Too many entrepreneurs and small businesses dive right into the thick of operations without following basic marketing principles.
In business, as in most things, 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 start this process before your product or service is ever brought to the market. It can still be a worthwhile exercise for and existing product though.
Segmentation is simply a fancy way of saying that you need to identify your customer. Think of every possible customer.
Now, start slicing that population into smaller, more defined segments (thus the name segmentation).
It’s best to start big here – for example, split individuals from businesses. Now, go into each segment and divide it further.
You could split individuals further by sex, age, socio-economic status, 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 their considerable overlap from one to the next?).
The next step in the process is to look at the segments you’ve created and make some decisions about which segments of the market you are going to go 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.
That is to say, are you going for a larger, less defined segment or a smaller more defined segment. The general trend over the last decade has been to go after more defined segments.
The extreme here would be to go after a “niche” market which is just a fancy term for a highly defined, fairly small segment. The reason being that there will be less competition for those segments.
The segment 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 segment 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 4P’s – Product, Price, Promotion, and Place.
You need to focus your product towards your selected target. What do the people/firms in your segment want or need?
If you are working 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 does? It’s critical to match the right product with the right customer.
Pricing your offering is an art. You must consider many factors, such as the stigma different price points carry – for example, being too inexpensive sends a message that your product may be junk.
It’s also critical to consider the competition here. 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 the subject of 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.
This is what most people think of when they hear the word marketing. As you can see though, it takes a fair amount of work before you get to 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?
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 sell directly to the customer or will you sell to distributors or retailers who will then sell it to customers?
Where geographically will you sell your product? Will you sell entirely on-line or in a traditional brick-and-mortar location?
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.
It can also help you to identify holes in your business and it sometimes can help you identify opportunities that you might not have thought to exploit.