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How to develop a sound segmentation, targeting and positioning model

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Segmentation Model

To market effectively and efficiently, companies need to know their customer intimately and then construct a strategy based upon a highly segmented and personalized approach to reaching this audience with the right content at the right time. 

Our team has written extensively about target markets, segmentation, persona development and integrated marketing.  

What is the best approach to precision marketing and messaging? Developing an STP (segmentation, targeting and positioning) model for your business.

An STP model has three primary components:

  • Segmentation, where a business identifies market sections and characteristics
  • Targeting, where the potential value of specific segments in relation to certain products and/or services are identified and matched 
  • Positioning, where a product and/or service is positioned from a messaging standpoint according to specific market segments and integrated marketing tacks are selected for deployment of these tailored messages

In summary, STP involves deeply understanding who your audience is, linking products/services to specific audience segments, and then developing messaging and the right mix of marketing activities to reach and engage them. 

What Are the Major Components of Segmentation, Also Known as Developing Target Audience Profiles?

There are three major components of a well-constructed target audience profile:

  • Quantitative data
  • Qualitative information
  • Personas

These are segmentation’s building blocks. The goal here is to identify market niches with specific needs that you can then target with customized positioning (marketing messaging) and integrated marketing tactics. 

When these three streams of information flow together, the result is an actionable profile that empowers strong targeting and positioning, which means getting the right message to the right people in the right way more often. In other words, the result is stronger engagement, conversion, and repeat business from existing customers (Customer Lifetime Value).

What’s Quantitative Data?

Very simply, quantitative data are measures or counts that are expressed as numbers. For example, the average age of a company’s consumers or purchasers of a specific product line can be measured quantitatively. Collecting, aggregating, and analyzing quantitative data are important in building a strong target audience profile, but are just part of a complex picture that needs to be assembled.

Customer quantitative data comes in many forms, but can be placed into two primary buckets of information: 

Demographics

To build a solid quantitative data profile, a company will need to look at a wide range of counts and values to get a clear picture of their target audience. The following data points should be part of a company’s target market profile:

  • Age ranges
  • Marital status
  • Number of children
  • Income ranges
  • Home value and home ownership 
  • Gender
  • Education levels
  • Disabilities and mobility
  • Employment status

Geographics

Another important quantitative consideration is geographic location. While the Internet has allowed even small, local family-run businesses to sell globally, it’s still a best practice to build part of your target audience profile by defining the geographic boundaries of a business. 

While geographic considerations might not play as large a role as in the past (though this really depends on the type of business and industry), it’s valuable information nonetheless. Consider the following geographic target audience profile inputs:

  • This could include a mile radius from a central retail location (i.e., 10-15-20 miles out as primary, secondary, and tertiary geographic markets), or buying patterns in certain ZIP Codes. It all depends on the individual business.
  • Research should be conducted on lead sources and sales by identifying ZIP Codes of consumers, thereby pinpointing geographic hot and cold spots for business as well as geographic areas of untapped potential.
  • A map should be created indicating the boundaries of these geographic markets.
  • Additional research could be conducted by buying mailing lists or hiring an outside company to conduct market research using pre-identified customer demographics to further substantiate the market’s boundaries.
Buying Habits

Psychographic information might be your buyer's habits, hobbies, spending habits and values.

What is Qualitative Information?

Qualitative data cannot be expressed in numbers and is used to characterize and approximate. 

“Qualitative data analysis tries to answer questions about what actions people take and what motivates them to take those actions,” according to Search CIO.  

This is where defining your target audience involves psychographics and a more narrative approach to what makes your customers tick. How do they behave? What motivates them? What might make them more likely to buy a product or services? How do they see the world? 

The answers to these questions will not be numerical outputs, but rather a kind of storyline that frames segments of your target market and adds color to the quantitative data housed in your database.

“Psychographics are kind of like demographics. Psychographic information might be your buyer's habits, hobbies, spending habits and values. Demographics explain ‘who’ your buyer is, while psychographics explain ‘why’ they buy,” according to HubSpot

Nailing the “why” can be difficult, but when coupled with accurate, up-to-date demographic/quantitative information, a company can really streamline its approach into a super-effective integrated marketing strategy that tailors its messaging to highly specific customer types. 

