18 August 2008 by A. Cedilla
I’m sure you’ve seen it before. So many eager entrepreneurs and small businesses fail before their first year because their enthusiasm overrode reason and they dove right into the deep end of the pool with inadequate preparation, the siren call of quick money drowning out the voice of your better self, saying, “Dude, wait, let’s think about this for a minute, ‘kay? May even for a few days — dude?”
Then, much later, “Well, hell. I told you to think about it.”
In business, as in most things, there are basic principles to follow. It pays to occasionally take a step back and evaluate the bigger picture. Drafting a very basic marketing plan can help you focus on the right activities, target the right customers and set the best prices.
The STP Process
STP is an acronym for Segmentation, Targeting and Positioning. It represents the highest level of your marketing plan. Ideally, you should have the results of this process in place before your product or service is ever brought to market. If not, you can still use it as a very good exercise for an existing product.
Segmentation is simply a fancy way of saying that you need to identify your customer. Think of every possible customer as a population of dots on a pie chart. Now, start slicing that population into smaller, more defined segments. For example:
Split individuals from businesses. Then, you could split these further by :
- Sex, age, educational attainment, civil status
- Socio-economic level
- Geographic location
- Interests and hobbies and so on.
At this point, try not to pigeon-hole yourself by prematurely selecting segments. Remember, you’re trying to find meaningful groups of potential buyers that will exhibit similar buying behavior.
Your goal is to identify opportunities. Once you feel that you have subdivided the market finely enough, then you need to evaluate those segments. Try to quantify how large those segments are, how reachable they are and how unique they are from one another (i.e. is there considerable overlap from one to the next?).
The next step is to look at the segments you’ve created and select which segments of the market you’re going after. One of the first decisions you will have to make is whether to target a “mass” market or instead whether your marketing efforts will be more focused. It’s the difference between using a shotgun and a sniper’s rifle. The trend over the last ten years has been to go after more defined segments. The extreme here would be to go after a “niche” market which is a highly defined, fairly small segment. The reasoning being that there will be less competition for those segments.
The target market you choose will have a profound effect on everything else you do. You need to carefully evaluate the most appropriate route for you business. When deciding between different market segments, you will want to try and identify the competition for that segment, the potential value of the segment (i.e. how large is it, how expensive will it be to reach it with advertising, etc.).
You’ve segmented the market and you’ve chosen the target that you are going to go after. The last part of your marketing plan will help you define how you are going to “position” your product or service to your selected target market. This is where you will invoke another handy acronym called the 4 P’s – Product, Price, Promotion, and Place.
Product – Focus your product towards your selected target. What do the people/firms in your segment want or need? If you plan to go with an existing product, you need to make sure it fits your intended target market. If it doesn’t, can it be altered so that it will fit with a minimum of modification or repositioning? It’s critical to match the right product with the right customer.
Price – You need to consider many factors, such as the stigma different price points carry – for example, too inexpensive = product may be junk (i.e “cheap”). Also, consider the competition. It makes little sense to target the same market with a similar product at the same price as your competitors. Entire books have been written on pricing. The important thing to keep in mind is that you can’t lock yourself into a cost plus profit margin way of thinking. Instead, consider the price independently at first in terms of your competition and the value your offering brings to the customer.
Promotion – This is what most people think of when they hear the word “marketing”. Bear in mind that it will take a lot of work before you reach this point. Promotion is simply how you intend to get the message to your customers about your offering. Will you use commercials, magazine advertisements, radio, the internet, mass mailings?
Place – Lastly, you need to think about how you will bring your product to market. This is sometimes referred to as marketing channels. That is to say, will you use direct-selling (no middlemen, just you and the customer or will you sell to distributors or retailers who will then sell it to customers? Geographically speaking, where will you sell your product? Will you sell entirely on-line or in a traditional brick-and-mortar location, or use both methods?
Bringing it all together
You probably already have some or most of your marketing plan in your head. However, following this tried-and-true process can help you formalize your marketing strategy and can help you to identify weaknesses and loopholes in your plan. And, sometimes it can help you identify opportunities that you might not have thought to explore.
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