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The Importance of Customer Segmentation and STP Marketing


What is stp in marketing? In today’s intense business environment, brands have come around to realize that to hold on to their customers, as well as upsell and cross-sell, they need to “know” their customers inside out. Read in detail about the importance of customer Segmentation and STP Marketing (segmentation, targeting and positioning marketing).

Gone are the days when businesses assumed that all their clients had uniform needs. With the average customer hopping across devices and channels to buy, today, the need to segment your customers is more than ever.

It is also important for the internal workings of your own business. Or else, the chance of a wrong offer being put before your customer, or a “missed opportunity” is extremely high. If all your teams do not have the same “view” of your customer, that is bound to happen, sooner than later.

That’s why, once you have segmented your client base, you can position the right product or service before each group and match the right sales motion to each customer. Segmentation is not a one-time process, though. Your teams need to refine it over time.

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Those days of “intuition” about customers are over.

Here are some factors to be considered when you embark on customer segmentation:

  • Do not have too many segments
  • Must have the ability to look back at their history
  • Segmentation must be harmonious across your company’s Sales, Marketing, Product, and Engineering
  • All of it must be based on an enterprise-wide agreed single source of truth
  • Select the right segmenting variables

Customer segmentation can help you in many ways: It helps a business develop focused strategies to hold on to its top-paying customers. Or, to re-engage those clients who haven’t purchased in a while. It is also used to provide a heightened customer experience.

Advantages of customer segmentation

  • Help identify least and most profitable customers, thus helping the business to concentrate marketing activities on those most likely to buy your products or services
  • Helps build loyal relationships with customers by developing and offering them the products and services they want
  • Helps improve customer service
  • Helps maximize the use of your resources
  • Helps improve or tweak products to meet customer requirements
  • Helps increase profit by keeping costs down

Here’s an important note: It is imperative that once a business completes the exercise of customer segmentation, the same is shared across the enterprise, with all teams. To adopt segmentation, the relevant teams must be able to use them in both strategic and day-to-day work. Or else, the exercise is bound to fail.

Once customer segmentation is done, you can deploy STP marketing.

What Is STP In Marketing?

STP marketing stands for Segmentation, Targeting, and Positioning. A marketing technique for the modern times we live in, it is a three-way model that is driven by the segregation of not only the market but your customers and then using their preferences to target them with content. The STP model is all about developing and delivering personalized and relevant messages to engage with different audiences. at different levels. An essential part of STP marketing is the drawing up of personas and communicating to each of these personas at a tactical communication label.

As the name suggests, segmentation or the classification of customers is the first step in STP marketing. So your customer base can be segregated into various segments that you choose specifically. The four popular types of customer segmentation are:

Geographic segmentation: As the name indicates, here, customers are grouped based on their place of residence like country, state.

Demographic segmentation: Demographic factors include gender, age, occupation, and so on.

Behavioral segmentation: Here, the criteria is how your audience behaves with your business.

Psychographic segmentation: Splitting up your audience based on “who” is your customer.

Segmentation is followed up with targeting. Under it, marketers look at the various sub-divisions to understand which of them were most likely to get conversions. What then goes on to become the ideal segment is the one that is constantly showing growth, comes at a relatively low acquisition dollar, and can deliver high profitability.

In positioning, the 3rd step in the process, marketers have to position their products or services apart from that of the competition. They need to let the customers know what the business’s USP is and how it is different from the competition.

Benefits Of STP Marketing

Clearly, STP Marketing helps define a target market and audience, thus helping brands step up their sales considerably. It helps companies position their services or products in targeted markets. Doing all this, thus helps in avoiding unnecessary advertising and marketing expenditure.

By segmentation, you can segregate customers or likely customers with similar requirements into segments. This helps to attract the right prospect. This in turn means your business can avoid the risk in deciding where, when, how, and to whom a product will be marketed. This means an increase not only in marketing efficiency but also a big boost to retaining your customers, and a reduction in customer acquisition cost.

How To Use STP Marketing

Among the very first step is to segment your market. The old days of generic marketing are long ago; today, we live in the age of digital, targeted marketing. Your business needs to use market segmentation to help align every customer into these groups. This, as we explained earlier, could be based on gender, country, or other such common characteristics. What this does is allow your business to tailor its marketing or sales approach to meet each group’s needs.

As we explained earlier, there are many different ways to segment your target markets. Size is one of them, while profitability is another. During segmenting, you must take into consideration which of your segments are willing to spend the most money on your product or service.

Another important factor while deploying STP-based marketing is reachability. A business must evaluate the relative degree of ease of reaching every segment with its marketing effort. Customer acquisition costs are another important factor, the higher it is the lower the profit to be gotten from that group of customers.

Identifying and targeting your best customers is another tactic of your STP marketing plan. Several factors come into play here: In addition to the perceived profitability of each segment, a business must analyze the size and potential growth of each customer segment. Questions to be asked here include: Is the group large enough? Will there be a steady outcome when marketing to such a group? How does it compare with the other segments?

The last step in STP marketing is to position your service or product. A business needs to understand how to position its service to reach the most valuable customer segments.

Points to be taken into consideration here are: Why should customers buy that product and not of your competitor? What is your USP? After matching it with the wants of your customer, you can create a value proposition that makes it very easy for a brand to underline the importance of its product or service vis-a-vis that of the competition. Also remember, STP marketing for the B2C segment differs from that of B2B.

STP Model

To start modeling, your business needs to of course, first select the market it wants to be in. This may include factors like market size, growth potential, and so on. Then, also select the first segment of customers or prospects.

Then, your business needs to work out your product’s USP, essentially to figure out the position of the product. This will put it on a different plane than the competition.

Next, you need to identify the problems of your customer segments, how your product or service solves that pain point. This formula will lead you to create a value proposition for your product.  All this means you have scientifically identified which likely customers in which market are ready to buy your product. And after that, you can also now instruct your marketing division to develop a targeted messaging campaign.

Image by Quinn Kampschroer from Pixabay

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