Well-defined (and constantly refined) target audiences mean greater engagement; poorly constructed (and rarely updated) or very limited target markets mean the opposite.

What Are Personas and How Do Companies Build Them?

A persona is a semi-fictional customer archetype that details customer demographics, goals, pain points, and proclivities. Your set of personas will become your team's roadmap for knowing the best way and time to attract their interest. 

According to a report by DemandGen, well-known brand Thomson Reuters found that “Buyer personas contributed to a 175% increase in revenue attributed to marketing, 10% increase in leads sent to sales, and a 72% reduction in lead conversion time.” 

In its most basic sense, a persona should be framed by writing a short story that follows your customer through a weekday and a weekend day. Review the short story. Look for patterns such as routines, feelings, values, and common friction points.

For a more in-depth look at personas consider checking out the following blog series on the topic:

Persona 101, Part I

Persona 101, Part II

Persona 101, Part III

How to Develop Strong Targeting Tailored to Specific Target Market Segments

Once your business has mapped and documented segments of your potential target market, your team needs to assess and evaluate the potential of each identified niche within the context of your company’s resources, products/services and the potential financial upside for each audience segment.

To achieve strong market targeting, take the following steps to create a prioritized list of segments/niches:

  1. Examine the overall size of your potential market and the niches you’ve identified. If your company’s market is already small, does segmentation make it smaller? In other words, is your company’s market large enough for segmentation to make sense?
  2. If your marketing and sales teams look hard enough, you can always identify niches or subsections of your audience. The key question is, are these differences measurable? For the segmentation to be impactful, the differences must be trackable and clearly defined.
  3. Does the potential commercial viability and profitability of a particular product in relation to a specific market niche justify the marketing investment? In other words, does a market segment project to generate strong ROI (return on investment)?
  4. How hard is it to engage niches within your target audience? Can you reach them easily and without additional expense of treasure and human capital?
  5. To justify segmentation, and have it actually work, target market segments or niches need to have discernibly different pain points and needs

In summary, your company’s market needs to be large enough, different enough, accessible enough and profitable enough for STP to make sense. In some cases, your marketing team might initially identify six market segments, but after assessing them using the criteria above, it might be wise to reduce them to three. 

In the end, your business will identify niches that will require you to create a positioning platform that will then be parsed and reconfigured to maximize niche engagement and conversion.

What is Positioning?

Intimately knowing your potential customers and existing patrons is important, but it will be useless if your company doesn’t know who it is and what its brand really stands for.

The key is you must deeply know your market and your brand. If either is an unknown, or is fragmented, your integrated marketing approach will not be as effective as it could be.

Companies of all sizes, whether multinational corporations or smaller, family businesses, need to establish a positioning platform to effectively execute an STP approach to marketing. 

How does a company develop a strong positioning platform?

  1. Understand what makes your brand meaningful and different
  2. Document your brand in its current state and what you believe is your position in the market 
  3. Perform a competitor analysis to see what other companies are doing in your market space. What is their brand positioning? What products and services do they offer and how do they present them to different market segments? Where is your company similar to other companies in the market and what opportunities or gaps exist that your company can capture?
  4. Bring all this information together, analyze it and determine what makes your company stand out in the market, i.e., what makes it different and unique
  5. Create a final brand and positioning document for your company that documents brand values, differentiators, key messages and how these key messages need to be segmented for different products/services as they relate to niche audiences that you are attempting to engage and convert

Doing a deep dive into your company brand as it relates to the market will uncover new opportunities and also help guide the deployment of specific messages via specific marketing channels that will more effectively engage market niches, capture more leads, retain current clients and generate more business from existing customers. 

The goal of an STP approach is to understand the big picture (who your customers really are and who your company really is in relation to the market) and then be able to efficiently slice and dice your brand messaging, elevating certain brand aspects for certain audiences and perhaps downplaying some characteristics for others, to increase market share and customer loyalty. 

Put simply, an STP approach leads to knowing who you are, who you’re speaking to, and which messaging and marketing channels work best for attraction, engagement, conversion, and retention of leads and current customers. 

Illumine8 can help you better understand how to develop and execute an STP-based approach to integrated marketing. Reach out to us today. We’d love to hear more about your story, challenges, and goals for the future.

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