What Is the STP Marketing Model?

The STP Marketing Model can help you to analyze your product offering and the way you communicate its
benefits and value to specific groups.

STP stands for:

 Segment your market.

 Target your best customers.

 Position your offering.

The model is useful because it helps you to identify your most valuable types of customer, and then develop
products and marketing messages tailored to them. This allows you to engage with each target group more
effectively, personalize your messaging, and – ultimately – increase your sales.

Applying the STP Model

Follow the steps below to apply the STP Model in your organization. For each step, we've also provided a worked
example using the fictitious travel firm, the Adventure Travel Company.

Step 1: Segment Your Market

Your organization, product or brand can't be all things to all people. So, use market segmentation to divide your
customers into groups of people with common characteristics and needs. This allows you to tailor your approach
to meet each group's needs effectively, and gives you a huge advantage over competitors who use a "one size fits
all" approach.

There are many different ways to segment your target markets:

 Demographic – by personal attributes such as age, marital status, gender, ethnicity, sexuality, education, or
occupation.

 Geographic – by country, region, state, city, or neighborhood.

 Psychographic – by personality, risk aversion, values, or lifestyle.

 Behavioral – by how people use the product, how loyal they are, or the benefits that they are looking for.
 Market targeting:
Market targeting is determining the group of customer to focus your marketing efforts.

It is evaluate the attractiveness of each segment and choose a target segment

The list below refers to what’s needed to evaluate the potential and commercial attractiveness of each segment.

 Criteria size: The market must be large enough to justify segmenting. If the market is small, it may make it
smaller.

 Difference: Measurable differences must exist between segments.

 Money: Anticipated profits must exceed the costs of additional marketing plans and other changes.

 Accessible: Each segment must be accessible to your team and the segment must be able to receive your
marketing messages

 Focus on different benefits: Different segments must need different benefits.

Product positioning

Positioning maps are the last element of the STP process. For this to work, you need two variables to illustrate the
market overview.

In the example here, I’ve taken some cars available in the UK. This isn’t a detailed product position map, more of
an illustration. If there were no cars in one segment it could indicate a market opportunity.

Factors Affecting Market Segmentation

Following are the factors affecting market segmentation:

1. Nature of demand

A commodity having wide demand the extent and size of the market will be large and contrary to it the size and
extent of the market will be Limited.

For example, Silver, Gold, sugar, and food-grains have a wide market while the demand for bangles, Gandhian
cap, and Nehru jacket are limited to India only.

2. Durability

Perishable goods like vegetables, eggs, milk, bread, and butter have a limited market while durable goods namely
T.V., radio, vehicles, gold, silver have a wide market.

3. Banking and Financial System

In a country where there is well developed organized money credit, banking and financial system are in
existence the market is widened because payments are quickly finalized.
On the other hand, if the banking and financial system is not well developed and organized the markets Limited.

4. Portability

The goods having heavyweight and prices are low the market is limited while those goods which are easily
portable and prices are high have the large size and extent of the market.

Thus, Bricks, cement other building materials have a small size and extend market while silver and gold have a
large size and extend the market.

5. Sampling and Grading of Goods

Those goods which are bought and sold on the basis of the samples and grading the market will be wide while the
goods not sold on the basis of samples and grading have a limited market.

Woolen clothes, food-grains, raw cotton etc. have a Wide market.

6. Adequate Supply

The goods and services having a flexible supply market will be widened and the goods having inadequate supply
will have a limited market.

7. Efficient and Honest Businessman and Traders

The presence of efficient and honest Business and trading community encourage the business and trade to flourish
and the market is widened.

Thus, while inefficient and dishonest Businessman and traders will adversely affect the business activities and the
market is limited.

8. Substitutes

A commodity having substitutes in the market will have a limited market while no substitute commodity will be
widely used and the size and extent of the market are widened.

9. Government Policy

Domestic and foreign trade is affected by government policy relating to exports and imports, license, protection,
taxes, etc.

If these policies are restricting the trade then the market will be Limited and when there are liberal policies the
market is widened.

10. Availability of Means of Communication and Transport

In a country where there are cheap, quick, and adequate means of communication and transport available the
goods are transferred from one part of the country to another and the market is widened.
Contrary to it the market is limited because goods cannot be transferred from one place to another.

Thus, all these factors play an important role in the market size and are factors to be aware of when thinking
about sizing a market, as they can help guide you on the best approach to take for a given market.

Factors affecting Targeting marketing:

The following are key factors that affect consumer preferences and therefore affect the size of the target
market:

1. Demographics

2. Geography

3. Economic factors

4. Social values

Factor # 1. Demographics:

The total demand for particular products or services is dependent on the demographics, or characteristics of the
human population or specific segments of the population. As demographic conditions change, so does the
demand.

For example, demographic statistics show an increase in the number of women who work outside the home.
Firms have adjusted their product lines to capitalize on this change. Clothing stores have created more lines of
business clothing for women.

