MARKETING MANAGEMENT

STP ANALYSIS OF BLUE-STAR

 WHAT IS STP

The STP process is an important concept in the study and application of marketing. The
letters STP stand for segmentation, targeting, and positioning.

The STP process demonstrates the links between an overall market and how a company
chooses to compete in that market. It is sometimes referred to as a process, with segmentation
being conducted first, then the selection of one or more target markets and then finally the
implementation of positioning. The goal of the STP process is to guide the organization to the
development and implementation of an appropriate marketing mix, as highlighted in the
following diagram.

Definitions of segmentation, targeting and positioning

Market segmentation can be defined as:

  The process of splitting a market into smaller groups with similar product needs or
identifiable characteristics, for the purpose of selecting appropriate target markets.

Targeting (or target market selection) refers to:

  An organization’s proactive selection of a suitable market segment (or segments)

with the intention of heavily focusing the firm’s marketing offers and activities towards this
group of related consumers.

positioning (which is sometimes referred to as product positioning) is:

 Positioning is the target market’s perception of the product’s key benefits and
features, relative to the offerings of competitive products.
 PROCESS OF STP

Step One – Define the market

In the first step in this more detailed model is to clearly define the market that the firm is
interested in. This may sound relatively straightforward but it is an important consideration.

Step Two – Create market segments

Once the market has been defined, the next step is to segment the market, using a variety of
different segmentation bases/variables in order to construct groups of consumer. In other
words, allocate the consumers in the defined market to similar groups (based on market
needs, behaviour or other characteristics).

Step Three – Evaluate the segments for viability

After market segments have been developed they are then evaluated using a set criteria to
ensure that they are useable and logical. This requires the segments to be assessed against a
checklist of factors, such as: are the segments reachable, do they have different groups of
needs, are they large enough, and so on.

Step Four – Construct segment profiles

Once viable market segments have been determined, segment profiles are then developed.
Segment profiles are detailed descriptions of the consumers in the segments – describing their
needs, behaviours, preferences, demographics, shopping styles, and so on. Often a segment is
given a descriptive nickname by the organization. This is much in the same way that the age
cohorts of Baby Boomers, Generation X and Generation Y have a name.
Step Five – Evaluate the attractiveness of each segment

Available market data and consumer research findings are then are added to the description of
the segments (the profiles), such as segment size, growth rates, price sensitivity, brand
loyalty, and so on. Using this combined information, the firm will then evaluate each market
segment on its overall attractiveness.

Step Six – Select target market

There are many factors to consider when choosing a target market. These factors include:
firms strategy, the attractiveness of the segment, the competitive rivalry of the segment, the
firm’s ability to successfully compete and so on.

Step Seven – Develop positioning strategy

Firms need to identify how to position their products/brands in the target market. As it is
likely that there are already competitive offerings in the market, the firm needs to work out
how they can win market share from established players.

Step Eight – Develop and implement the marketing mix

Once a positioning strategy has been developed, the firm moves to implementation. This is
the development of a marketing mix that will support the positioning in the marketplace. This
requires suitable products need to be designed and developed, at a suitable price, with
suitable distribution channels, and an effective promotional program.

Step Nine – Review performance

After a period of time, and on a regular basis, the firm needs to revisit the performance of
various products and may review their segmentation process in order to reassess their view of
the market and to look for new opportunities.

METHODS OF SEGMENTATIONS
 

Types of Market Segmentation

1) Demographic segmentation

Demographic segmentation is one of the simplest and most widest type of market

segmentation used. Most companies use it to get the right population in using their products.
Segmentation generally divides a population based on variables. Thus demographic
segmentation too has its own variables such as Age, gender, family size, income, occupation,
religion, race and nationality.

2) Behavioural segmentation 

This type of market segmentation divides the population on the basis of their behaviour,
usage and decision making pattern. For example –  young people will always prefer Dove as
a soap, whereas sports enthusiast will use Lifebuoy. This is an example of behaviour based
segmentation.

3) Psychographic segmentation

Psychographic segmentation is one which uses lifestyle of people, their activities, interests as

well as opinions to define a market segment. Psychographic segmentation is quite similar to
behavioural segmentation. But psychographic segmentation also takes the psychological
aspects of consumer buying behaviour into accounts. These psychological aspects may be
consumers lifestyle, his social standing as well as his AIO.

4) Geographic segmentation

This type of market segmentation divides people on the basis of geography. Your potential
customers will have different needs based on the geography they are located in.

