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 STP in 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 make a purchase, the need to segment your customers is more pressing than ever.
It is also essential for the internal workings of your own business. Otherwise, the chance of a wrong offer being presented to your customer, or a "missed opportunity," is exceptionally high.
If all your teams do not have the same "view" of your customer, that is bound to happen sooner or 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 proper sales motion to each customer.
Segmentation is not a one-time process, though. Your teams need to refine it over time.
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 enables a business to develop focused strategies to retain its top-paying customers. Or, to re-engage those clients who haven't made a purchase in a while.
It is also used to provide a heightened customer experience.
6 Advantages of Customer Segmentation
- Help identify the least and most profitable customers, thereby enabling the business to concentrate its marketing activities on those most likely to purchase its 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, it is shared across the entire enterprise, with all teams.
To adopt segmentation, the relevant teams must be able to use it 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.
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What is STP Marketing?
STP marketing stands for Segmentation, Targeting, and Positioning.
A marketing technique for modern times, it is a three-way model driven by the segregation of not only the market but also your customers, and then using their preferences to target them with relevant content.
The STP model focuses on developing and delivering personalized and relevant messages to engage with diverse audiences at different levels.
An essential part of STP marketing is creating personas and communicating with each of these personas at a tactical level.
Knowing your customers inside and out is crucial in today's customer-centric market. Speak to Our Experts to get a lowdown on how the STP Marketing Model can help you.
As the name suggests, segmentation or the classification of customers is the first step in STP analysis. Your customer base can be segmented into various segments that you choose specifically.
4 Popular Types of Customer Segmentation
- Geographic segmentation: As the name suggests, customers are grouped based on their place of residence, such as country or state.
- Demographic segmentation: Demographic factors include gender, age, occupation, and other relevant characteristics.
- Behavioral segmentation: Here, the criteria are based on how your audience interacts with your business.
- Psychographic segmentation: Splitting up your audience based on "who" your customer is.
Segmentation is followed by targeting. Under it, marketers examine the various subdivisions to determine which ones are most likely to result in conversions.
What then becomes the ideal segment is one that consistently shows growth, comes at a relatively low acquisition cost, and can deliver high profitability.
In positioning, the third step in the process, marketers must differentiate their products or services from those of the competition.
They need to let customers know what the business's USP is and how it differs from the competition.
Benefits of STP Marketing
Clearly, STP Marketing helps define a target market and audience, thereby assisting brands in significantly increasing their sales.
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 categorize customers or potential customers with similar requirements into distinct segments. This helps to attract the right prospect. This, in turn, means your business can avoid the risk of deciding where, when, how, and to whom a product will be marketed.
This means an increase not only in marketing efficiency but also a significant boost in customer retention and a reduction in customer acquisition costs.
How To Use STP Marketing
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.
This allows your business to tailor its marketing or sales approach to meet the needs of each group.
As we explained earlier, there are many different ways to segment your target markets. Size is one of them, while profitability is another.
During segmentation, you must consider 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 ease of reaching each segment with its marketing efforts.
Customer acquisition costs are another critical factor; the higher it is, the lower the profit to be gained 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 final step in STP marketing is to position your service or product effectively.
A business needs to understand how to position its service to reach the most valuable customer segments.
Key points to consider are: Why should customers choose your product over your competitor's? What is your USP?
After matching it with the needs of your customer, you can create a value proposition that makes it easy for a brand to highlight the importance of its product or service compared to those of its competitors.
Additionally, note that STP marketing for the B2C segment differs from that of the B2B segment.
Apply Customer Segmentation to Acquire Profitable Customers >>>> Learn more
STP Model
To start STP modeling, your business needs to, of course, first select the market it wants to be in.
This may include factors such as market size, growth potential, and others. Then, also select the first segment of customers or prospects.
Then, your business needs to determine its product's USP, essentially identifying its unique selling proposition. This will put it on a different plane than the competition.
Next, you need to identify the problems of your customer segments and how your product or service solves that pain point. This formula will lead you to create a value proposition for your product.
This means you have scientifically identified which likely customers in a specific market are ready to buy your product. After that, you can also now instruct your marketing division to develop a targeted messaging campaign.