Argos Segmentation, Targeting and Positioning (STP)

Introduction

The objective of this assignment is to understand Argos segmentation, targeting and positioning in strategic marketing and how Argos uses STP to gain competitive advantage. In strategic marketing STP plays a vital role in the organization or company because it is a marketing strategy for dividing market in segments, targeting customers and making a position for products. (Whaley, A.2010, P12) Competitive Advantage is important for a company because it gives a company advantage over its competitors and gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and services.

Argos is a unique retail company in the UK. Its slogan is “choice, value and convenience” (Argos i, 2010). Argos was founded in 1973 and it owned by GUS PLC. Argos sells general merchandise and other products for the home from 750 stores throughout the UK, republic of Ireland, North Ireland, Wales and Scotland. (HRG PLC Annual i 2010A). Moreover, there are 33,000 employees are working in Argos’s stores. Argos serves over 130m customers through stores and takes 26% of sales through the internet. (Argos i, 2010). In 2010, there are 19,300 products registered in Argos latest spring and summer catalogued. (HRG PLC Annual i 2010).Argos majors products are toys, jewellery, sports, electrical goods and leisure equipment and these goods making up50% of its sales mix(scribd i:2010).

As the leader in UK for general merchandise retailing, Argos latest revenue is £1,812.8M in 2010 which is less from 2009 and it sales down 3%. Multi-channel sales grew to 44% of Argos’ sales in the first half of the year. The internet represented 32% of Argos’ sales (HRG PLCi: 2010B). Argos is unique amongst its major competitors. Its main competitors are Tesco, Asda, PC World, Homebase and Curry’s, and online retailer Amazon.co.uk. All competitors have internet presence. However, Tesco recently has been trying to imitate Argos’ retailing style with its Tesco direct catalogue and in-store shops. (Scribd i, 2010)

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What is STP?

STP stands for Segmentation, Targeting and Positioning. In strategic marketing STP is the second level. In STP; segmentation(S) the market segment deciding which customer to target (T) deciding what messages you want the targets to associate with you; what is called positioning(P).The whole process of dividing the market in different segments, targeting customers and product positioning is known as STP. (Whalley, A. 2010,P12).STP is one of the most important processes in strategic marketing which management should take on both at the start of a new offer creation as well as part of a periodic revision of the collection of offers and strategies by the organization.

Taken from Whalley, A. 2010, and P72.

2.1 Segmentation

Segmentation is the first step in STP process. In strategic marketing “Segmentation can be defined as a process of dividing the total market in different segments for product or service into distinct sub-groups”. (Whalley, A. 2010, P72). In segmentation each segment represents a separate target market to be reached with a distinctive marketing mix. Market segment means dividing the market into different subsets of customers with different needs.

Segmentation can also be summarized as dividing the market by set of Pre- determined criteria.

(Taken from Whalley, A. 2010, P72)

Different variables can play a role in purchasing decision of the customers. In segmentation it is important to focus on the customer needs rather than other variables such as geography, demographics, occasion, behaviours etc. Effective

segmentation is not easy to achieve, because in the society different groups of people have different choices and needs about products. It can only be achieved when customers share similar of demands.

2.2 Targeting

In the STP process, the second step is targeting the market. After the completion of segmentation companies decide which segment they need to target and it depends on the size, area, profit and growth of each segments. Thus, “Targeting of market is defined as the identification of market segments that are identified as being the most likely purchasers of a company’s product”. (Whalley, A 2010:P76) In targeting, a company should target segments in which it has a differential advantage over its competitors.

In targeting companies decide to target one or more segments. For that purpose choice about targeted segments should generally depend on the several factors. The first factor in targeting is checking the existing level of the competition and how good it is serving the customers need. The organisation should know about segment, how large it is and how we can expect it to grow and have company strengths as company that will helps customers demand particularly to one group of customers. Company’s actual ability of communication with the segment is also an important factor for companies in targeting. (Whalley, A.2010:P76)

2.3 Positioning

After segmentation and targeting the next step is positioning in STP process. “It refers to the way in which an organization sets itself apart in the market and how its products are perceived by the target market as a whole”. (Whalley, A 2010:P77) Product positioning is the process of designing product features. These features are product, place, promotion and distribution. Positioning is about the communication of the overall value of proposition such as that it creates and maintains it clearly to customers. A product position is the place where product occupies in consumers’ minds. Market position gives a product a clear, unique and desirable place in the minds of target consumers. It is very important for the firm to define market segments, determine the target segments and understand customer needs, expectation and priorities .The study of competitor’s positioning about services and products are very important for a company, because it’s essential for a company to make good position for its customers and communication about products for customer needs. Customers need should be a main priority of an organization. (Whalley, A.2010:P77)

