Case Study
Understanding STP and Marketing Mix: The Case of NIVEA as an Example

A.    INTRODUCTION

The increasingly competitive business environment is due to the tremendous increase of organizations is pressing businesses to rethink its marketing philosophy, in order to stand out from the crowded and information overload global environment. Many marketing concepts and philosophies are suggested, by theoreticians, academicians, practitioners and consultants. In this writing, the most basic but practical marketing concepts and ideas will be introduced. These concepts and models are powerful as it is straightforward, rational and have been applied successfully in many business contexts. The effective marketing concepts to be introduced and discussed here is the Segmentation-Targeting-Positioning Value Delivery Process and the 4P Marketing Mix framework. For practicality purposes, a case study on these subjects will also be presented, to understand how these concepts are being applied successfully in the real life. Recommendations on how to further improve marketing activities are also presented later. The article conclude with acknowledgement that although complicated marketing theories and frameworks are available, successfully executing the fundamentals and marketing principles is already sufficient to ensure a company to achieve competitive advantages in the marketplace.

 

B.    LITERATURE REVIEW

1.     The Concepts and Definition of Marketing

Theoretically, marketing is a broad term dealing with identifying and delivering value to human and society. Marketing is about meeting human and society needs, and from the business standpoints, to meeting those needs in a profitable manner. There are various definitions concerning the subject of marketing. For example, a widely cited definition of marketing as defined by the American Marketing Association is as follow: marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefits the organization and its stakeholder. Some researchers argue that such a definition is commercial-oriented and have been proposing a marketing definition that is more socially oriented. From the sociology perspective, marketing is the process whereby individuals or a team of individuals attain their needs by creating, promoting and exchanging valuable products and services with one another.

Generally, in today business environment, there are three broad categories of marketing concept. All of these concepts are based on a customer-oriented and sense-and-respond selling philosophy. The first type of marketing concept is called the reactive market orientation concept, where a company tries to understand and meet the customer’s expressed needs. The second type of marketing concept is the proactive marketing orientation concept, where the company takes initiative to understand the hidden needs of customers and find ways to meet those untold needs. Lastly, the third one is the total marketing orientation concept, where the company will practice both the reactive and proactive marketing philosophy in delivering values to the society.

Marketing is essentially a process to create, deliver and satisfy consumers or customers’ needs and wants. The entire marketing process is thus often described as a value delivery process – where it is concerning about how an organization create and deliver its value proposition to the society.

There are various philosophy and perspectives in defining how an organization should deliver value to the society. Generally speaking, the value creation and delivery process contain three stages. The first stage is to choose the specific value proposition. In this stage, the market must perform comprehensive researches on the marketplace before he can expect to successfully deliver valuable goods and services to the marketplace. The STP formula is a widely known marketing concept in this stage, where STP stands for segmentation, targeting and positioning. Specifically, the marketer must segment the market, select the relevant market target and then to develop the value offering’s positioning. In the second stage, marketer provides value to the society. The concepts of marketing mix, namely the 4P or the 7P framework is often applied here. In this stage, marketer decides how he is going to provide the value to society from the products, price, place, and promotion dimensions. In the third stage, the market must communicate the value proposition to the society, and this can be done through promotion, advertising, sales force, branding and even by exercising Corporate Social responsibility in the marketplace.

 

2.     The STP Process – Segmentation, Targeting and Positioning

According to Kotler et. al. (2004), the formula of STP, namely – segmentation, targeting and positioning – is the essence of strategic marketing. As mentioned before, the three steps are important for a marketer to plan how the value offered is to be delivered to the society. The paragraphs below will discuss these steps in details.

Market Segmentation. Market segmentation is a strategy where marketers imaginarily divide the market into various partitions with the objective of choosing one or more market segments which the organization can appeal to through the design of specific marketing mixes (specially attending to the particular market needs). Often, a market segmentation strategy can also refer to the process of selecting the designated market segment where a firm possesses competitive advantages. By selecting the best market segment a firm can compete in (possibly due to the experience, human capital, products or any other successful dimensions of the company), the firm can optimize its value chain and value delivery process to the market place, through a fit of internal firm situation and external circumstances. Through a market segment, the design of marketing mix can also be more specific and clear.

Targeting. Once the company has chosen a market segment it should also select a generic competitive strategy. At this point it is also critical to investigate the chosen strategy across segments and research on the general strategic approaches. According to Kotler (2004) the only sustainable generic strategy in the long run in a segmented market is by pursuing a differentiation strategy. He asserted that the other generic competitive strategy choices (such as low cost) are not sustainable or practical in a segmented market. Thus, in this second step of STP process, it is important for the firm to select a generic strategy to target the particular market segment.

