The STP Approach


Segmentation is the breaking down of large markets into sub markets or segments of consumers that are similar in terms of needs wants ad buying habits. The first method of segmenting a market is demographic segmentation. In demographic segmentation factors like age, gender, income, education, occupation, marital status family cycle and ownership of durables are used for determining consumer segments.

Segmentation may also be on a geographic basis, by considering criteria like area type, area density, neighborhood type and region. Geographic segmentation may be done within a country, for a region state, province or neighborhood. The usage patterns of the consumers can also be use to segment the markets. Here, consumers and be classified as heavy users, non-users brand loyal users and switchers or variety seekers.

Segmentation may also be done on the basis of psychographics and lifestyles. By understanding the psychographics a retailer tries to understand the activities, the interests and the opinions of the consumers. An insight into the activities and interests of the consumer gives an idea of the kind of lifestyle followed and the kind of products that would appeal to him. On the other hand, by following benefit segmentation, a retailer would try to understand the benefits that a consumer seeks from a particular product or service and create a product or service accordingly.

While determining a viable market segment, a retailer should take intro consideration the size of that market as it will help estimate the sales. Ideally, for a retailer, the criteria for describing segments should be relevant to a purchase situation. The main benefits of retail segmentation are that it helps the retailer focus on certain segments of the population and gives it a direction for the strategy to be adopted. It aids the quantification of the size of the market and also helps monitor market performance by estimating the market share.

The target Market

After having divided the market into various segments, the retailer now needs to decide on whom he is going to cater to. The consumer segment that he decides to cater to is known as the target market. While selecting a target market he needs to look at the ability of the retail organization to meet the needs of the segment, the size and the future growth potential of the segment the kind of investment that would be required and the kind of profits that could be earned.


Now that the target market /s have been finalized a positioning platform needs to be created. Positioning starts with a product a piece of merchandise a service, a company an institution or even person. Positioning is not what is done to the product but what is done to the mind of the prospect. That is, you position the product in the mind of the prospect

The concept of positioning needs to be looked at from the perspective of the environment that it operates in. It is how your product is perceived in the marketplace relative to the competitor. In retail the environments are constantly changing thus the context of the positioning is bound to change. The overall strategy of the firm largely affects the positioning strategy adopted by the retailer. The four main areas that affect the retail positioning strategy:

1) Merchandising strategy
2) The trading style / format strategy
3) Customer service strategy
4) Customer communications strategy

Retailers have to understand the various influences that influence consumer buying behavior. In order to correctly segment the population and thereafter to create a marketing strategy a retailer will have to take in data in various forms and types like demographic and psychographic data, data collected from a survey of household panels, in-store audits and interviews done of customers buying from the store and alternatively not buying form the store. A retailer mat also use data from syndicated studies like a study of the consumers, wardrobe etc.

The significance of each type of data varies with respect to the target audience. For example, the marketing strategy adopted while communicating to teenagers will be different from that adopted while catering to the health conscious or may be the elderly. The positioning platform created by the retailer has to be done after taking all these factors into consideration.

The key to successful retail positioning is that the store must have an identify that has some advantages over competitors and at the same time those advantages must be recognized and valued by the consumers.

Market positioning based on price, product differentiation and service provision, is central to the competitive strategy of multiple retailers. Store image ties have assisted retailers in developing positioning strategies of their outlets, enabling them to differentiate stores in terms of the products prices or services they offer.

The segment target market and the positioning strategy adopted by the retailer dictates the image to be created for a retail store. This in turn, decides the communication mix that the retailer chooses to communicate with the consumers.