BLUE STAR – INTRODUCTION

Blue Star is India's leading air conditioning and commercial refrigeration company, with an
annual revenue of over ₹5200 crores (over US$ 750 million), a network of 32 offices, 5
modern manufacturing facilities, 2800 employees, and 2900 channel partners. The Company
has 5000 stores for room ACs, packaged air conditioners, chillers, cold rooms as well as
refrigeration products and systems, along with 765 service associates reaching out to
customers in over 800 towns. Blue Star's integrated business model of a manufacturer,
contractor and after-sales service provider enables it to offer an end-to-end solution to its
customers, which has proved to be a significant differentiator in the market place. In fact,
every third commercial building in India has a Blue Star product installed.
The Company fulfils the cooling requirements of a large number of corporate, commercial as
well as residential customers. Blue Star has also forayed into the residential water purifiers
business with a stylish and differentiated range including India’s first RO+UV Hot & Cold
water purifier; as well as the air purifiers and air coolers businesses. The Company also offers
expertise in allied contracting activities such as electrical, plumbing, fire-fighting and
industrial projects, in order to offer turnkey solutions, apart from execution of specialised
industrial projects.
Blue Star's other businesses include marketing and maintenance of imported professional
electronics and industrial products and systems, which is handled by a wholly owned
subsidiary of the Company called Blue Star Engineering & Electronics Ltd.
The Company has manufacturing facilities at Dadra, Himachal, Wada and Ahmedabad,
which use modern, state-of-the-art manufacturing equipment to ensure that the products have
consistent quality and reliability. The Company has a manufacturing footprint of about 1 lakh
sq m, with the mainstay of product development and R&D being energy-efficiency, coupled
with eco-friendly and sustainable products

PRODUCT MIX DETAILS

The diverse air conditioning product range serves both commercial and residential segments,
and includes a solution for every need. Blue Star serves homes through Precision Inverter,
Split and Window ACs. Commercial complexes and condominiums are served through a
wide range of state-of-the-art VRFs and Ducted Systems. Showrooms, offices and ATMs use
the Company’s commercial solutions including a range of standard Split ACs as well as
Mega Split, Cassette, and Vertical cool ACs. Blue Star’s Chillers adorn landmark buildings
and mega structures such as airports, malls, hospitals and industrial establishments.
The Company’s commercial refrigeration solutions include Water Coolers, Bottled Water
Dispensers and Deep Freezers, besides Modular Cold Rooms and Ripening Chambers. Blue
Star’s portfolio also offers Medical and Retail Refrigeration equipment, as well as speciality
solutions such as Mortuary Chambers.
Blue Star’s AC&R range has been further augmented recently by the launch of product
categories such as Water Purifiers, Air Purifiers and Air Coolers, each a complete range of
technologically advanced solutions. The Company’s Water Purifiers use RO+UV technology
and a 3-stage filtration process along with unique features such as cold and hot water,
touchscreen, speech assist and electronic dispensing to deliver absolutely safe and pure
drinking water. The range also includes India’s first hot & cold RO+UV water purifier.
Air pollution has been a subject of focus recently, and interestingly indoor air quality is worse
than the air outdoors in many cases due to closed environments that trap pollutants and
micro-organisms. Blue Star’s range of elegant and contemporary Air Purifiers packed with
advanced features such as sens air and Plasma technologies, supported by a multi-stage
filtration process, helps keep the air in homes pure, clean and healthy.

SEGMENTATION OF AIR CONDITIONER

Airconditioning and commercial refrigeration major, Blue Star Limited, has announced the
launch of a new range of contemporary, energy-efficient and eco-friendly room air
conditioners for the residential segment. These air conditioners, apart from sophisticated
features, array of colours and state-of-the-art technology, offer considerable power savings.
Blue Star, which has a legacy of over seven decades in providing expert cooling solutions,
has always been a strong contender in the corporate and commercial segment and did not
cater specifically to the residential segment. However, four years ago, the Company thought
it prudent to enter the residential segment realising that consumers now prefer specialist air
conditioning players rather than general consumer durable brands. Further, the Company had
significant potential to make deep inroads in this segment, given the strong brand equity that
Blue Star enjoys amongst home buyers due to its rich pedigree
This initiative met with resounding success and Blue Star's room air conditioner sales has
grown considerably, outperforming the market year-on-year. In fact, the residential segment
now contributes to 70% of its overall room air conditioner sales signifying the overwhelming
response that the Company has received from the home segment. The Company plans to
continue its thrust in this segment with its new line-up for 2015 and is targeting a market
share of double-digits in FY16 as compared to the current 8.5%, in terms of value.
New line-up of energy-efficient products
Blue Star's new line-up of room air conditioners comprises over 80 models. Apart from being
energy efficient, the range of split air conditioners for 2015 has a stylish look with multi-
colour options in the 3-star and 5-star models such as pearl white, champagne gold and wine
red to appeal to home consumers. In addition, the new range boasts of several features
including feel for comfort where one sits, seven filters for ultra-pure air, turbo operation,
hidden display, long distance piping, auto mode, dry mode, sleep mode, blow/self clean
function, elegant remote control, rust-resistant construction, self diagnosis, scroll compressor
and acoustic insulation on compressor, amongst others.
The Company will also continue to aggressively promote its inverter range of residential split
air conditioners for the benefit of upwardly mobile customers who are energy conscious. The
inverter compressor in these units varies its speed depending on the ambient load, resulting in
perfect cooling, apart from considerable energy savings. Inverters save up to 30% power over
the 5-star rated split air conditioners. Considering the technological advantages that inverters
offer and the fact that the price difference between the 5-star rated split air conditioners and
inverter-based air conditioners has reduced significantly, inverters are anticipated to grow
exponentially over the next few years. Though inverters comprise over half the market in
countries such as China, inverters are only about 8% of the Indian market and this share is
likely to triple over the next couple of years.
Distribution
As regards to distribution, in 2015, Blue Star's room air conditioners will be available in 3500
outlets in over 500 locations spread across the length and breadth of the country, vide
exclusive and multi-brand sales and service air conditioning dealers, retail showrooms and
modern trade. The Company has also built up a strong installation and service franchise
network to support the retailers. The expansion of the Company's presence in Tier 3, 4 and 5
markets has contributed immensely to its growth. Nearly half of the Company's sales are
from smaller towns since consumers in these markets are aspirational and prefer premium
brands.

