STP: Connecting Segments Through Targeting

STP: Connecting Segments Through Targeting
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Paul Argus is the CMO at smrtr. In this piece, he explains why ‘STP marketing’ is still so popular and how marketers can connect with profitable segments using data.

In the world of modern marketing, the Segmentation, Targeting, Positioning – otherwise known as the STP model – remains as relevant as ever. In fact, with the avalanche of data now available it is arguably more powerful than ever.

While many marketing strategies of the bygone era focused on the product or service, today it is all about finding the right customers and delivering them relevant and useful marketing materials.

And the STP model offers exactly that. By identifying the most valuable audience segments marketers can focus their attention on these specific groups as a way to improve the ROI of a campaign. 

STP: A brief guide

As the name suggests, the STP model is built around three main steps.

Segmentation involves identifying important characteristics and dividing the market up into groups based on these factors. These segments can be built based on a variety of factors, depending on the product or service that is being marketed. Products that are aimed towards a specific age group might build segments based strongly around demographic data, while a retailer, for example, might target customers based on transactional and/or location data.

Once audience segments have been built, the focus then moves to targeting. Data can be used to identify the size of each segment and its sustainability and which segments will be the most likely to turn into customers so marketing efforts can be centred around these individuals. The targeting process also involves determining the appropriate channel to reach this desired segment.

Positioning in the STP model refers to how the product is differentiated from other products on the market using the insight gained from a particular segment. While a brand needs to present itself in a consistent manner, there are opportunities to emphasise certain attributes over others for different segments. The positioning process also involves finding the right marketing mix that is most likely to appeal to the desired audience.

STP in action

The power of STP marketing can be seen in any company which uses multiple brands to reach a wider audience. Whether it is Qantas launching Jetstar as a more affordable airline, or Foxtel with streaming services such as Kayo and Binge, having multiple brands allows for greater audience segmentation and as a result increased overall sales.

One of the more famous uses of the STP approach leveraged attitude and loyalty as the key inputs to the segmentation. Coca-Cola focussed on three key market segments:

  1. Consumers with a positive attitude to the Coke brand who were 100% loyal to Coke.
  2. Consumers with a positive attitude to the Pepsi brand who were 100% loyal to Coke.
  3. Consumers with a positive attitude to both brands, with loyalty to both, who switched their purchases between both brands

In this case, Coca-Cola actually used the segmentation to their detriment by introducing “New Coke” in an effort to position themselves with people in the third group and alienating their most loyal customers.

Like the Coca-Cola segmentation, the STP model traditionally leverages basic groupings of geographic, demographic and survey based attitudinal data. However, the advancements in analytics and ability to collect and store data from a wider range of offline and online sources means today’s segmentation can be more detailed and offer much richer insights. Transaction data in particular offers direct insight into what people are actually buying while AI methods are now mainstream.

At smrtr, we combine transaction data from our industry partners with location, demographic, geographic and wealth based data. This is used by our partners to build segments to target potential customers who are statistically more likely to purchase certain products or services.

We also have a range of validated pre built segments for a number of industries. These readily available segments mean the ‘S’ of STP marketing is already taken care of, which in turn helps ensure the targeting and positioning is more effective. 

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