In Silicon Valley it's often said that product is King. As one of the four P's of traditional marketing, that's certainly true. But if product is King, marketing is the Queen and the most disheartening thing I've seen more than once are companies with great products who fail miserably because their marketing sucks. I'm not talking about the quality of their product videos, websites or mobile apps either. I'm talking about their inability to talk to the right people or tell those folks what they really need to hear.
As someone who's worked in startups and mentored startup CEO's for over 10 years, I often see that the reason why marketing budgets are pissed away and companies bite the dust boils down to the lack of three simple letters:
Not to be confused with STD's, which can affect anyone regardless of whether they work in marketing or not ;) STP stands for Segmenting, Targeting and Positioning. (Tweet this)
To compete in today's highly competitive world of 24-7 always-on digital marketing, viral videos and social media, companies will struggle to succeed unless they're able to successfully master this framework.
What is STP?
S = Segmentation
In order to properly identify which audience you should be targeting, you first have to segment your market. This involves breaking down your market into identifiable groups or target profiles. The key with segmentation is to chose the most relevant variables that matter to your target customer and, more importantly, to choose variables where you can compete and win (Tweet this).
For a business-to-consumer product for example, these variables could be:
- Location (urban vs. rural for example)
- Household income
- Some other industry-specific variable (for example, in mobile phones it could be screen size or camera quality)
Segmentation matters because as markets grow they become more competitive. At the beginning of any new market cycle, there are few players. However, once a few players begin to develop the market, capture consumers and build value, the market will attract new players who, in turn, will compete for these users and attempt to take market share. As new players enter, marketing costs increase and profitability per customer falls.
The goals and output of your segmentation work should be:
1. Establish the criteria under which you segment the market. Segment the market into different groups and understand the size, value, growth and dynamics of each of segment.
2. Determine what is important to each market segment and understand which segments your competitors are addressing. This will help you identify where they are weak and whether there is an opportunity for your business.
3. Determine if a segment has unmet needs that you can either target with an existing product or with a new one. You will also need to assess whether you have sufficient resources (product, human, capital) to meet the needs of that segment.
If you want more information on segmentation (such as what information you'll need to get started or companies who can help you conduct the market research to get that data check out my slide deck here).
T = Targeting
Now that you've broken down your audience it's time to identify the best segment that has unmet needs that you can serve.
When considering which target audience to focus on, keep in mind the following criteria:
1. Is the target segment really underserved by what's already on the market? More importantly, is this need a serious pain point they are willing to pay for?
2. Is the target market large or fast growing enough to provide a sustainable stream of revenue? Can this target market be profitable?
3. Does serving this target audience align with your company's Vision, Mission and Brand values (see my post on building Brand Bibles)?
4. What kind of changes, if any, do you need to make to your product / service to serve this market? What are the costs of making these changes?
5. What kind of organizational changes do you need to make to serve this market (eg. hiring more salespeople, adding more customer support)? Can your company afford to make these changes?
6. How well to you understand this target segment? What additional research do you need to do to properly market to them successfully? (hopefully you'll have done some of this when segmenting your market)
7. How easy or not is it for competitors to pivot into serving this market? What are the barriers to entry and are they sustainable?
It's important to recall that target markets can change over time. The audience that you go after at the beginning of your company's journey might not be the same 3-5 years later. Here's one way to think about it:
In new markets you'll want to target your offering broadly to capture the largest possible amount of customers and collect customer data. However, as the market matures you'll need to start to segment your market and your targeting will have to become more focused. Initially, you might target based on certain demographic factors such as age, race, and location but as the market continues to evolve you'll be looking for certain more specific needs. Lastly, in highly competitive markets you'll move to be more focused on building emotional connections with clients and attempting to make them think and feel certain things as they use your product / service. The strongest brands have such a strong emotional bond with consumers that consumers don't even consider alternatives, even when they are significantly less expensive (think Apple, Nike, Coke and Amazon for example).
So the outcome of your segmentation work and targeting can best be summarized by the following example:
In this example, Rovio, a Finnish maker of mobile games, decided to enter the highly competitive market of mobile racing games. They decided to capitalize on their Angry Birds franchise to enter the market in a way that was more unique and differentiated. Traditionally, mobile racing games have focused on graphics and gameplay. The top players in the market attempted to make games that were both ultra realistic graphically, included all the top, high-end car brands and also featured complex and realistic gameplay. Instead, Rovio took the approach of designing a game that was more cartoonish in nature, fun and true to their Angry Birds franchise. They chose to make the controls simpler and not focus on licensed cars the way other games like CSR and Real Racing had. They also included features such as a unique game mode that allowed users who owned physical Angry Birds figurines to unlock those characters in the game by placing those figurines on the phones' camera. The result was a game that was quirky, amusing and simple to play. Whereas as games like CSR and Real Racing went after the traditional core gamer which is male, 18-24 years of age, and that looked for graphics and realistic gameplay, Rovio focused on a younger male / female demographic of gamers that were younger (8-13 years old) and that wanted something fun, simple and unique.
The results: On Android alone, Angry Birds Go has had over 50 million downloads to date which exceeds EA's Real Racing by 5x and is on par with the market leader, CSR racing.
P = Positioning
The final piece of our framework is positioning. Once we've identified our target audience, we need to develop a positioning statement that will give consumers a compelling reason to try or buy our product.
Positioning is: "The way in which marketers attempt to create a distinct impression in consumers' minds." (Tweet this)
According to Doug Stayman of Cornell University, the ideal positioning statement:
1. Is simple, memorable and designed for your specific target audience
2. Presents a clear, unmistakable idea of your product which is unique
3. Is credible; Ie. it can deliver on the products promise to users
4. Is unique and ownable
5. Acts as a guidepost for future marketing programs / products
6. Is open ended. Ie - it leaves room for growth and doesn't restrict you in the future.
So how could you apply this to the highly competitive motorcycle market? Look no further than Harley Davidson's "American by Birth, Rebel by Choice" positioning for example. This statement perfectly captures the essence of Harley Davidson and also adheres to the 6 key rules outlined above. Also, take one look at a Harley and they simply scream "rebel" to the core.
Some other famous positioning statements include:
Home Depot: The hardware department store for do‑it‑yourselfers
One final consideration is that a positioning statement can also reposition your competition in a negative light while making your product appear superior. For example, "The Ultimate Driving Machine" not only positions BMW in a superior light but it indirectly makes consumers think that competitors simply aren't as good. The same could be said of Volvo's positioning statement. By making the claim that they are the safest, they also imply others are less safe.
As a founder, CEO or head of marketing there has never been a better time, nor better tools, nor more diverse channels to reach customers in a way which is unique, personal, and powerful. But if you start off targeting the wrong audience or even find the right audience but give them the wrong message, you'll simply continue to do what many marketers sadly do today: Flush marketing dollars down the toilet.
So for the sake of your employees, shareholders and consumers like me who are sick of being targeted by the wrong products, at the wrong time with the wrong message, get yourself some STP and do it right. You'll sell more product, please more customers and might even save the planet some water.
So that's it for me folks. I hope this post has been useful. If it's been helpful please like, share and comment below.
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If you're a senior marketing executive and feel like you might benefit from some coaching, feel free to book a session here (first session is complimentary) or visit my Facebook page for more info.