Food manufacturers have created easy-to-fix frozen foods to accommodate the busy schedules of wage-earning
women. The tendency for people to have less free time and more income has resulted in increased demand for
more convenience services, such as quick oil changes and tire replacement services.

One of the most relevant demographic characteristics is age because target markets are sometimes defined by age
levels. Demographic statistics show that the population is growing older. Consequently, the popularity of sports
cars has declined as customers look for cars that are dependable and safe.

Automobile manufacturers have adjusted to this demographic change by supplying fewer sports cars. Home
Depot created an installation service business to capitalize on the growing number of mature customers who
prefer not to do repair or installation work themselves.

Although the population has generally grown older, the number of children in the United States has recently
increased. Many of these recently born children have two parents who work outside the home and spend large
sums of money on their children. Firms such as Oshkosh B’ Gosh and The Gap have capitalized on this trend by
producing high-quality (and high-priced) children’s clothing.

To illustrate how characteristics of the population can change over time, consider the changes over the 20-year
period 1985-2005. In general, the population has grown larger, while both the number of people age 65 or older
and the number of households earning more than $60,000 annually have increased. Such information is relevant
to firms because it suggests that the size of specific target markets may be changing over time.

Factor # 2. Geography:

The total demand for a product is also influenced by geography. Firms target snow tires to the northern states and
surfboards to the east and west coasts of the United States. Tastes are also influenced by geography. The demand
for spicy foods is higher in the southwestern states than in other states.

Factor # 3. Economic:

As economic conditions change, so do consumer preferences. During a recessionary period, the demand for most
types of goods declines. Specialty and shopping products are especially sensitive to these conditions. During a
recession, firms may promote necessities rather than specialty products.

In addition, their pricing may be more competitive. When the economy becomes stronger, firms have more
flexibility to raise prices and may also promote specialty products more than necessities.

.Factor # 4. Social Values:

As the social values of consumers change, so do their preferences. For example, the demand for cigarettes and
whiskey has declined as consumers have become more aware of the dangers to health from using these products.
If a firm producing either of these products anticipates a change in preferences, it can begin to shift its marketing
mix.

Alternatively, it could modify its product to capitalize on the trend. For example, it could reduce the alcohol
content of its whiskey or the tar and nicotine content of its cigarettes. It may also revise its promotion strategy to
inform the public of these changes.
Market Segmentation: 7 Bases for Market Segmentation

Some of the major bases for market segmentation are as follows: 1. Geographic Segmentation 2.Demographic
Segmentation 3.Psychographic Segmentation 4.Behaviorist Segmentation 5.Volume Segmentation 6. Product-
space Segmentation 7. Benefit Segmentation.
1. Geographic Segmentation:

Geographic location is one of the simplest methods of segmenting the market. People living in one region of the

country have purchasing and consuming habit which differs from those living in other regions. For example, life

style products sell very well in metro cities, e.g., Mumbai, Delhi, Kolkata and Chennai but do not sell in small

towns. Banking needs of people in rural areas differ from those of urban areas. Even within a city, a bank branch

located in the northern part of the city may attract more clients than a branch located in eastern part of the city.

2. Demographic Segmentation:
Demographic variables such as age, occupation, education, sex and income are commonly used for segmenting
markets.

(a) Age:
Teenagers, adults, retired.

(b) Sex:
Male and female.

(c) Occupation:
Agriculture, industry, trade, students, service sector, house-holds, institutions.

(i) Industrial sector:

Large, small, tiny.

(ii) Trade:
Wholesale, retail, exporters.
(iii) Services:
Professionals and non-professionals.

(iv) Institutions:
(e) Family Life-cycle:
Young single, young married no children, young married youngest child under six, young married youngest child
over six, older married with children, older married no children under eighteen, older single, etc.

3. Psychographic Segmentation:
Under this method consumers are classified into market segments on the basis of their psychological make-up,
i.e., personality, attitude and lifestyle. According to attitude towards life, people may be classified as
traditionalists, achievers, etc.

Psychographic. Many businesses offer products based on the attitudes, beliefs and emotions of their target market.
The desire for status, enhanced appearance and more money are examples of psychographic variables. They are the
factors that influence your customers’ purchasing decision. A seller of luxury items would appeal to an individual’s
desire for status symbols.
Business customers, as well as consumers, can be described in psychographic terms. Some companies view
themselves as cutting edge or high tech, while others consider themselves socially responsible, stable and strong. Still
others see themselves as innovative and creative. These distinctions help in determining how your company is
positioned and how you can use the company’s position as a marketing tactic.

4. Behavioristic Segmentation:

In this method consumers are classified into market segments not the basis of their knowledge, attitude and use of
actual products or product attributes.

Behavioristic. Products and services are purchased for a variety of reasons.

Business owners must determine what those reasons are, such as: brand, loyalty, cost, how frequently and at what
time of year customers in a segment use and consume products. It’s important to understand the buying habits and
patterns of your customers. Consumers do not rush and buy the first car they see, or the first sofa they sit on.
A Fortune 500 company doesn’t typically make quick purchasing decisions.