Discuss Argos’s segmentation, targeting and positioning

3.1 Argos’s segmentation

As discussed previously, market segmentation means dividing a market into different subsets of customers with different needs. Different variables can play a role in purchasing decision of customers. In Argos demographic approach is used because demography is the study of population and it refers to personal statistics like income, age, gender, nationality, religion, and occupations etc. Argos adopts demographic approach because this approach represent the every member of the society i.e. there are many high and low income people in society, they have different needs about products. Furthermore, people of different ages and choice for men and women also important for a company before dividing the market in different segments. Argos’s strategy about market segmentation is to fulfil the need of every customer. It does not matter customer is rich or poor, male or female, educational or uneducated etc. Argos creates well balanced market segment for its target and product. (The Times i, 2010)

3.2 Argos’s Targeting

Customers buying habits change with the passage of time. Advancement of the technology changes customer shopping habits because technology makes its access simple for people. Many people nowadays like to use modern technology for shopping and purchasing different products, for that purpose they like to use internet, telephone. Many people like to come into stores to buy goods but the proportions of online buyers are increasing. This behaviour of customers changes companies’ approach of targeting. Argos thus uses a variety of modern channels to communicate with customers and to provide them with facilities for inquiring about availability of stock, and for making purchases.

Argos recognizes that its many customers have different needs and prefer to shop in different ways. Argos targeting approach is getting to success because Argos’s customers have already decided what they want to buy before visiting stores. Argos targeting approach make its value reliable for its customers because it’s targeting strategy aims to target more and more customers and make easy access for its products. Hence, Argos is using modern technology to target its customers because in this busy world ,where people are using advanced technology for communication make essential for Argos to use it for targeting customers. (The Times i, 2010)

3.3 Argos Positioning

As discussed previously, product positioning is the process of designing product features. These features are product, place, promotion and distribution. Positioning is the final step in STP process. A strong positioning strategy is very important for company. Argos product positioning is using a differentiated market strategy. Argos’ low prices create value for its customers and its branded products lines are able to meet the demands of customers. Argos uses low price strategy because it is able to achieve cutting cost through retailing channels and it does not require a large shop space and big staff. Argos positioning strategy about place divides in three formats. These formats are store format, online format and catalogues. In distribution feature, Argos distributes products through Royal mail and its own delivery services. Argos uses advertising tools like internet, TV and indirect advertising through shopping catalogues for the promotion of its products. (Scribd i, 2010)

Argos as a truly multi-channel, value orientated general merchandise Retail Company. Its strategy about product positioning is differentiated and formatted. Argos offers highly competitive customers through its positioning features like product, place, distribution and promotion. Infrastructure advantages strategy is to gain infrastructure advantage to increase revenue for this purpose Argos spends capital to improve its stores because strong infrastructure also helpful to create product position in market for customers. Argos positioning about reductions or increased flexibility cost has been achieved while Argos is still maintaining or improving its operational standards. (HRG PLCi: 2010B).

Conclusion

In conclusion, the STP process always plays a vital role in strategic marketing, because of the division of market into segments, targeting segments and positioning of products. Argos is a unique retailer company in the UK. It has a unique STP strategy policy as a company for dividing market into segments; demographic strategy is used for market dividing because it’s more suitable than other variables such as geography, occasion, behaviours etc. Argos’ strategy for targeting customers is flexible because Argos uses a variety of modern channels to communicate with customers and to provide them with facilities for inquiring about availability of stock, and for making purchases. Argos’ strong product positioning is totally for the benefit of its customers. As a UK retailer company Argos is unique, popular and successful because it is focused around meeting customer needs. Argos has gained competitive advantage on the basis of providing the best value of money for its customers through the best products branding, low prices, place, distribution and promotion.

In this assignment, my main objective was to discuss Argos as retailing company

and it’s STP strategy in strategic marketing. Furthermore, its aim was to show how

Argos uses STP to gain competitive advantage from rivals by differentiating itself

on the basis of providing the best value for money for customers through the most

convenient shopping experience.