Advertising and Brand Communication

In terms of advertising and brand communication, the Company has plans to invest about Rs
35 crores in the forthcoming summer season. The differentiated value proposition to the
residential audience over the last few years has been 'Get office-like cooling at home' which
leveraged Blue Star's expertise in cooling offices and communicated that one can get the very
same expertise at home. Given the fact that Blue Star is now well entrenched in the
residential segment, the Company has identified a new value proposition of 'Nobody Cools
Better' which highlights the unmatched expertise, experience and deep understanding of the
science of cooling that Blue Star offers to its customers.

ADVANTAGES OF MARKET SEGMENTATION

Market Opportunities
A segmentation strategy enables your marketers to study the needs of each segment and
understand current offerings of your competitors. This enables to identify market
opportunities to satisfy customers better. When your market segmentation strategy finds
dissatisfied customers, we can then enter this market by providing customers with the
products or services they’re looking for.
Product Design
Implementing customer segmentation models allows you to design products that truly match
the demands of your target audience. One of the best benefits of market segmentation is that
it can help you get into the mind of your customers and understand their realistic expectations
of your brand. A market segmentation strategy allows you to determine what is working well
for your business and what is not, giving you the insight to make necessary changes to meet
customer’s needs more effectively. Eg : Inverter AC

Customer Retention
Customer segmentation models also increase customer retention by giving you ways to
segment customers throughout their customer lifecycle. The manufacturer could identify the
needs and can satisfy it.
Profitability
Implementing a market segmentation strategy will not only increase your competitiveness but
also allow you to properly price products for your different customer segments. Market
segmentation will help you identify the best prices to target new customers and set fix prices
for your products and services accordingly.
Better Communication
Segmentation marketing increases communication with your target audience by increasing
your knowledge of your customers allowing you to communicate with them better.
Improved Marketing Efforts
There are many benefits of market segmentation including providing customers with a sense
of belongingness to your brand which increases customer loyalty. When we segment our
customers, we learn more about them and how you can meet their needs and expectations
more accurately. Without a proper market segmentation strategy in place, we’re likely losing
out to our competitors and not meeting the demands of our customers.

CHALLENGES OF SEGMENTATION

1. Limited Production:
In each specific segment, customers are limited. So, it is not possible to produce products in
mass scale for every segment. Therefore, company cannot take advantages of mass scale
production; scale of economy is not possible. Product may be costly and affect adversely to
the sales.

2. Expensive Production:
Market segmentation is expensive in both production and marketing. In order to satisfy
different groups/segments of buyers, producers have to produce products of various models,
colours, sizes, etc., that result into more production costs. In the same way, the producers are
required to maintain large inventory for different styles, colours, and sizes of products.

3. Expensive Marketing:
Market segmentation also results into expensive marketing. Due to different groups of
buyers, the marketer has to consider all the segments in terms of needs, interests, habits,
preferences and attitudes. Marketer has to formulate and implement several marketing
strategies for different segments.

4. Difficulty in Distribution:
Company needs to make the separate arrangement for each of the products demanded by
different classes of customers. Salesman’s recruitments, selection, training, payments, and
incentives are more difficult and costly.

5. Heavy Investment:
Market segmentation leads to heavy investment. In order to satisfy different needs and wants
of various groups, a company has to produce variety of product lines and product items. For
the purpose, the company requires to invest more on technology and other inputs that may
demand heavy investment.

6. Promotion Problems:
Market segmentation also creates promotional problems and multiplies promotional
difficulties. It is obvious that different segments are made on the basis of distinguished
characteristics of buyers. Each group differs in terms of advertising media, appeal or
message. In order to influence various segments of buyers, the company is required to
prepare a separate advertising programme or strategy.