Answer the following questions regarding your market.

Reason/occasion for purchase?

Number of times they’ll purchase?

Timetable of purchase, every week, month, quarter, etc.?

Amount of product/service purchased?

How long to make a decision to purchase?

Where customer purchases and/or uses product/service?

Any of the following variables might be used for this purpose:

(а) Purchase Occasion:
Buyers may be differentiated on the basis of when they use a product or service. For example, air travellers might
fly for business or vacation. Therefore, one airline might promote itself as a business flyer while another might
target the tourists.

(b) Benefits Sought:

The major benefit sought in a product is used as the basis of classify consumers. High quality, low price, good
taste, speed, sex appeal are examples of benefits. For example, some air travellers prefer economy class (low
price), while others seek executive class (status and comfort).

(c) User Status:

Potential buyers may be classified as regular users, occasional users and non-users. Marketers can develop new
products or new uses of old products by targeting one or another of these groups.

5. Volume Segmentation:
Consumers are classified light, medium and heavy users of a product. In some cases, 80 per cent of the product
may be sold to only 20 per cent of the group. Marketers can decide product features and advertising strategies by
finding common characteristics among heavy users. For example, airlines having ‘Frequent Flyer’ are using user
rate as the basis of market segmentation. Generally, marketers are interested in the heavy user group.

6. Product-space Segmentation:
Here the buyers are asked to compare the existing brands according to their perceived similarity and in relation to
their ideal brands. First, the analyst infers the latent attributes that consumers are using to perceive the brand.
Then buyers are classified into groups each having a distinct ideal brand in mind. The distinctive characteristics
of each group are ascertained.

7. Benefit Segmentation:
Consumer behavior depends more on the benefit sought in product/service than on demographic factors. Each
market segment is identified by the major benefits it is seeking. Most buyers seek as many benefits as possible.
However, the relative importance attached to individual benefits differs from one group to another. For example,
some consumers of toothpaste give greater importance to freshness while other prefers taste or brightness of teeth.

What is customer segmentation?

Customer segmentation is the process by which you divide your customers up based
on common characteristics – such as demographics or behaviours, so you can market
to those customers more effectively.
 These customer segmentation groups can also be used to begin discussions
of building a marketing persona. This is because customer segmentation is typically
used to inform a brand’s messaging, positioning and to improve how a business sells
– so marketing personas need to be closely aligned to those customer segments in
order to be effective.

Segmenting customers based on who they are

The process of understanding who customers are typically focuses on demographics.
This will include factors such as:

 Age
 Geography
 Urbanisation – are they city or rural?
 Income
 Relationship status
 Family
 Job type

Why Segment Customers?

Segmentation allows marketers to better tailor their marketing efforts to various audience subsets. Those efforts
can relate to both communications and product development. Specifically, segmentation helps a company:

 Create and communicate targeted marketing messages that will resonate with specific groups of customers, but
not with others (who will receive messages tailored to their needs and interests, instead).
 Select the best communication channel for the segment, which might be email, social media posts, radio
advertising, or another approach, depending on the segment.
 Identify ways to improve products or new product or service opportunities.
 Establish better customer relationships.
 Test pricing options.
 Focus on the most profitable customers.
 Improve customer service.
 Up sell and cross-sell other products and services.

What Types of Customers Do You Serve?

Let’s say you own a retail store that anchors a well-trafficked mall. You spend a day standing at the main entrance
to your business, greeting people as they enter. Your aim is to get to know your customers better, so you ask
them, “Why did you come to my store today?”

Here’s what you discover:

1. Lookers
Some visitors are “just looking.” They’re not after anything in particular. They’re having fun shopping and want
to see what you have that might catch their attention. They may even have been looking for a different store, but
got lost in all the mall traffic.

2. Bargain Hunters
Some shoppers have heard you’re having a sale. They want to see if they can find a bargain.

3. Buyers
Some people are there on a mission. They know exactly what they want, and they’re there to get it.

4. Researchers
Some are researching. They have a general idea of what they’re after, but they want to compare options and
prices.

5. New Customers
Some are relatively new customers. They enjoyed their last visit to your store, and they’re back to find out more
about what you offer.

6. Dissatisfied Customers
Some are there to return something. For some reason, a previous purchase didn’t suit them. They want customer
service.

7. Loyal Customers
Some are your best customers. They come back often and love shopping with you.

Is that a fair assessment of what a local store owner might determine by greeting shoppers for a day? Wouldn’t
this be valuable information – especially if it would allow you to cater more to the particular needs of each of
these types of customers?

Guess what: the very same thing applies to your ecommerce store. If you can learn to identify your different types
of customers and how to deal with them, your ability to convert those customers will grow.

