Solution

1.0 Introduction

Currently, the core challenge that affects organisations is not lack of goods and services, but the reduction of customers. This is attributed to market dynamics, an increase in competition, and changes in consumer behaviour (Khan, 2013). Therefore, for a firm to increase its sales and market share, it has to conduct broad research regarding its potential market. Kampamba (2015) espouses that establishing a profound marketing strategy is centred on three core elements of segmentation, targeting, and positioning (STP). This report, therefore, evaluates and critiques the STP concept and its implementation. The structure of the report follows an overview of the STP concept, its implementation in various industries such as automotive, hospitality, and banking, and recommendations on how companies can apply the concept for competitive advantage.

2.0 Overview of STP

The STP concept is fundamental in strategic marketing management. According to Asih and Asih (2015), this concept allows firms to identify their most valuable segments in the market and later develop a marketing mix that will sell the goods and services to the segment. In addition, the STP model allows the firm to establish the best messages in marketing that will suit the customers. Also, STP promotes engagement between the organisation and the target group, which increases the number of customers and sales.

2.1 Market Segmentation

Presently, organisations that do not understand the details of their customers are losing them, which is reflected in low revenue and lack of competitiveness. According to Alt and Iversen (2017), the current era is characterised as customer-oriented. Firms, therefore, aim at breaking down markets into small and manageable segments comprising of consumer groups and accord them different treatment based on similarities in their characteristics. Khan (2013) note that an increase in competition, educated and informed customers, and dynamism in the changing clients’ demands prompt companies to remain attentive to the segmentation factors. One of the theories related to segmentation is the Maslow hierarchy of needs. Velmurugan and Sankar (2017) describe this theory based on the five categories that should me met among people. These needs include physiological, safety, social, esteem, and self-actualisation. Notably, one need must be met before moving to the next categories. Companies are, therefore, expected to establish ways to meet these needs. The relationship between Maslow’s hierarchy of needs and market segmentation is demonstrated in figure 1 below, where the segmentation is distinguished into various elements.

Figure 1: Segmentation of Consumer Market (Khan, 2013).

2.2 Targeting

Targeting dimension entails the selected market that the firm decides to serve. Targeting is a convenient approach that addresses the same segments with an identical marketing mix. A key challenge in contemporary society is that customers move between segments within a short duration. As argued by Ho et al. (2017), companies are therefore expected to develop strategies that will target consumers according to their unique needs. The importance of Maslow’s hierarchy of needs is also reflected in targeting, where firms target customers with specific requirements and needs that do not change easily. Khan (2013) refers to this approach as bucketisation, where the target market by an organisation is only present for a short duration but has particular circumstances which it prefers. Another theoretical framework associated with targeting the dimension of STP is the marketing mix. According to Datta, Ailawadi, and Van Heerde (2017), the marketing mix entail a combination of factors that a firm can control to influence customers to purchase the product or service. Among the dimensions of the 7Ps marketing mix are people. However, other dimensions should be considered, including the product, place, and price to deliver goods and services that meet customer preferences. Key elements to consider during segmentation are size, growth, capability, and technology.

2.3 Positioning

Positioning entails the selection of the market where a firm anticipates to compete and the competitive advantage. It is also the strategy of establishing a shelf space that the firm occupies in the prospective customers. According to Heinberg et al. (2019), positioning is the final goal, where the firm decides how it positions itself to the valuable clients. This then informs the marketing mix. Primary aspects that firms should consider are the unique selling proposition (USP), which entails the reasons why the client may choose to purchase one’s product or service compared to those of the competitors, and an evaluation of how every segment will perceive the brand or service. In the positioning element, firms should establish a proposition that explains how the product or service being offered to meet the customer’s preferences. Another essential element in positioning is the marketing campaign, which is essential in presenting the value proposition in a manner that the target audience will acknowledge. Magnusson, Westjohn, and Sirianni (2019) note that positioning is concerned with value and brand perception by customers. The importance of the marketing mix is also reflected in positioning, which aids in ensuring the competitive advantage of the firm.

2.4 Critique of STP

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