By Andrew Ballard
A common question I hear from those suffering stagnant sales is, “How can I ‘magically’ improve my promotion?” My response is always the same, “There’s no ‘magic pill’ and your challenge likely has more to do with positioning than promotion.”
The STP acronym I’m referencing stands for Segmenting, Targeting and Positioning, a niche strategy that often gets overlooked. Promotion without positioning (STP) is like adding premium gas to an old clunker — your performance will still be disappointing.
The purpose of STP is to focus your resources by targeting market segments that demonstrate the greatest response sensitivity to your selling proposition. It involves a three-step process.
First, segmenting is the function of subdividing the market pie into segment pieces. Your market includes all who consume within your product or service category. Segments are consumer (or business) groups that have common characteristics or circumstances.
Apply the 80/20 rule, which suggests that a smaller group of your customers generate a larger proportion of your sales. Query your database to identify who your best customers are and what they have in common. In addition to data mining, a customer survey can be very informative to the segmentation process.
Profiling your best customers enables you to better identify your best prospects. The prevailing segmentation criterion is demographics by age, gender, ethnicity, education, occupation, income, family unit and location.
Most companies intuitively do what I call “surface segmenting.” For example, they may classify Snohomish County residents, 35 to 54 years of age with incomes of more than $75,000 as their target. It’s a good start but still a “mass market.” You’ll need to dig deeper to uncover the most profitable “niche market.”
A more predictive segmenting criterion is behavior, such as user status (frequency of and reason for buying), benefit sought and underlying motives. The GAP clothing store targets younger consumers — not by age, by user status — because they buy clothing with the greatest frequency.
The second step is targeting — the process of honing in on the best market segment. After you’ve divided up your market pie, rank the segment pieces based on response sensitivity and profit potential. Some consumer groups are more profitable than others, based on frequency and amount of purchases, or because they require less service.
Be sure to target expanding (or at least stable) markets, versus contracting segments. At the same time the market was exploding for personal computers, it was evaporating for typewriters. Remain mindful of how innovation and new technologies can change your market’s purchasing behavior.
The third step is positioning. After you’ve determined which segment(s) to target, position yourself (in the mind of those consumers) as the best provider. To do this, develop a unique value proposition (UVP) based on your competencies.
Your UVP must have two attributes to communicate an attractive position. It must distinguish your brand (or offer) from competitors, and that distinction (or competency) must be valued by your targeted segment. Ask yourself: What do we do best that our customers’ value most, and does that competency translate into a competitive advantage?
VISA has the distinction of being accepted in more places than any other credit card. One segment they target is football fans. Their slogan, “more fans go with Visa,” effectively communicates that position. In addition, they launched a cross promotion with the NFL. That is a prime example of aligning positioning to promotion, which is the endgame.
Survey your best customers to learn about their preferences and perceptions. Then study your key competitors to determine their relative weaknesses (or openings in your competitive landscape). With those two data sets, you’ll be able to develop a unique distinction of value to your target market segment.
When developing a positioning strategy, it is essential to land on and communicate a single position. It is difficult enough to be known for “one thing” and nearly impossible to be known for several. An exception to that rule is GEICO, the insurance company that spends nearly $1 billion a year on advertising. My point is, unless you have a billion-dollar ad budget, stick with the branding law of “singularity.”
The most critical success factor is to consistently incorporate your unique value proposition (position) in all of your marketing communications — long term. There’s no magic marketing pill you can take, but I assure you, adding STP to your marketing engine will lead to more profit than Prozac.
Andrew Ballard is the president of Marketing Solutions, a local agency specializing in growth strategies. For more information, call 425-337-1100 or go to www.mktg-solutions.com.