Targeting:
The selection of potential customers to whom a business wishes to sell products or services. The targeting
strategy involves segmenting the market, choosing which segments of the market are appropriate, and
determining the products that will be offered in each segment.
Effective Strategies for Identifying Your Target Customers
The market targeting strategies can be identified under four main segments.
1. Undifferentiated Marketing
2. Differentiated Marketing
3. Concentrated Marketing
4. Micromarketing
Undifferentiated Marketing
This is also known as the Mass marketing strategy. Under this strategy, the organization decides to ignore the market
segmentation and decide to produce it to the entire market. This is suitable for productions such as garment and
necessary food. This type of strategy focuses on the common needs of the consumers and products to satisfy those
common needs. There is no uniqueness or specification for the product. The organization should invest a large amount of
capital for mass production.
Differentiated Marketing
Differentiated Marketing strategy is also known as the segmented marketing strategy. It decides to select several target
markets in the industry and produce customized products for each market segment. By offering separate product types for
each market segment, the organization is expecting to achieve a higher market share in each market segment and plan to
stabilize separately in each segment. This strategy requires many research and development skills, innovative and creative
skills to produce products that can satisfy all the selected market segments.
Differentiated marketing is a highly costly strategy. Apart from that, it can be considered as one of the safest ways of
production. If one marketing segment fails to achieve the expected income, the organization has a few more options to
improve and encourage.
Concentrated Marketing
Concentrated marketing is known as Niche marketing as well. Under the concentrated marketing strategy, the
organization focuses on a large share of one or more small segments (niches). Through concentrated marketing, the
organization is planning to achieve a strong market share and create brand loyalty in the customers. By focusing on one or
a few niches the organization is planning to obtain better knowledge on the customer needs and provide exactly what
they are expecting from the product.
This strategy helps smaller companies to focus on their resources and provide with minimum waste and achieve bigger
and better market share.
Micromarketing
Micromarketing strategy is about producing the product and the marketing method to suit the taste of a specific individual
or specific location. Rather than producing for every customer, micromarketing concentrates on satisfying the needs of
specific, prestigious customers.
Micromarketing can be divided into two categories naming local marketing and individual marketing.
1. Local Marketing – This is about providing a product or a service based on the requirement of a customer group
2. Individual Marketing – This is about providing a product or a service based on an individual customer. This can be
identified as one-to-one marketing or mass customization.

Top 5 Target Marketing Strategies

Based on the response from the market, marketing strategies are designed. The target marketing strategies vary
based on the purchasing power of the customer, and the geographical location of the market. The types of target
marketing strategies are dependent on multiple factors inclusive of age group, gender, and geographical location
to name a few.

Various Target Marketing Strategies

Broadly the target marketing strategies are classified into the following types

 Mass Marketing
 Segment Marketing
 Niche Marketing
 Micro Marketing
 Local Marketing

A) Mass Marketing
Mass Marketing involves marketing to the entire population with a single strategy. Mass marketing focuses to
reach everyone with maximum exposure to the product. An attempt is made to spread the message to everyone
with mass media such as TV, newspaper, and mobile.

Regularly consumed products like toothpaste and toothbrushes, mass marketing is all that is needed.

B) Segment Marketing

Segment Marketing known for its differentiated targeting strategy focuses on a section of people known as the
‘target audience’. The target marketing concept is to attract customers to their products. This segment of
marketing fetches good results for new products entering to market with established organizations. This
differentiated marketing is expensive. The differentiated marketing strategy can be designed uniquely for the
different target audiences. A very good two differentiated marketing examples implemented by Lilly Pulitzer are
as follows.

Lilly Pulitzer a luxury beachwear company for 60 years catered to an audience inclined towards luxury. In 2015,
the company teamed up with Target and came up with a differentiated marketing strategy. The company came up
with a target market definition example. The company designed an affordable range of products for sale for a
limited duration for another set of the target audience. On the day of the launch, the Target site crashed due to
huge traffic. The company gained another section of the target audience in no time.

C) Niche Marketing

Niche marketing also known as concentrated marketing targets a small section of the market. The entire campaign
is around this small section of the market. Luxury goods like Rolex and Armani are examples of niche marketing.
Niche marketing yields results for small companies with limited production and sales. There are advantages and
disadvantages to niche marketing.

Advantages of niche market segment are:

 Generates high revenues.

 Loyal customer base.
 Competition is less.

Disadvantages of niche marketing are:

 The market is small.

 The scope for growth is less.
 Less competition so keenness to improve is minimal

D) Micromarketing

Micromarketing focuses on a much smaller section of people than niche marketing. Micromarketing definition is
customized marketing or one-to-one marketing. The products are customized to the requirements of the customer.
The micro marketing strategies involve customer tastes, whims, and wishes. A good example of a micromarketing
strategy is Etsy.com which focuses on handmade goods taking orders from customers with their specific
requirements.
A few micromarketing examples are Uber and Red Bull. Uber used a unique local micromarketing strategy in
each city to become visible and expand its customer base. Red Bull did not focus on its unique point of being an
energy drink but on a lifestyle. Red Bull focused on its target audience ‘youth’ interested in sports.

