Key question: what is the customer’s need?
Kotler’s STP model helps with this. STP stands for segmenting – targeting – positioning. In Dutch, it is SDP (segmenting – target market determination – positioning). This model is used to identify which segments of the market offer the most potential and what positioning is best suited to them in order to best approach the customer (
see value proposition
). I begin first with a summary of the various components in the model and then go into more detail about segmentation and positioning.
“A product market combination is a unique combination of a product for a specific group of customers.”
Segment
In segmenting, you are going to divide the market into different segments. A segment is a group of (potential) customers who match on a number of characteristics. Buyers differ and respond differently to your marketing message. Thus, to create an effective message, it is important to identify these different segments. For effective segmentation, a segment must meet the following requirements:
- Measurable: size and purchasing power
- Accessible: they can be reached and helped
- Substantial: large enough to be profitable
- Differentiable: respond differently from other segments
Target market definition
In target market definition, you name which segment you will approach. In target market determination, you must consider segment size and growth. An important model which can help with target market determination is Porter’s
5-forces model
. It is used to determine the attractiveness of a market segment.
There are 4 choices in strategies:
- Individual marketing, here you choose an individual as your segment
- Niche marketing, here you choose one segment.
- Segment marketing, here you choose multiple segments.
- Mass marketing (or full market coverage), here you serve all segments using different combinations in the marketing mix.
Position
Once you have decided which segment(s) you are going to focus on, you need to determine how and what you are going to communicate. By choosing good positioning, you differentiate yourself from the competition. There are 5 main categories in which you can differentiate yourself:
- Product
- Services that help with marketing, sales and after-sales services
- Staff
- Channel
- Image
These are the three steps you use to arrive at a good product-market combination. In the next two parts, I’ll take a closer look at segmentation and positioning.
Part 2: Making the right segments in the business marketplace
Successful companies have a clear focus on their market. On the road to this success, it is important to regularly examine your product-market combination and choose the right communication strategy. Market segmentation or segmentation helps keep track and determine where you should pay more or less attention. In doing so, you significantly shorten the path to success.
To arrive at a good product-market combination, it is important to divide the market into different segments. Segmentation is important to differentiate yourself from the competition and to communicate a unified, effective message. Philip Kottler and Kevin Keller identify seventeen segmentation criteria. In this blog, we cover the three most important criteria that quickly contribute to successful segmentation.
Want to market a (new) product or service?
Then download our roadmap: in 5 steps to a product launch!
What is segmentation and why is it important?
Segmenting is dividing the market into different groups with the aim of providing focus and creating distinctiveness. Segmentation is therefore important to differentiate yourself from the competition and to communicate a unified, effective message. But what are you going to communicate? So what differentiates your from competing competitors who claim the same thing? When you focus on a particular segment you develop your business as a specialist. This suddenly makes you have a lot less competition and tell a much clearer story.
Example: For example, in the financial world (read: administration and accounting), it is common to say that you work for every company in the region. Because everyone in the market is positioning themselves as generalists, little distinctiveness is created. In addition, there is something to be said for large offices being able to live up to this better than smaller ones. Small providers would do well to specialize using the seventeen criteria.
What does a segment need to meet?
A good segment meets four criteria:
- Measurable: size and purchasing power
- Accessible: they can be reached and helped
- Substantial: large enough to be profitable
- Differentiable: respond differently from other segments
What segments can be distinguished?
Kottler and Keller identify seventeen segmentation criteria, divided into five categories. The three most commonly used criteria are: company size, location, sector/industry. These are easily incorporated into your operations. For convenience, do a finger exercise by testing your existing customer base against the criteria below.
Company size
With company size, segment your company by number of employees, workplaces or revenue. Business size is a segmentation variable that is important within a wide range of industries.
Coverage
Catchment area is a traditional form of segmentation. Don’t see this as too scary. Depending on your service area, you decide which location you yourself are in and where your potential clients are located. Factors such as relative travel distance and lower logistics costs make your proposition interesting to your target audience. Knowledge of the local market is an underrated differentiator that you can make good use of.
A company that knows its catchment area incurs less advertising and advertising costs than a company that seeks its customers nationwide and has a higher revenue from it. It’s very tempting to develop national campaigns; in our experience, it’s better to leave that to the larger, generalist professional brethren.
