The STP Approach Segmentation has two phases: Phase 1 Segment the market using demand variables (e.g., customer needs, wants, benefits sought, problem solutions desired, and usage situations). Phase 2 Describe the market segments identified using variables that help the firm understand how to serve these customers (e.g., shopping patterns, geographic location, clothing size, spending power, and price sensitivity), how to talk to these customers (e.g., media preference and use, attitudes, activities, interests, and opinions), and buyer switching costs (the costs associated with changing products or suppliers).

For General Understanding of a Market Benefits sought (in industrial markets the criterion used is purchase decision) Product-purchase and product-use patterns Needs Brand-loyalty and brand-switching patterns A hybrid of the variables above For Positioning Studies Product use Product preference Benefits sought A hybrid of the variables above Segmentation: objectives For New-Product Concepts (and New- Product Introduction Reaction to new concepts (intention to buy, preference over current brand, etc.) Benefits sought

For Pricing Decisions Price sensitivity Deal proneness Price sensitivity by purchase/use patterns For Advertising Decisions Benefits sought Media use Psychographic/lifestyle A hybrid (of the variables above and/or purchase/use patterns For Distribution Decisions Store loyalty and patronage Benefits sought in store selection

Evaluating Segment Attractiveness

Conjoint analysis procedure Stage 1 – Designing the conjoint study: Step 1.1: Select attributes relevant to the product or service Sept 1.2: Select levels for each attribute Sept 1.3: Develop the product bundles to be evaluated Stage 2 – Obtaining data from a sample of respondents: Step 2.1 Design a data-collection procedure Sept 2.2 Select a computation method for obtaining part-worth functions. Stage 3 – Evaluating product design options: Step 3.1 Segment customers based on their part-worth functions. Step 3.2 Design market simulations. Step 3.3 Select choice rule.