E) Local Marketing

Local marketing strategy involves nearby and neighborhood areas. The organizations use this marketing strategy
to thrive on local connections and make their presence felt. Amazon Local is a good example of a local marketing
strategy. The online service providers along with local businesses come up with offers for hotel booking, spa
treatments, and restaurant meals at regular intervals. The local companies earn good revenue with sales. Another
initiative is CSAs which are community-supported agriculture shares. Local marketing works wonders for freshly
grown greens, fruits, and vegetables by creating a market in a nearby locality.

The marketing team is always looking for new ways to capture the audience. A combination of the above
strategies along with mobile marketing is making inroads in expanding the customer base. Every marketing
strategy will have a promotional campaign to create awareness, research, and surveys to get to know their target
audience and segment marketing to make sales to potential customers.

Positioning:

Positioning refers to the place that a brand occupies in the minds of the customers and how it is distinguished
from the products of the competitors and different from the concept of brand awareness

Market positioning refers to the process of establishing the image or identity of a brand or product so that
consumers perceive it in a certain way. For example, a car maker may position itself as a luxury status symbol.
Whereas a battery maker may position its batteries as the most reliable and long-lasting.

Let’s see some typical examples of marketing positioning:

 Tesla and Audi position themselves as a luxury status symbol

 Starbucks positions itself as a trusted source of upscale quality coffee and beverage

 McDonald’s positions itself as a place to get quick and cheap meals

 Microsoft and Apple position themselves as a tech company that offers innovative and user-friendly
products.
Types of positioning in marketing
Below are some common types of positioning in marketing.
Pricing
Pricing is an essential factor that impacts the decisions of most customers. Companies with the lowest-priced
products at a reasonable level of quality usually wins in many product areas.
For example, Gillette vs. Dollar Shave Club. Lower-priced alternatives to some high-quality brands like
Gillette have changed the landscape of razors and refill blades. The Washington Post reported on
Gillette’s decreasing market share due to Dollar Shave Club’s low prices. The cheapest refill razor cartridge of
Dollar Shave Club was 20 cents, compared to $2 to $6 a cartridge for Gillette.

Quality
Quality can help rebuff most pricing wars. In some markets, such as luxury cosmetics or cars, quality can define
who the competitors are.
For instance, Chipotle vs. Taco Bell. Ranked 14th in the top 50 fast-food restaurants in America by QSR
Magazine, Chipotle has grabbed a significant market share over the years by focusing on quality instead of price.
Differentiation
Differentiation is what sets your product or service apart from the crowd. If your product or service is
dramatically different, rivals may not pose as much of a threat.
For example, Toyota vs.Tesla. Tesla entered the electric vehicle market with a luxury sports model, rapidly
sidestepping economy cars like the Toyota Prius. Tesla actually targeted the high-end market with the Model S.

Convenience
Convenience creates an easier life for customers. From location to usability, convenience could incorporate
something like free returns and E-commerce.
For example, Simple vs. Bank of America. Some traditional banks have been slow to create mobile apps, but
online-only banks like Simple have invested in this to appeal to younger and more technical-savvy customers.
The company even charges no fees and has convenient built-in budgeting and savings tools.

Customer service
Customer service emphasizes creating helpful and friendly interactions. This can be especially critical in specific
industries, such as restaurants and banking areas.
For example, Allstate vs. State Farm. Both insurance companies recognize the importance of customer service
in this industry, where contact with customers is indispensable. They use customer service-based messages in
their marketing to focus on this position.

User group
This type of positioning targets a particular group of users and explains why the company’s offerings are directly
applicable and relevant to this group.
For instance, Johnson’s vs. Axe. While Johnson’s baby shampoo positions itself as gentle for children, Axe
body spray targets men.

5 Benefits of positioning in marketing

There are a number of reasons why you should consider making positioning part of your marketing strategy. With
the right positioning tactic, you can create better marketing messages, shape your services better, and structure
pricing plans so that you remain competitive.
Here are 5 advantages of positioning in marketing:
Create a strong competitive position
Proper positioning influences how customers perceive your product or service relative to the competition. When
you create a positive image of your product/ service in the customers’ minds, you’re likely to enjoy an ongoing
market advantage. By doing this, you can claim your position in the competitive landscape, which helps you a lot
to stay ahead of the curve.
Improve sales
One of the main goals of any business is to improve sales and revenue. By having a more relevant offering and
communicating it more effectively, your company may be able to penetrate a new market, which can translate
into new clients and additional sales.
Define a clearer target market
Positioning in marketing allows you to claim a specific feature or benefit and focus your products/ services
accordingly so that you appear as an expert in the services. As a result, your value to prospects will increase
significantly.
Make more effective decisions
Once you have the core message that ensures successful positioning strategies, you’ll be in a position to make
more effective decisions throughout the process. Clear positioning in marketing also drives effective
communication, provides healthier and stronger relationships with customers.
Connect to consumer needs
Through positioning in marketing, companies have an opportunity to communicate the critical benefits that their
product/ service offers. It not only helps to energize the product but also connects it to the specific customer that
needs it.

Product differentiation Strategies:

Overall, product differentiation can be part of a strategy in positioning a product amongst its competitors: by
highlighting its unique qualities. Though product positioning alters customers' perceptions, the marketing
message does not always influence people as desired.

