Creating a marketing strategy is never easy, especially in the startup ecosystem, where it’s all too easy to get lost in the noise. In our previous blogposts – among many other useful topics – we’ve tackled why branding is important from the very beginning, and we’ve given some tips and useful knowledge on the basics of digital marketing. We’ve introduced the concept of the marketing funnel and this time around we’re going to delve into the task of creating a marketing strategy by implementing the segmentation, targeting and positioning (STP) method.
Understanding customer heterogeneity
When approaching the task of creating a marketing strategy, you must first truly understand the target audience of such a campaign. It’s necessary to realize, that customers are more than numbers and data. Your customers are people, and they are all different, with different needs and all sorts of opinions. We call this concept customer heterogeneity, and this variation stems from several different factors:
- Individual differences – The different, consistent ways people engage with the world, regardless of their life experiences.
Like a person’s favourite colour or how open someone is to new experiences, as well as things like neuroticism. - Life experiences – Those life experiences that influence people’s values and preferences, independently of the above-mentioned individual differences.
An interesting example of this is people’s increased preference to spicy food in warm climates close to the equator where, in past periods, spices were used to preserve and mask the taste of perishable foods that spoiled quickly in the heat. - Functional needs – Personal decision making across functional attributes based on people’s personal circumstances or simply put, what functionality the individual, in their specific uses, wants from a product.
For example, in terms of electronic devices, for a salesperson a longer battery life, while for say a hiker being waterproof could be more important than other functions. - Self-identity / image – Customers actively seek products that they believe will support or promote their desired self-image.
Motorcycle riders often wear leather and people with a goth style will usually prefer the colour black. - Marketing activities – Firms’ attempts to build links between their brands and prototypical identities or meanings.
Take for example BMW, who paid $25 million to have James Bond drive their car in the movie Skyfall, believing that Bond’s image would be aspirational to their target audience, men aged 30-50 years.
So, as you can see, no mass solution can work for everyone, and people need to be reached in different ways! This is where the STP methodology comes into the picture, and we’re going to explain just how exactly.
Why should I use STP?
As a startup, you must distinguish yourself from the competition, find your ideal customer base and take a calculated stance in the market. By implementing the STP methodology, you break down the market into manageable segments, focus your efforts on specific targets and then position your brand accordingly, all in an effort to optimize your campaigns, achieve a stronger market presence and eventually propel business success.
New startups emerge quickly, and good positioning is key for survival; to stand out and clearly define what makes you unique and what differentiates you from already existing solutions.
The first step, Segmentation
First and foremost, as a marketer, you must define your market, a.k.a. go through the process of market sizing and establish the accurate TAM, SAM and SOM – something which you can read more in depth about in our previous blogpost on the topic, here.
Once your market has been defined, the next step is to segment it into smaller, more manageable parts. To achieve this, first you must clearly outline the basis of your segmentation, for which one can consider 5 main categories:
Geographic (country, region, etc.)
Demographic (age, gender, etc.)
Psychographic (risk aversion, openness to new experiences or technology acceptance)
Behavioural (purchasing frequency, media usage e.g. TV, social media, etc.)
Value-based (such as religion, political orientation; but it can be also less concrete, like social causes)
Roughly following these categories, you can choose those characteristic types which you consider most relevant in your specific case, these will form the different market segments for your marketing strategy. Potential customers in each group have similar needs and desires, however each group differs as much as possible from all other groups!
Be careful! It’s usually commonplace to take the broad market and categorize it purely based on demographic data; but this really isn’t sufficient for the basis of your market segmentation. You need to rely on at least a few more categories – preferably all – to properly create the necessary market segments.
While this is all well said and done, as a startup you simply can’t grasp the entire market, you most likely don’t have the resources for it, and there really isn’t even a point in attempting something such large-scale. Instead, you must try to make an educated approximation of those customer segments which could be interested in that specific product or service, for that specific use case.
So, how can you make that educated guess? – By starting from the problem and heading backwards!
Try to ask yourself the following questions:
- Who could have a problem that I have the solution to?
- How much does the problem bother them?
- Would they only use this once and fix it all or is it a continuous service?
- How much can-, and how much are they willing to pay?
- How can my solution fit into their day-to-day life and processes?
Once you have these approximated groups of interest, however, it is crucial to try to gather as much information on them as possible! You can use many free resources to do this, like publicly available data, previous analyses and most importantly just by speaking with them, a lot.
Targeting the defined groups
After having defined those customer segments which are of interest to you, you must then analyse them to find the right approach. The most crucial data you have to consider are size, purchasing power, competitors on the market, CAC (Customer Acquisition Cost), CLV (Customer Lifetime Value) and derived from all of these, profitability. To get a deeper understanding of these two metrics, you can read this Hootsuite article on the topic! Beyond these, you also must look at future trends and recognize which segments have more potential and you can compare them based on aspects like market attractiveness and competitive strength.
