops a tailored marketing mix:

Product:

• Health-Conscious Hannah:
  • Organic-certified vegetables
  • Non-GMO verified
  • Minimal processing to retain nutrients
• Busy Brenda:
  • Pre-cut and ready-to-cook options
  • Variety packs for diverse meal planning
  • Affordable premium lines for family budgets

Price:

• Premium Pricing: Reflects the high quality and organic certifications for Health-Conscious Hannah.
• Value Pricing: Competitive pricing for convenience-focused Busy Brenda, offering affordability without sacrificing quality.

Place:

• Health-Conscious Hannah:
  • Available in health food stores, organic sections of supermarkets, and online platforms specializing in organic products.
• Busy Brenda:
  • Widely distributed in mainstream supermarkets, grocery chains, and convenience stores for easy accessibility.

Promotion:

• Health-Conscious Hannah:
  • Influencer partnerships with nutritionists and health bloggers
  • Content marketing focused on health benefits and sustainability
  • Social media campaigns highlighting organic sourcing and nutritional value
• Busy Brenda:
  • In-store promotions and sampling
  • TV and radio ads emphasizing convenience and time-saving aspects
  • Family-oriented advertising showcasing easy meal preparations

Step 9: Review Performance

VeggieFresh establishes key performance indicators (KPIs) to track the success of its STP strategy:

• Sales Growth:
  • Monitor sales increases within each target segment.
• Customer Satisfaction:
  • Collect feedback through surveys and product reviews to gauge satisfaction levels.
• Market Share:
  • Assess changes in market share within the premium frozen vegetable category.
• Brand Awareness:
  • Track brand recognition and recall through marketing campaigns and social media engagement.
• Sustainability Goals:
  • Measure progress towards environmental objectives, such as reducing carbon footprint and waste.

After six months, VeggieFresh reviews its performance and finds robust sales growth and high customer satisfaction within the Health-Conscious Hannah segment. However, adoption rates among Busy Brenda are slower than expected. In response, VeggieFresh adjusts its marketing mix by enhancing digital promotions targeting Busy Brenda and expanding its range of multi-use vegetable packs to better meet the convenience needs of this segment.