The STP process to building a successful internet business

by James Agate

David Packard, the co-founder of computer giant Hewlett Packard (now HP), once said that marketing was far too important to be left to the marketing department. Whilst you may or may not have a marketing department, it really does stress the importance of effective marketing – particularly in an internet based business.

The STP process is a marketing tool used by many of the largest companies in the world in order to identify the customers that exist, select suitable customers to target and develop a new product/service (or tailor an existing one) in order to appeal to those customers. STP stands for Segmentation, Targeting and Positioning.

It is the marketing equivalent or ready, aim, fire!

Segmentation

This is the process of subdividing your market into groups or clusters of potential customers according to their demographic (income, gender, age etc), behaviour (internet usage, loyalty to brands, trust of businesses etc), location (where in the world they are accessing your website from) or lifestyle choices (opinions, political views, social attitudes, aspirations etc).

It is unlikely that location will play a big part in this process for your business since the internet removes this barrier.

Why segment? -  What’s in it for you?

• Much more effective marketing – you will be able to convert more customers, more often and save yourself a fortune on advertising.
• An edge over competing websites – they won’t know what’s hit them!
• Increased engagement with your audience – leading to longer, more profitable relationships, less unsubscribers and less unprofitable exits from your website.
• Increase your income – you can tailor your proposition in order to make your product or service more appealing to more people.

STEP ONE – Build a current customer profile (the average user of your product or service)

If you are creating an entirely new product or service then skip to STEP TWO.

The more information the better, here is a good starting point:

• Average age
• Estimated income
• Average purchase value
• Frequency of visits
• Frequency of purchases
• How long do they spend on your site
• What other sites do they use? (Google Analytics and your stats on traffic sources can be useful here!)

Build an ideal customer profile

Use identical variables as in your current customer profile (so as to make a comparison easier). Make sure that you are realistic. We would all like visitors that look at our website for 5 hours a day, every day of the week and make average purchases of £5000 but you have to live in reality therefore make a reasoned judgement based on the information you have. For example, if your products or services appeal to middle aged men who have an average income of £100,000 then pulling your average spend up from £10 per customer to £50 per customer is probably achievable. Attempting to get busy mums to access your website more than the 30mins they already spend a day on your website is unlikely because they have other things to do.

Conduct a GAP analysis – what are the differences between your current and ideal?

• Look at all the differences and make a note of them
• Make each of the differences into a strategy for improvement e.g. a difference in average spend would indicate you need to embark on a strategy of ‘improving spend per customer’.
• Transform each of these into objectives – practical steps you plan to take in order to make this happen. If you are looking to increase spend per customer, (“Would you like to add another two products to your basket for an extra £x?”) or have your developer add a bit of code to suggest other products you offer at the checkout so as to maximise your chance of a linked sale.

You will just have improved the efficiency of your marketing and hopefully this will strengthen your existing proposition.

NOW GO AHEAD TO STEP TWO IN ORDER TO BUILD YOUR BUSINESS THROUGH TARGETING OF ADDITIONAL SEGMENTS

STEP TWO – How to segment for a NEW product or service

Look at your market as a whole – try to see the bigger picture, who might conceivably have a need for the product or service you plan to offer?

Gather information and build a profile of each of these groups – this can mainly be done through online research which is usually free. Really set aside some time in order to build a comprehensive picture of the market you intend to serve.

For example, if you have a product or service which appeals to website owners, there will be various different types within that larger market, i.e. hobby owners, part-time owners with a job, full-time owners who make a living from their website, or even entrepreneurs with large scale websites and a team of employees.

Really attempt to understand the market and group these users together by specific variables (mentioned earlier in this guide) such as demographic, behaviour and lifestyle choices. If you are likely to be targeting business customers then you may also like to consider grouping potential customers according to how they use your product, the levels of service they expect and so on.

STEP THREE – Positioning

Now that you have a comprehensive picture of your market as a whole, you can begin to select the segment (or more likely segments) you intend to target.

Ask yourself the following questions before you select a particular segment of the market to target:

1.    Is it big enough? – (targeting a particularly small niche may prove unprofitable particularly if they are expensive to acquire or market to)

2.    Is the segment going to last? – short term markets are ok but be sure to do the maths before making investments that you are never going to get a return on.

3.    How easy is it to access and market to this segment? – are you going to be able to access this segment through relatively easy methods like blogs, social media and other digital promotional forms? If not, then you may want to consider your segment choice (unless of course the segment is going to be particularly profitable!)

4.    Is it going to be prohibitively expensive to target this segment? – how will you ever make a return if it becomes too expensive for you to acquire your customers?

5.    How responsive are they likely to be to your proposition? – this is a difficult one, but try to be honest with yourself and really judge whether the segment you are choosing is going to respond positively to what it is you are offering, or are you going to be fighting an uphill battle. For example, older people may be less responsive to an email opt-in offer because they have an inherent fear of giving away their details.

STEP FOUR – Targeting

Targeting in a marketing sense is designing an offer so that it occupies a distinct and valued place in the minds of your customer.

The main part of targeting is tailoring what you do or what you offer to appeal to that particular segment. Many successful internet entrepreneurs simply choose to slightly repurpose their content in order to appeal to a broader range of customers. I know of a blogger that successfully sells what is essentially the same ebook to three different segments of the market simply by adjusting the content internally and the ‘offer’ (name, packaging, price) externally.

His top tip is to ensure that the different segments don’t ever find out about eachother! Customers will be less than pleased that you are utilising your market knowledge to charge them a higher price!.

Those are key because what you are offering needs to be distinct and valuable to the customer. This can be communicated to the customer through your promotional materials, packaging, branding and many other things. You really do have to make a 360degree assessment of your business.

Important things to consider

• Product, service (and business) name
• Pricing
• The packaging of your proposition – includes website look, eBook covers, emails and so on
• Language choices – speak the language of your customer! The more you know about them, the easier it will be to use words and phrases that resonate with them.
• Media choice – interacting with customers on their terms by selecting relevant media outlets to advertise and engage with them. This basically means you choose Myspace if you are looking to target the youth market because it demonstrates you have a fundamental understanding of your consumers (you know where they ‘live’ online). This may not necessarily consciously occur to your potential customer but they will make a judgement that if you are advertising in a place where they like to spend time then your business must be worthy of their time also.
• Types of sales promotions you use – different segments will respond better to different types of offers for example, a segment with high incomes may respond well to an upsell i.e. an offer of more products for a higher but discounted price whereas the youth market who may only have enough to buy one of your product or service will respond better to a free trial or buy-one-get-one-free.
• Associations – which brands your product and service associate with i.e. through distribution deals, public relations campaigns and recommendations you offer.
• Your personal brand – YOU are likely to be the biggest component in your business so you ideally need to be the public face of your business and really embody the value of your brand. You wouldn’t find Stelios Haji-Ioannou, founder of low cost airline EasyJet, flying first class because that would go against all the brand values he has worked hard to build.