Segmentation, Targeting, and Positioning
Marketing in an MBA program teaches you to segment, target and postion - STP. Who are all the possible people who could use your product? Knowing all the different segments, which one is it must lucrative to target? How do we then position ourselves in the minds of that segment? In our Models of Consumer Behavior class, we took this lesson one step further.
The paper towels market is an example of STP in action. You would think that all paper towels are all the same. After all, they are pretty standard commodity items. How different can one be from another? Well, the data shows that this is a $2.33Bn market, and Bounty, with $914.6M in revenues, has almost 40% share of the market. This should be a perfectly competitive market - because the goods are difficult to distinguish between each other. Yet, Bounty clearly has a dominant position, so it is not.
While there are many different people who use paper towels - including me - and thus many different segments, Bounty has determined that the most attractive segment is 'busy moms'. There are more of those who will buy these paper towels than there are people like me. For these busy moms, Bounty perfectly positions itself in that target's mind not as a paper towel, but as an insurance policy. For these busy moms, when the baby knocks over some milk, or what is cooking on the stove spills over - for these use cases - Bounty positions itself as, and markets itself as, the perfect solution.
There may be twenty different brands of paper towel that function just as well as Bounty. However, it is Bounty that is shouting out to the specific segment of busy moms. It is Bounty that portrays itself in its marketing as the ideal solution for that segment's problems. Consequently, while the paper towel market should in theory be a perfectly competitive market, it is not. The products in this market are differentiated - but not through significant differences in the product. The are differentiated simply through branding and marketing.