Promoting Product Differentiation

The references to a product's differentiating qualities are reflected in the product's packaging and promotion and,
often, even in its name. The cat food brand name Fancy Feast implies a high-quality cat food that cats love, and
the advertising reinforces that claim. The Fresh Pet cat food brand highlights its use of natural ingredients. Hill's
Science Diet conveys the message that the cat food was developed by animal nutrition experts.

Types of Product Differentiation

Ideally, a product differentiation strategy should demonstrate that the product can do everything the competing
choices can but with an additional benefit that is exclusive to that product. Below are a few of the most common
strategies employed to differentiate a product or service-

Price

Price can be used to differentiate a product in two ways. Companies can charge the lowest price compared to
competitors to attract cost-conscious buyers—the retailer Costco is an example. However, companies can also
charge high prices to imply quality and that a product is a luxury or high-end item, such as a Bugatti sports car.

Performance and Reliability

Products can be differentiated based on their reliability and durability. Some batteries, for example, are reputed
to have a longer life than other batteries, and consumers will buy them based on this factor.

Location and Service

Local businesses can differentiate themselves from their larger national competitors by emphasizing that they
support the local community. A local restaurant, for example, will hire locally and may source its food and
ingredients from local farmers and purveyors .

The Positioning Process

Arriving at the best positioning and differentiation strategy involves a process. The goal of the process is to
design an identity that both confirms the value of the product, service, or brand in the customer’s mind and
explains why and how the offering is better than the competition. To reach that goal, marketers typically follow a
positioning process comprised of the following five steps:

Steps of the Positioning Process

1. Confirm your understanding of market dynamics

2. Identify your competitive advantages
 3. Choose competitive advantages that define your market “niche”
4. Define your positioning strategy
5. Communicate and deliver on the positioning strategy

Step 1: Confirm Your Understanding of Market Dynamics

At the start of the positioning process, you need a firm understanding of your target market and answers to the
following questions:

 In which product, service, or market category (also called the “frame of reference”) do you plan to use this
positioning?
 Which target segment is your focus for the positioning you are developing?
 What factors do these buyers evaluate when they make a purchasing decision?
 How do these buyers view your competitors in the category?

If you don’t have answers to these questions, you should consider conducting formal or informal marketing
research to reach a better understanding of your target market and the market dynamics around it. Some marketers
may have the time and resources to conduct extensive research, while others may need to rely on their own
experience and anecdotal conversations with target customers. Either way, you’ll remember that the customer is
at the center of the marketing mix, so knowing whom you’re targeting is the only place to start.

Step 2: Identify Your Competitive Advantages

A competitive advantage is some trait, quality, or capability that allows you to outperform the competition. It
gives your product, service, or brand an advantage over others in purchasing decisions. Competitive advantage
may come from and or all of the following:

 Price: Something in your production process or supply chain may make it possible for you to provide
comparable value at a lower cost than competitors.
 Features: You may provide tangible or intangible features that your competitors do not: for example, more
colors, better taste, a more elegant design, quicker delivery, personalized service, etc.
 Benefits: You may provide unique benefits to customers that your competitors cannot match. Benefits are
intangible strengths or outcomes your customer gets when they use your offering. For example, time
savings, convenience, increased control, enjoyment, relaxation, more choices, feeling better about oneself,
being more attractive, etc.

Create a list of the things that make you different from competitors in positive ways. Then identify which of these
factors are also competitive advantages: the influential factors that help you perform better in the marketplace and
cause customers to choose your product, service, or brand over other options.

As a rule, it is relatively easy for competitors to undercut your pricing or match your features, so it is difficult to
maintain a consistent competitive advantage in either of these areas. Market-leading products, services, and
brands are most likely to differentiate based on benefits—the intangible strengths and outcomes that are harder
for competitors to match.

For example, many car companies achieve strong ratings in safety tests, but driving a Volvo provides an extra,
intangible benefit for the driver of feeling safer because of Volvo’s longstanding record and reputation for safety.
A variety of theme parks in Southern California offer exciting rides and family fun, but only Disneyland’s Magic
Kingdom makes people feel like they’re in the happiest place on earth.
You don’t necessarily need a long list of competitive advantages, but your list should be substantive: it should
include the things that truly create distance between your offering and competitors. Dig deep to identify the
intangible benefits your customers experience–or intangible benefits they could experience—from your offering
that make it different and better than the alternatives.

Step 3: Choose Competitive Advantages That Define Your Niche

Your list of competitive advantages represents a set of possible positioning strategies you could pursue for your
product, service, or brand. The next step is to examine how these factors fit into customer perceptions of your
broader competitive set. Your goal is to pick a positioning approach that gives you a unique and valued position
in the market that competitors are not addressing.

A perceptual map is a great tool for this step. Perceptual maps create a picture of how different competitors are
positioned in the market, based on the key criteria that strongly influence customer decisions. Examples of two
different perceptual maps are included below. The first one maps automobile brands based on customer
perceptions of price and quality. The second one maps lifestyle programming on cable TV channels, according to
whether it is younger/edgier vs. older/mainstream and educational vs. entertainment.