Sector/industry
One of the most common features used to segment is selection by a sector or industry. By focusing on a specific industry, you claim authority and can better market your added value. In addition, potential customers are easily identified by the mandatory industry codes upon registration. Please use the
SBI codes
from the Chamber of Commerce. Choosing an industry in which you are a specialist ensures that you have a clear message to the outside world.
Other ways of segmenting
The above segementation criteria are the most commonly used ways of segmenting. They are easily applicable and give your communication strategy a positive boost. Segmenting in this way already gives you enough differentiation. If you like that, it’s time for the next step:
Click here
for the full list of segmentation variables that Kotler and Keller distinguish in the b2b market.
Segmentation is an important step in achieving a good product-market combination. Once you have created different segments you need to start determining which segment(s) you are going to target, or target market definition. In the first section, I explain how this works.
After you’ve chosen a segment, you start positioning.
Part 3: how positioning works
The final step in developing a good product-market combination is positioning. In steps one and two, you divided the market into segments and from these you chose which segment to focus on. Now the only question is, what will you communicate and in what way? In other words, how will you position yourself?
What is positioning?
The meaning of positioning is as follows:
“designing a company’s offerings and image to occupy a distinctive place in the minds of its target audience (Kotler & Keller, 2015).”
With segmenting you bring focus, with positioning you develop the market offering.
Why is good positioning important?
Resources are always scarce. Therefore, it is important to develop the right positioning strategy. Good positioning sets your company apart from its competitors. This makes it clearer to potential customers why they should do business with you instead of your competitors. In addition, you create concrete expectations that you live up to. This increases customer loyalty. By positioning you get more return from your marketing and your customer loyalty increases and because of this you get a good product-market combination.
Want to market a (new) product or service?
Then download our roadmap: in 5 steps to a product launch!
In 7 steps to a positioning strategy
1. Find a compelling product or service performance advantage.
As for any brand, demonstrable and meaningful differences in product or service performance are key to success. At a time when potential buyers can find all possible substitutes with one click, this is a significant challenge, and one that you do need to meet. After all, if your target audience does not see a big difference in your product or service, you are just another “me-too” forced to compete on price.
Examples of benefits include products/services that save costs, provide ease of use, last longer than the competition but also excellent customer service can be an advantage.
Here
you can find more examples of product or service benefits.
2. Focus on building a single brand based on one or two key (brand) associations.
Small businesses often have to rely on only one brand and one or two key (brand) associations as differentiators. These associations must be consistently reinforced in all marketing communications and over time. These are often associations based on the benefits of the product/service (see step 1) or attitudes toward your company. These attitudes are based on your company’s core values.
3. Encourage in every way possible to test your product or service.
Seeing is believing. What you claim your competitor can also claim. So make sure you prove the claim as well. Do this with testimonials , handing out samples (when selling a product), offering demonstrations or other ways to engage potential customers with the brand.
4. Develop a cohesive digital strategy to make the brand “bigger and better.”
The Internet allows companies to have a wider reach than they would have before. Digital communication is very important, but never rely solely on a digital platform. It’s great for creating awareness, but much less effective at moving customers to action. Your digital strategy must therefore be integrated with personal communications.
5. Create buzz and a loyal brand community.
Businesses in the b2b market usually rely on word of mouth to establish confidence in their positioning. Good complements to word of mouth are public relations, social networking and low-cost promotions and sponsorships. Creating a vibrant brand community with current and potential customers can also be a cost-effective way to reinforce loyalty and spread the word to new prospects.
6. Use a well-integrated set of brand elements.
All the elements that convey your brand belong to the brand elements . These are elements such as your brand name, logo, pay offs, use of color and language. Brand elements should be distinctive and meaningful, with as much creative potential as possible. For example, your brand name, logo and payoff should actually make it clear at a glance what you deliver and what sets your proposition apart.
7. Use secondary associations as much as possible.
Secondary associations are any people, places or things with potentially relevant and positive associations. These are cost-effective shortcuts to creating brand value, especially those that help signal quality or credibility.
Sponsoring a charity is an example of creating secondary associations, as is linking you to a trusted, well-known vendor (IT parties that work with Microsoft or administrative offices that work with exact).
Research is key! Because that’s how you get to the right product-market combination
This model roadmap is mostly internally focused, but it is equally important to look externally when you are working on your positioning issue. It is important to research how your competitors are positioning themselves and to test what existing associations (potential) customers have so that you develop the best positioning strategy.
Want to market a (new) product or service?
Then download our roadmap: in 5 steps to a product launch!
