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Marketing’s STDP Process
When you delve into marketing strategies, you’ll often encounter the STP process—Segmentation, Targeting, and Positioning.
However, depending on the marketing textbook you’re referencing, this process might also be expanded to STDP, which includes an additional step: Differentiation. Understanding both STP and STDP is crucial as they guide you from analyzing market segments to effectively positioning your product in the marketplace.
Please note that this website has numerous articles dedicated to the STP process for more information. And please review the video at the bottom of this page.
STP vs. STDP: Understanding the Difference
- STP Process:
- Segmentation
- Targeting
- Positioning
As suggested by the letters, there are four key components of the STDP process, as follows:
- S stands for segmentation – or more appropriately market segmentation
- T stands for targeting – or target market selection
- D stands for differentiation = having something unique in the product offering that is not available in the same combination from a competitor
- P stands for positioning – the main attributes and benefits that the brand is known for
Like the STP Process, the STDP process should be approached in a sequential manner—starting with segmentation, moving through targeting and differentiation, and culminating in clear positioning. This sequence ensures that each step builds upon the previous one, leading to a cohesive and effective marketing strategy.
While both processes are fundamentally similar, STDP makes the Differentiation step explicit. Typically, differentiation is considered a component of positioning, but some textbooks separate it to emphasize its importance in creating a unique product offering.
About Market Segmentation
In the STDP process, market segmentation plays a pivotal role in helping you analyze an overall market of interest and then splitting it into related groups of consumers. Here’s how you can approach it:
Analyzing the Market
- Purpose: Gain a comprehensive understanding of the marketplace.
- Outcome: Identify key marketing insights and potential competitive advantages.
Approaches to Segmentation
There is no one-size-fits-all method for segmenting a market. Viewing the market from different perspectives can help you uncover unique segments that competitors might overlook. It is critical to ensure that market segments, when finally defined, have effectively grouped consumers that have some similarity – in terms of needs, purchases, behavior, or profile – that is relevant to the brand in question.
The primary segmentation bases include:
Geographic Segmentation
- Region
- Climate
- Population density
Demographic Segmentation
- Age
- Gender
- Income
- Education
Psychographic Segmentation
- Lifestyle
- Values
- Personality
Behavioral Segmentation
- Purchase behavior
- Brand loyalty
- Usage rate
- Benefits sought
Tools and Techniques
To effectively segment the market, you’ll often rely on:
- Market Research Data: Collecting and analyzing data to understand consumer characteristics.
- Cluster Analysis: Grouping consumers based on similarities.
- Segmentation Trees: Visual tools to map out different consumer segments.
Please see these related article on cluster analysis and segmentation trees.
Ensuring Effective Segmentation
It’s critical to ensure that your market segments are:
- Measurable: Quantifiable in terms of size, purchasing power, and profiles.
- Accessible: Reachable through your marketing channels.
- Substantial: Large enough to be profitable.
- Differentiable: Distinct with unique needs and responses to marketing efforts.
- Actionable: Segments can be effectively targeted and served.
About Targeting
Once you’ve segmented your market, the next step is targeting—selecting the most appropriate segments to focus your marketing efforts on. Here’s how to navigate this crucial phase:
Defining and Measuring Segments
In this step, each of the market segments would be defined, measured, and various pieces of information would be provided, typically including:
- Quantifying the Segment: Understanding the size and growth potential.
- Evaluating Profitability: Assessing the financial viability of each segment.
- Analyzing Competitiveness: Determining the level of competition within each segment.
Selecting Target Markets
And based upon this information, a marketer would select the most appropriate target market/s (could be more than one) for the brand (discussed further in this article on selecting target markets), usually based around:
- Size and Growth: Is the segment large enough, and is it growing?
- Profitability: Does the segment offer sufficient profit margins?
- Competitive Intensity: How fierce is the competition in this segment?
- Environmental Factors: Are there external factors that could impact the segment?
- Market Structure: How is the segment structured in terms of demand and supply?
Assessing Firm Capabilities
In addition to the above consideration of the attractiveness of the target market, obviously it is critical that the firm have the capabilities to successfully compete in that market segment. In that regard, the firm’s channel relationships, product mix, brand equity, geographic coverage, and so on would need to be a good fit to address the marketing challenges. This includes:
- Channel Relationships: Strong distribution and retail partnerships.
- Product Mix: A diverse range of products that meet segment needs.
- Brand Equity: A strong brand that resonates with the target audience.
- Geographic Coverage: Adequate presence in relevant locations.
About Differentiation
Differentiation is the additional step in the STDP model that sets it apart from the traditional STP process. The reason is the same process being discussed, is that differentiation is typically an embedded component of positioning, but in some marketing textbooks they break it out as a separate entity.
What is Differentiation?
Differentiation is simply being different. Having something unique in the offering of the brand/product to the consumer. Ideally, it is something that cannot be offered well by consumers.
- Definition: Differentiation is about being distinct. It involves offering something unique in your product or brand that competitors cannot easily replicate.
- Purpose: To give consumers a compelling reason to choose your product over others, beyond just price competition.
Importance of Differentiation
Differentiation is important because it gives consumers a reason to purchase your product versus a competitor offering. Without any differentiation, a brand is effectively forced to compete on price only, which severely limits the profitability potential of the brand.
- Competitive Advantage: Differentiation allows you to stand out in a crowded market, attracting consumers who seek specific attributes.
- Pricing Power: Unique features enable you to command premium prices, enhancing profitability.
- Brand Loyalty: Differentiated products foster stronger emotional connections, leading to higher customer retention.