Step 4: Define Your Positioning Strategy

With your competitive advantages identified and information about how key competitors are positioned, you’re
ready to evaluate and select your positioning strategy. This is the decision you make about how, exactly, you plan
to position your offering relative to the rest of the field. How will you be different and better?

Step 5: Communicate and Deliver on Your Positioning Strategy

The next sections of this module will delve deeper into this step, but don’t underestimate its importance.
Communicating your positioning strategy begins with creating a positioning statement and sharing it internally
across the organization to make sure that everyone understands how and where your offering will fit in the
market. Your positioning builds on a competitive advantage, and it is essential for you to deliver on the
expectations your positioning sets in customers’ minds. You should design your positioning strategy to endure
over time, while recognizing that it can and should be adjusted from time to time to reflect changes in the
competitive set, your target segment, market trends, and so forth.

What Is Branding?
Branding is the process of assigning characteristics and properties within and outside an offering to give that generic
offering an identity which helps it to be recognized and differentiated in the market.
Three points that should be noted in this definition of branding are –
 Assigning characteristics and properties within and outside an offering: Even though the characteristics and
properties are offering-specific, they are not limited to within the offering. A Facebook post by the company
represents the brand as well.
 To give an identity: The main purpose of branding is to give an identity to the generic product. The identity is
very much human-like; with a name, voice, tonality, colour, and sometimes even sound.
 To help it be recognised and differentiated: Another role of branding is to be unique. A unique branding results
in the product being more recognised and differentiated in the pool of competition.
Importance Of Branding
Brand is the sum total of how someone perceives a particular organisation. Branding is shaping that perception. – Ashley
Freidlin, CEO & Founder of Guild
One should not ignore the importance of branding. It has become a necessity for products, organisations, and even humans
today. There’s no dearth of offerings with similar properties and the only thing that separates the particular offering from
the competition in such a case is the brand.
Branding the offering should be a priority before the launch of the product in the market as it helps to:
  Create an identity for the offering: Branding is what the product is known for besides the generic properties. It is
the unique name, colour, design, and even the psychological experience that makes the product identifiable in the
market.
 Create consumer preference towards the offering: The market is full of offerings with the same properties
which often confuse the consumer to what he should buy. A way through which consumers can confront this
problem is through leaning towards such brands which they know and trust. Popular brands are known to be safer
investments as compared to the risky ones and they provide consumer satisfaction for the utility it provides them.
 Create a new asset and build value: A brand in itself is an asset that can be sold separately. Wonder why Apple
products cost twice as much as the competition which sells the product with the same configuration? It’s the brand
effect.
 Build trust: Branding an offering results in the professional appearance of the offering. It includes well-
strategised labels and packaging according to the legal requirements and the planned positioning. This increases its
appeal as consumers trust offerings with a professional outlook.
 Improves pride and satisfaction: Branding the company or the offering improves the pride and satisfaction of
both the customers as well as the employees. It personifies the company and its offerings and helps everyone who
associates with it to create a deeper connection with the brand.
 Develop marketing strategies: Marketing strategies without a brand will be nothing but futile as there will be
nothing to identify the offering with. Branding is a core part of marketing as all of the marketing strategies have
their roots in branding.
Elements Of Branding
Branding isn’t limited to just name and logo. It is a combination of characteristics and properties which have
an effect on almost all of our senses to result in a uniform experience every time we have contact with it.
Branding is made up of innumerable elements few of which are –
 Name: The name which we use to identify the product with.
 Logo: A symbol or other design adopted by the business to identify its brand.
 Colour: A colour mostly used by the business in its marketing messages to describe or complement the
brand.
 Vision: The group of goals or objective behind the brand that help guide its activities and its future.
 Message: the value proposition of the brand which it conveys through the brand personality to set the
brand positioning.
 Shape: Either the distinct shape of the offering or the shape of the packaging.
 Aroma: The distinct smell which the user experiences before, during, or after he uses the offering.
 Graphics: The uniform and distinct aesthetics used in the marketing messages.
Types Of Branding
Branding isn’t limited to products. Today we witness the branding of organizations, products, services, places, and
even people. Here are 4 types of brandings one should know about –
Product Branding
Product branding is one of the most common types of branding where the offering is given an identity and a personality to
make it identifiable and differentiable in the market. Even though it is called product branding, it isn’t limited to just
products. Product branding refers to the branding of any offering be it product or service.
An example of product branding could be Mountain Dew. Mountain Dew has its own name, color, voice, and personality.
One can recognize the brand even when the generic product is not even there.
Personal Branding
Personal branding is very common among politicians, celebrities, athletes and other people who have niche
followership. This type of branding makes it easier for these people to create an image for themselves among their
followers. This brand image not only helps them in creating new business opportunities for themselves but also
benefits the brand associated with them.
Michael Jordan is a perfect example of personal branding who, because of his niche followership, was not only
able to benefit himself by launching his own apparel line but also benefited Nike which partnered with him to
launch the same.
Corporate Branding
Branding the organisation is as important as branding the offering it’s selling. Corporate branding gives an
identity to the offering provider and opens new opportunities for him to extend his offerings portfolio easily.
Corporate branding is also of vital importance when it comes to hiring as employees always desire to work with a
company with a known brand.
PepsiCo is a good example of corporate branding. The company has several products lines in its product
mix including Frito-Lay, Pepsi, Diet Pepsi, Mountain Dew, Lay’s, Gatorade, Tropicana, etc. all of which are
owned and operated by the parent brand- PepsiCo.