After conducting the proper analysis and comparing your segments, you can select a target segment. This segment must meet some important criteria to be the most ideal target market:
- It should be based on customer needs; it must revolve around an existing pain point or pain points of your target audience.
- It should also be different from other segments, with as little crossover competition as possible.
- These differences should match your competencies, simply put, you should be able to meet their needs with your existing resources.
- It must be sustainable, somewhere you can continue to keep your customers from switching to the competition.
- The customers of your target segment should be easily identifiable, so you can actually find your target customers.
- In the long run, it should, of course, be financially viable.
Once again, this seems all fair and simple when laid out, however, as a startup things aren’t that easy. To truly stand out, you must find your niche, the market segment that not only fits all criteria, but also is small enough for the market leader, large firms to just not be worth specializing in; however still large enough for your brand to grow and expand.
It’s important to note, that this shouldn’t be a small market no one focuses on, but a smaller market segment of a broader market with enormous growth potential!
You should try to outline this market segment so that you can completely cover and control it with your product. This will serve as your beachhead; somewhere you can branch out from later. As the term suggests, this is what we refer to as a beachhead strategy, originally from military terminology, and it simply means, winning a border territory and converting it to a stronghold to advance towards the rest of the territory from it.
Lastly, positioning your startup's brand
The last stage of the STP method is positioning, how you identify yourself – and how others can identify you – within your target market. Your positioning must reflect your brand’s key characteristics and benefits. It serves as the introduction point of your brand, the foundation of how you want to be perceived and how others will see you and your products or services, as well as how they compare that to all others on the market, as customer perception is always relative.
There are many paths to take to determine your positioning, so let’s take a look at how you can approach it:
- Category-based positioning – You can position your brand by determining and outlining how your products or services are better than the existing solutions on the market.
- Competitor-based positioning – Similar to category-based, however you can also prove that you are better than a specific competitor of your brand.
- Consumer-based positioning – You can align your product/service offering with your target audience’s behavioural parameters.
- Price-based positioning – Distinguish your brand based on the value people get for the cost they purchase your product or service for.
- Benefit-based positioning – You can also position yourself by proving the benefits that customers get from your solutions (in this case regardless of price).
- Attribute-based positioning – It’s also possible to simply zero in on a USP (unique selling proposition) that makes your product or service stand out in order to position your brand.
- Prestige-based positioning – Another way to position yourself is to offer an ESP, or an emotional selling proposition to your customers by proving that your products supply a certain boost in status to those who purchase it.
Once you’ve chosen one or a few different ways of positioning your brand, you can create a positioning map. A positioning map plots two key product benefits on horizontal and vertical axes of a graph (classically price and quality, however, based on your positioning goals this can be different) to compare your product to your competition, like this one:
You can also create a positioning statement, which are written documents that need to communicate your goals clearly and effectively. Here are some examples, to help you get inspired:
Disney: "Disney provides unique entertainment for consumers seeking magical experiences and memories. Disney leads the competition by providing every aspect of related products and services to the world and appealing to people of all ages."
Nike: "For athletes in need of high-quality, fashionable athletic wear, Nike offers customers top-performing sports apparel and shoes made of the highest quality materials. Its products are the most advanced in the athletic apparel industry because of Nike's commitment to innovation and investment in the latest technologies."
Apple: "For individuals who want the best personal computer or mobile device, Apple leads the technology industry with the most innovative products. Apple emphasizes technological research and advancement and takes an innovative approach to business best practices — it considers the impact our products and processes have on its customers and the planet."
Now that you have segmented the market, chosen your target areas effectively and positioned yourself clearly to align with your ideals, you must choose the elements of the marketing mix that most accurately serve this purpose, the 4P-s of marketing, product, place, price and promotion.
The positioning step changes both the actual offering and the perceived offering at the same time. Innovating newer products and reducing manufacturing costs you alter the original offered product or service to better meet your target market’s needs and building your brand identity accordingly changes the way your customers (or potential customers) identify you and compare your brand to other competitors. Thus, a well-positioned product should offer target customers the best fitting solution, relative to competitors, not only differentiating from other current solutions on the market but also providing a robust barrier to future competitive attacks.
It’s important to acknowledge that while it is very much important to position yourself accordingly as early as you can while building your brand, positioning strategies are implemented over time and may take years to achieve their desired effect.
So, what happens now?
After you’ve followed the step-by-step STP method, did your research, found your niche, you are ready to take on the task of ironing out your marketing strategy. By now, you should have your marketing segments, you have your beachhead where you can confidently build your foundations, and you have positioned your brand to reflect these goals and the values your startup represents.
Now, you must start creating the appropriate marketing material, make a content calendar, set-up your avenues of marketing that are appropriate for your chosen strategy and begin the process of creating content. The first steps are always difficult, but once you have a well-defined strategy to follow and clear targets and goals to take on, the only thing you must pay close attention to is being consistent and professional!
If you need help achieving that, check out our CMO Partner service, where we take care of your marketing so you can focus fully on growing your startup.