Examples of Differentiation
Differentiation can be quite simple – such as a unique flavor of a food or drink item. Or it can be quite technical or advanced – such as a patented pharmaceutical, or a technically superior smart phone.
- Simple Differentiation: A unique flavor in a food or beverage product.
- Technical Differentiation: Advanced features in a smartphone or patented technology in pharmaceuticals.
By focusing on differentiation, you ensure that your product has a clear and compelling value proposition that appeals directly to your target segments.
About Positioning
Positioning is the final component of the STDP process, encompassing how you want your brand to be perceived in the minds of consumers. While closely related to differentiation, positioning focuses on constructing a specific image and value proposition for your brand.
What is Positioning?
- Definition: Positioning is the strategic process of establishing your brand’s identity and value in the marketplace. It defines how your brand is perceived relative to competitors.
- Goal: To create a distinct and desirable position in the minds of your target consumers.
Crafting a Positioning Statement
A well-crafted positioning statement should include:
- Target Audience: Who you are targeting.
- Frame of Reference: The category or market in which your brand competes.
- Point of Difference: What makes your brand unique.
- Reason to Believe: Evidence or reasons that support your point of difference.
Example: Starbucks
Positioning is an image construction in consumer’s minds of what the brand is best for and how it is better than other competing offerings. For example, many consumers know Starbucks offer a wide choice of coffee drinks, in many convenient locations, delivered with friendly and fast service.
- Positioning Statement: “Starbucks offers a wide variety of high-quality coffee drinks in convenient locations, delivered with friendly and fast service.”
- Key Elements:
- Wide Choice: Emphasizes the variety of coffee options.
- Convenient Locations: Highlights accessibility and convenience.
- Friendly and Fast Service: Focuses on customer experience and efficiency.
In this above statement, the key elements of Starbucks’ value proposition are listed, along with a positive spin – such as “wide choice” and “convenient”. This positioning helps Starbucks stand out as a premium coffee brand that caters to diverse tastes and busy lifestyles.
The Role of the STDP Process
STDP highlights the key elements of marketing strategy for many firms and brands, as it forces the marketer to consider key strategic questions and make clear decisions before designing and implementing the marketing mix.
By considering market segmentation, the firm must first define the overall market that they wish to compete in. That may sound strange at first, but consider a fast food restaurant chain – are they in the burger market only or are they in a broader range of food offerings – are they also in the takeaway coffee market – are they in the in-store dining market? As you can see, the scope of the market can be very narrow or extremely broad.
In the market segmentation stage, the firm will get to understand the different types of consumers in the marketplace and their need. Which ones have similar needs? What are the different ways of looking at the same market? Can we have a different view of the market than our competitors?
This is very helpful information both from a marketing insight perspective, but also from a potential competitive angle as well.
In the target market selection stage, the firm will consider which consumer segments of the market that they will compete in. As we know in marketing, it is difficult to be a mass-marketer. Therefore, most firms will need to be selective in where they channel their marketing resources, and the target market selection answers the big question = Where to Compete?
Differentiation requires the firm to have at least one unique aspect in their overall value proposition that will appeal to the targeted segment. Without clear differentiation – which consumers see as having value – there is no reason for a consumer to purchase their products, as opposed to any other offering in the marketplace.
Therefore, considering differentiation forces the company to design an offering that has a clear target market appeal.
And finally, positioning is how the brand wishes to be seen and known in the marketplace. It will most likely include its clear points-of-difference from above, and may also highlight what is known as points-of-parity.
Strategic Questions Addressed by STDP
The STDP process is foundational to developing a robust marketing strategy. It compels you to address key strategic questions and make informed decisions before designing and implementing your marketing mix.
- Where to Compete?
- Answered By: Market Segmentation and Targeting.
- Example: Determining whether your firm competes solely in the burger market or in a broader range of food offerings, including takeaway coffee and in-store dining.
- How to Compete?
- Answered By: Positioning Strategy and Marketing Mix Implementation.
- Example: Deciding whether to compete based on price, quality, convenience, or another differentiating factor.
Benefits of the STDP Process
By following the STDP process, you can develop a marketing strategy that is both targeted and differentiated, positioning your brand for sustained success in a competitive marketplace.
- Clarity and Focus: Helps you concentrate your marketing efforts on the most promising segments.
- Competitive Advantage: Enables you to differentiate your offerings effectively.
- Customer Alignment: Ensures your products and messaging resonate with the needs and preferences of your target audience.
- Strategic Consistency: Aligns your marketing mix with your overall business strategy, enhancing coherence and effectiveness.
FAQs on the STDP Marketing Process
What does STDP stand for in marketing?
- STDP stands for Segmentation, Targeting, Differentiation, and Positioning. It is an extended version of the traditional STP process, which includes an explicit focus on Differentiation to highlight unique product attributes separate from Positioning.
How is the STDP process different from the STP process?
- While both STP (Segmentation, Targeting, Positioning) and STDP (Segmentation, Targeting, Differentiation, Positioning) cover similar stages, STDP explicitly separates Differentiation from Positioning. This separation emphasizes creating unique product features before establishing how to position the product in the market.
Why is market segmentation important in the STDP process?
- Market segmentation allows you to divide a broad market into smaller, more manageable groups of consumers with similar needs or characteristics. This analysis helps you gain key marketing insights, identify target segments, and tailor your marketing strategies effectively to meet specific consumer demands.
Can you provide an example of differentiation in a product?
Consider Apple’s iPhone:
- Unique Features: Advanced technology, seamless ecosystem, superior design.
- Differentiation: Apple differentiates its iPhones through innovative features like Face ID, high-quality cameras, and exclusive software integrations, setting them apart from other smartphones in the market.
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