3.7 Customers and STP Analysis

5Cs: Customers

The fifth and final part of a 5Cs analysis considers the customers that companies and brands target.Of course, customers are the most important aspect of any marketing analysis. While the 5Cs framework provides a useful and straightforward way to analyse the macro environment overall, customers are so important to any company that a full understanding of the target customer segment, their attributes and their needs, is of vital importance. Consequently, customer analysis requires a whole separate set of tools and frameworks that we generally refer to as Segmentation, Targeting and Positioning (or STP).

Key Customer Attributes

While a more in-depth analysis is needed to gain a full picture of who a brand’s customers are (and, vitally, who they are not), a business should be able to summarise its target market on several simple attributes. The important thing to remember is that the more precise the definition of the customer, the easier it will be to design a good marketing strategy specifically targeting that segment.

For consumer goods, markets can be defined by the following attributes:

Income level

Nothing is more important than income. You should define your customer target based on their annual incomes. This determines whether your brand should be low-priced or high, which media it should be promoted in, where it should be sold (distribution), and various aspects of the product itself.

High-income consumers may be happy with the same product or service as low-income customers, but as they have the ability to pay more, some brands will specifically design their offerings and marketing to target higher-income groups. Similarly, some brands will consciously try to position their brand as cheaper than rivals’ brands.

Remember that income is relative. For any given market, such as the New Zealand market for example, marketers need to know the median annual income. This determines the mid-point for the market. Lower-income consumers will earn less than this, and higher-income consumers will earn more. Stats NZ release regular updates to median income levels. For example, in June 2023, the median income from wages and salaries for New Zealand was $66,196 (Stats NZ, 2023).

Demographic characteristics

You can define your market in broad terms by the following characteristics:

• Age (NB: Age should be defined as narrowly as possible. A market that targets people aged 10-60 can probably be split into multiple markets)
• Gender
• Location
• Household make-up (age of household head, number of people, number of children, life stage, and so on)

Other Socio-economic factors

Other than income, markets can be defined by the type of work they do and, in some cases, their consumption behaviour. Some households spend more or less on some products (e.g. alcohol or meat), while others are less so. Some buy expensive versions of products (e.g. wines), while others buy only cheaper options. This, again, often relates to income.

Socio-Cultural & Behavioural Factors

Socio-cultural factors relate to culture, interests, beliefs, background and behaviour. Religion, for example, only relates to certain products, but for those products, it can be very important. Anyone can buy and consume products that are certified as halal, but Muslims would not buy and consume any animal products that are not certified as halal. There are travel agencies, for example, that work to ensure that travellers can have an entirely halal experience when travelling (see Have Halal will Travel).

Other interests, hobbies, beliefs and preferences could all relate to the customer’s behaviour.