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Assess the contribution of STP to market planning

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Introduction

MM203 - Marketing Management Assess the contribution of STP to market planning Market segmentation is the process of dividing a market into groups of customers with similar needs or characteristics who are likely to exhibit similar purchase behaviour (Dibb, 1996). In segmenting the market, the business is acknowledging that different 'types' of buyers may require different products, marketing approaches or marketing mixes. Whilst a mass marketing approach will treat the market as a whole by providing one version of the product and one marketing mix for all buyers in the market; market segmentation enables the business to target different groups of buyers by adapting its product and marketing mix to best suit each targeted segment (Doyle, 2002). The following essay will therefore set out to examine the contribution and importance of segmentation, targeting and positioning (STP) in relation to market planning. It will also consider the possible disadvantages of using this approach whilst revising what other strategies may be used. Businesses from all industry sectors use market segmentation in their marketing and strategic planning (Dibb 1997). For many, market segmentation is regarded as the solution of modern marketing (Wind, 1978 cited by Dibb, 1997). Segmentation, targeting, and positioning are marketing tools used by a company to gain competitive advantage in the market. ...read more.

Middle

Saunders (1987) also quoted a sales director with a similar comment, who stated: "We do not see the market as being made up of specific segments. Our market is made up of the whole industry." The above quotes contain relevant points because it seems that the company is currently profitable and has enough market share; making it worthless to spend capital on developing a strategy of STP when the mass marketing approach appears to be functioning well. Whatever variables are used in terms of segmentation, according to Dibb et al (2001): "Haphazard implementation can lead to ineffective market segmentation, missed opportunities and inappropriate investment...There must be real differences in the needs of consumers for the product or service because there is no value in segmenting a homogenous market." The appeal of mass marketing is in the potential for higher total profits. Companies that employ the system expect the larger profit to result from (1) expanded volume through lower prices and (2) reduced costs through economies of scale made possible by the increased volume. In order for the system to work, the product must have broad appeal with features that distinguish it from competing products. One of the most widely recognized examples of mass marketing is Ford. Henry Ford applied the concept in the automobile industry. ...read more.

Conclusion

(Cited by Doyle, 2003). Although many people argue that STP is the fundamental part of any modern business, adopting the market-segmentation approach can also be accompanied by some drawbacks. Particularly when multiple segments are targeted, both production and marketing costs can be more expensive than mass marketing. Different product models, for example, are required for each segment, and different promotion may be required for each market. In addition, administrative expenses go up with the planning, implementation, and control of multiple marketing programs. In conclusion, it is evident that the majority of the supporting material maintains that market segmentation is imperative for meeting the demands of different customer requirements, and therefore increases the growth and sales of the business. This is particularly true for a modern day business where the competition has increased significantly since the days when mass marketing was prevalent. Although there may be certain implications by segmenting the market, I think that the evidence provided firmly supports that a carefully considered strategy of market segmentation, targeting and positioning contributes significantly to effective market planning. Segmentation also helps businesses to remain at a competitive advantage, and to allocate financial and other resources more effectively. By focusing these resources on the most attractive areas of the market, segmentation encourages businesses to play to their strengths. ...read more.

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