Positioning. According to researchers, the positioning strategy should consist of three dimensions: (a) customer targets (i.e., referring to the results obtained from the segmentation research); (b) competitor targets (i.e., referring to the results from external environment analysis); and (c) competitive advantage (i.e., referring to the research results from environmental analysis). In formulating the positioning goals, researcher is arguing that positioning is not what marketers do to the product, but what marketers deal with the consumers’ mind. Comprehending how a mind perceives events, stores or rejects information will enhance the probability of ensuring the positioning objective are successfully implemented with actual positioning in the target marketplace.

 

3.     Marketing Mix

The 7P marketing Mix Framework is a famous and practical tool widely used by researchers or practitioners. In the following section, all these elements of 7P will be discussed in details.

Product. Under the dimension of product, the marketer should firstly define the characteristics of the products to be marketed to meet the customer’s needs. The products or services offered should provide values to the customers. The design of marketing mix in this dimension can either be introducing a new product or improvising the existing one.

Price. The pricing strategy in a marketing mix design is primarily about identifying the total costs to the users. The pricing strategy must fulfill two critical requirements. Firstly it must be competitive. Secondly, it must entail profit. Several issues should be taken into account in formulating a pricing strategy, namely, discounts, offers, and the perceived product’s value for money. Researchers identify three types of pricing strategies. The first one is called the cost-based pricing strategy. This strategy is designed to cover costs and include an element of profit. It purely focuses on the product costs structure but does not consider the perceptions of the customers. The second type of pricing strategy is called penetration price. Such a strategy offer a low initial price to entice customers in order to quickly increase the market share, with the intention to encourage the customers to develop a habit of buying the products or brand. The third strategy is price skimming. This strategy is useful for niche or unique product. By setting an initial high price, those who want to try out the product will need to pay a premium, and this enable the business to potentially gain maximum profit before the competitors’ products reach the market place.

Promotion. Promotion is about persuading the customers to buy. Promotion activities can be categorized as either above the line or below the line. Above the line promotion is those promotion the company paid directly for, such as advertising in newspaper or mass media. In contrast, below the line promotion is about using other promotional methods to communicate the value proposition to customers. Some examples are events or trade fairs, direct mail marketing, public relation activities, branding, or sales promotion.

Place/ distribution channel. There are two components in this dimension. Firstly, it is referring to how the product arrives at the destination of sales – and this is essentially a distribution channel strategy. Secondly, it concerns about where the products are sold, such as in the retail outlets, supermarkets, departmental store, or through internet (i.e., e-commerce).

People. In business, it cannot be denied that people is the key critical success factor. Common sense informs us that good services and products are impossible delivered by unskilled or demotivated employees. However, under this dimension, people are referred to many other parties, such as the customers, employees, management, and even the various external stakeholders.

Process. This dimension is about how the value delivery process is being organized. It is also about how the customers receive the products or services. It is very important to understand if any services are helpful and friendly towards the customers, and if these services or products are delivered in a timely and professional manner.

Physical evidence. This is the dimension regarding the physical part of a business, and it often includes material evidences such as packaging, internet or website, paperwork (i.e., invoice, receipt, memo, deliver order and etc.), brochures, office furnishing, uniforms, business cards, or even signage.

 

C.     CASE STUDY: NIVEA

1.     Introduction to the Company

Nivea is a famous brand in skin and beauty care industry. It is one of the subset of brands manufactured and offered by Beiersdorf. Nivea is today one of the largest skin care products providers in the world. In 2005, Beiersdorf launched Nivea Visage Young in order to focus on the target market of young female aged from 13 to 19. The value proposition of Nivea Visage Young is to enable young females to follow a proper skin care program, which will then in turn enhance healthy and beautiful looking skin for the teenage.

In the following section, a case study focus on this product will be presented. It will be illustrated that a market can be identified by formulating an excellent product/range and promoting it to the market (i.e., the product-orientated method) or by discovering a gap in the market and innovate for a product to fill it (i.e., the market-orientated method). Having discovering a gap in the market place, Beiersdorf launched Nivea Visage Young with a well-design marketing mix – all the product, price, promotion and place dimensions are designed to be mutually supportive and internally consistent. It is critically important that any marketing program should obtain the balance of these four marketing dimensions accurately so that the value proposition to the market place is effective and clear.

 

2.     Analysis on the Marketing Mix of NIVEA

 i.     Product

The first step in formulating a successful mix is to comprehend the market. Nivea employs extensive market research to target key market segments. The market segment identified consists of groups of people with the same characteristics, from various dimensions such as age, gender, attitude, or even lifestyle. The knowledge and information from the research assists in the formulation of new products. Nivea arranges and implements its market research efforts with consumers in a number of different ways. Three strategies are applied. Firstly, the company uses focus groups to collect feedbacks from consumers directly. Secondly, the company gathers data from customers via different research techniques. Lastly, the company launched product testing activities with customers in different geographical locations.