Geographical Branding
Geographical or regional branding is often used by the tourism industry who create a brand out of a geographical
location by assigning it certain characteristics and experience to attract more visitors.
For example, Hawaii is being marketed as the perfect destination to visit if you want to go to beautiful islands
lined with beaches of warm, white sand and verdant, lush flora. The state is also marketed as the only place to
experience Hawaiian cuisine, Hawaiian art, and the Native Hawaiian religion.
Examples Of Branding
We agree that brands are everywhere. People are brands as well.
But what makes a great brand? What separates a good brand from a bad one?
Well, here are three examples to help understand the concept of branding even more.
Coca-Cola
With an estimated brand value of $73.1 billion, Coca-Cola is the no. 3 most valuable brand in the world. The
company used branding so well that the word Coca-Cola is the second most understood word in the world, after
the word OK.
The company started with the product branding by naming its soda Coca-Cola, giving it a unique taste, colour,
bottle shape, and eventually turning the product into an experience and product branding into corporate branding.
McDonald’s
McDonald’s stands out not only with its logo but also with other characteristics like the mascot Ronald
McDonald, the sonic branding, the same design of stores all over the world, and the uniformity of service
provided in those stores.
Apple
If prefix ‘i’ to any generic category, chances are that people will consider it to be an Apple product. Such is an
amazing branding strategy of Apple. The company has positioned itself as a premium brand which comes
with high standards and has a minimalistic marketing approach.
Brand Equity:
Brand equity refers to the value a company gains from its name recognition when compared to a generic
equivalent.
Brand equity refers to a value premium that a company generates from a product with a recognizable name when compared
to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily
recognizable, and superior in quality and reliability. Mass marketing campaigns also help to create brand equity.
When a company has positive brand equity, customers willingly pay a high price for its products, even though they could
get the same thing from a competitor for less. Brand equity is an extension of brand recognition, but more so than
recognition, brand equity is the added value in a particular name.

Brand equity, in marketing, is the worth of a brand in and of itself – i.e., the social value of a well-known brand name. The
owner of a well-known brand name can generate more revenue simply from brand recognition, as consumers perceive the
products of well-known brands as better than those of lesser-known brands.

Positive brand equity vs. negative brand equity:

Brand equity is the positive effect of the brand on the difference between the prices that the consumer accepts to pay when
the brand is known compared to the value of the benefit received.
There are two schools of thought regarding the existence of negative brand equity. One perspective states brand equity
cannot be negative, hypothesizing only positive brand equity is created by marketing activities such as advertising, PR, and
promotion. A second perspective is that negative equity can exist, due to catastrophic events to the brand, such as a wide
product recall or continued negative press attention (Blackwater or Halliburton, for example).
Colloquially, the term "negative brand equity" may be used to describe a product or service where a brand has a negligible
effect on a product level when compared to a no-name or private label product.

Components of Brand Equity

Brand equity includes fulfilling the business promise towards its customers along with maintaining
the business-customer relationship well. Components of brand equity include:
Brand Awareness
The first step of the brand building process is creating awareness of the brand name in the mind of consumers. This
means that customers are aware of the brand and able to associate it with a particular category. Building brand awareness
can help marketers to increase brand visibility to the target audience through different advertisement campaigns.
Brand Association
Brand association is anything that a customer relates to their preferred brand. Getting in interaction with brands allows such
associations. Having a good brand association is important as it leads to repetitive sales and provides the business word of
mouth marketing. Such associations are leveraging the brand and give a tough time to new entrants into the market.
Brand Experience
This is the aggregation of customer experience with the overall brand. When customers have the good brand experience they
will consider the brand as superior and will start preferring it over others.
For example, how you feel when eating at McDonald’s? How is the overall inner environment, how the staff behaves and
what is the quality of the food? To provide the same experience, the company have to maintain uniform standards all over
the outlets in the world.
Brand Preference
This is another component of brand equity and can charge additionally for the same product. However, this requires
organizations to assure that customers have good experiences and associations with the brand.
Brand positioning:
Brand positioning has been defined by Kotler as “the act of designing the company's offering and image to occupy a
distinctive place in the mind of the target market”. In other words, brand positioning describes how a brand is different
from its competitors and where, or how, it sits in customers' minds.

There are three standard types of product positioning strategies brands should consider: comparative, differentiation, and
segmentation.