The market research by the company discovered that younger females demand more specialized face care products primarily focusing at their own age group that can further enhance the ‘beautifying’ benefit. In contrast, the existing products for the age group are mainly providing a solution to skin problems. Thus, to fill the gap, Nivea Visage Young is a skin care range appealing at young females who do not want medicated products but instead demand a solution to beautify their normal skin. As mentioned above, the competitor products are largely medicated solutions, and this creates opportunity for Nivea to gain competitive advantage by introducing a new product range for untapped market. Nivea Visage Young delivers a unique linkage between the teenage as well as the adult market.

 

ii.     Price

Nivea Visage Young is one of the key market players in the skin care industry, and by meeting the beautifying needs of the various market segments; the company is effectively the price leader. As a price leader, the company sets the price benchmark that competitors will either follow or undercut. However in the future, Nivea needs to constantly review prices if any competitor joins the market at the ‘market growth’ stage of the product life cycle in order to ensure that the products are competitively priced.

 

iii.     Place

Nivea Visage Young is trying hard to use as many appropriate distribution channels as possible to ensure a widest reach of its products to the particular market segment. Currently, the company’s main channels are those retail outlets where customers used to visit in finding skin care products and solutions. These retail outlets include the high street shops, and large grocery chains. The rationale for employing such a distribution strategy is due to the research findings from the company, where it is discovered around 20% of the younger females purchase products for themselves from the various high street stores when shopping with friends. Apart from that, the research also discovered that the majority of purchasers are actually parents buying for their daughter. Particularly, the mothers are more likely to purchase the product from supermarkets in the midst of grocery shopping.

Nivea distributes through a variety of outlets that are cost effective, while at the similar time, able to reach the largest possible amount of consumers. In fact, the company’s distribution strategies also take into account the environmental effects due to transport. The company employs a central distribution system in UK. The company does not distribute directly to smaller retailers because the volume of products sold cannot justify the high costs to do so. Instead, the company uses wholesalers for these smaller retailers. Not only that, the company also decided not to sell directly through its corporate website as the costs of producing and distributing small orders would be too impractical.

 

iv.     Promotion

Nivea selects promotional techniques that appeals to the tastes of its target market through the range of mass media available. The company believes that one way advertising methods are less effective if compared to communicating directly to the customers. Therefore the company does not plan to use any above-the-line promotion techniques. The company arranges the promotional techniques to be consumer-led through below the line promotion. By employing various below-the-line routes, the company implements ways of communicating to teenagers and their mothers as well directly. One of the critical parts of this strategy is the distribution of product samples. These enable the prospective consumers to touch, feel, smell and test the products. These samples be available and widely distributed through the corporate website, and are also given out at Visage road shows around the country. Apart from that, Nivea Visage Young implemented an attractive online magazine, namely the FYI (Fun, Young & Independent) to increase and invoke brand awareness. The key idea delivered behind the magazine is to provide teenage females the confidence to become young women and yet to celebrate their newly discovered independence.

 

v.     Discussions on NIVEA Marketing Mix

We have discussed how the company structures its marketing mix or the four Ps of marketing in order to target the market segment effectively. Before the design and implementation of the marketing mix program, the company is successful in discovering a specialized market segment, which is largely untapped by the competitors. The competitors are largely offering medicated products, and thus, to fill the gap or demand where the young teenage females want to have a beautifying product, the company introduces the skin and beauty care (but not medicated) products to these market segments. One the market segment is identify, the company create a products to target these segment of consumers. Later, the company design and carried out mutually consistent and internally supportive marketing mix to deliver the value proposition, and products to the end users. The marketing mix is designed to position the company attractively and appeals to the young teenagers. Overall, the process of STP and the framework of marketing mix (i.e., the four Ps of marketing) are successfully implemented by the company. The company is a case study that adds to the evidences on how these theories can be applied in the real world.

 

D.    CONCLUSION

In short, we have seen how the traditional, simple but highly practical method of 4P framework is used successfully in our case study. The concepts of STP and Marketing Mix is very important in assisting managers to plan for marketing efforts to local and international market, and in fact, such a framework serves as the founding principles for development of more complex and advanced marketing strategies in the modern days. These concepts are not only theoretical popular and widely taught in business schools, but are also useful in practice, in analysis or planning successful marketing campaign or strategies for organizations.

E.     REFERENCES

“Marketing Management, Analysis, Planning and Control”, Philip Kotler – PHI.

“Marketing Management”– Stanton – John Wiley.

Kotler, P & Armstrong, G (2004), ‘Principles of Marketing’, Tenth Edition, New Jersey: Pearson Education Inc

Lauterborn, R (1990), ‘New Marketing Litany: 4P’s Passe; C-Words Take Over’, Advertising Age, Oct 1, 1990:26

Lazer, W (1971), ‘Marketing Management: A Systems Perspective’ New York:  John Wiley & Sons.

McCarthy, E J (1960), ‘Basic Marketing – A Managerial Approach’, Illinois: Irwin.

Proctor, T (2000), ‘Strategic Marketing: An Introduction’, London: Routledge.

 

(Visited 2,111 times, 1 visits today)

About the author

Related Post

Leave a comment

Your email address will not be published. Required fields are marked *