Segmentation, Targeting & Positioning (STP) in marketing: Explained with Examples

Segmentation, Targeting, and Positioning (STP) is a fundamental approach marketers use to analyze and plan the strategic positioning of their products or services. Let’s break down each of these concepts:

Segmentation is the process of dividing a broad market into distinct consumer groups with everyday needs, preferences, or characteristics. Segments can be defined in many ways, such as demographic (age, gender, income), geographic (location, climate), psychographic (lifestyle, values), and behavioral (usage rate, loyalty) factors.
Targeting: Aftermarket segments are identified, marketers must decide which segments to focus on. This decision depends on factors such as the segment’s profitability, the company’s ability to serve the segment effectively, and how competitive the segment is.
Positioning: Once the target segments are selected, the company must decide how to position its products or services in the market. Positioning involves developing a marketing mix that will appeal to the target market. It’s about creating a unique, clear, and desirable place for the product in the minds of target customers relative to competing products.

Let’s understand Segmentation, Targeting, and Positioning (STP) in Marketing in detail

Segmentation

Demographic Segmentation: This is perhaps the most common form of market segmentation, where the market is divided into groups based on variables such as age, gender, income, occupation, education, religion, race, and nationality. For example, a clothing brand might target different age groups with different styles and designs.
Geographic Segmentation: This method divides customers into segments based on their physical location. It could be as broad as a country or region or as specific as a city or neighborhood. A company might market winter clothing in colder climates and summer clothing in warmer ones, for example.
Psychographic Segmentation: This segmentation is based on lifestyle, personality traits, attitudes, values, and interests. For example, a travel company might market adventure packages to thrill-seekers and relaxation packages to those seeking tranquility.
Behavioral Segmentation: This divides customers based on their knowledge of, use of, or response to a product. It could be based on customer loyalty, purchase frequency, readiness to buy, benefits sought, usage rate, etc. For instance, a software company may offer casual versus power users different packages.
Technographic Segmentation: This relatively new form of segmentation, enabled by the rise of technology, categorizes customers based on their relationship with technology – their use, knowledge, and ownership of different technologies. For example, a tech company might target early adopters with its cutting-edge products.

The ultimate aim of segmentation is to identify high-yield segments – those segments that are likely to be the most profitable or have growth potential – so that these can be selected for special attention. Although several factors may be employed in the segmentation process, it’s important to ensure that the segments created are measurable, accessible, substantial, differentiable, and actionable. This is known as the criteria for effective segmentation.

Example of Segmentation

Let’s imagine that we have a company that produces fitness equipment – treadmills, stationary bikes, weights, and so on.

Demographic Segmentation: The company might start by looking at demographic information. They could segment the market by age and income, for instance. Perhaps their products are particularly popular with people aged 25-45 with a higher-than-average income level. This makes sense because fitness equipment can be quite expensive and is often purchased by people concerned about their health, which tends to correlate with age and income.
Geographic Segmentation: Next, the company could look at geographic data. They might discover that they sell more products in urban areas than in rural ones. This could be because people in urban areas have more disposable income and less access to outdoor activities.
Psychographic Segmentation: The company could then segment by lifestyle and attitudes. They might find that their products are popular with people who value a healthy lifestyle and enjoy the convenience of working out at home. They may also find that their customers are motivated by goals like weight loss, muscle gain, or maintaining an active lifestyle.
Behavioral Segmentation: The company could segment the market based on behavioral factors. They might find that their most loyal customers are those who initially bought a large piece of equipment, like a treadmill, and then returned to buy smaller items, like weights or yoga mats. They could also look at usage rates and find that customers using their equipment daily are likelier to recommend their products to others.

By conducting this segmentation, the fitness equipment company now has a much clearer picture of their ideal customer: a high-income, 25-45 year old, urban-living individual who values a healthy lifestyle, uses the equipment daily, and is motivated by fitness goals. They can now tailor their marketing messages to appeal to this segment, making their marketing efforts more effective and efficient.

Targeting

Targeting is the second step in the STP (Segmentation, Targeting, and Positioning) process. After the market has been segmented into distinct groups, the next step is to select which segments to target with your product or service. The process involves evaluating the attractiveness of each segment and deciding which ones to focus your marketing efforts on.

There are several targeting strategies that a business can adopt:

Undifferentiated (Mass) Marketing: In this strategy, the company ignores segment differences and targets the whole market with one offer. This approach focuses on what is common in the needs of consumers rather than on what is different.
Differentiated (Segmented) Marketing: The company targets several market segments and designs separate offers for each. For example, a car company might produce different models for different income levels.
Concentrated (Niche) Marketing: Here, the company targets a large share of one or a few smaller segments or niches. Businesses with limited resources often choose this strategy as it allows them to focus their efforts and specialize.
Micro-marketing (Local or Individual Marketing): In this strategy, the company tailors products and marketing programs to suit the tastes of specific individuals and locations. This includes local marketing (tailoring to specific cities or neighborhoods) and individual marketing (tailoring to individual people).

The choice of which strategy to adopt depends on company resources, product variability, product life cycle stage, market variability, and competitors’ marketing strategies.

The targeting step aims to identify the segments most likely to respond to the company’s offerings and where the company’s resources can be most effectively used. It’s about finding the best match between your products or services and the customers most likely to need or want them.

Explain of Targeting

Let’s continue with the example of the fitness equipment company we used while explaining segmentation.

After the company has segmented the market, it has several distinct groups to consider. Let’s assume they identified these four main segments:

Young adults (18-24) who are students or just starting their careers. They have lower incomes and limited space for large fitness equipment.
Adults (25-45) with higher incomes who value a healthy lifestyle and enjoy the convenience of working out at home.
Older adults (46-64) are interested in fitness to maintain health and mobility but may have specific needs or limitations.
Gyms and fitness centers that require commercial-grade equipment.

Now the company needs to decide which of these segments to target. They consider the attractiveness of each segment based on several factors, including size, profitability, accessibility, and the company’s ability to serve the segment effectively.

The young adult group is large, but they have limited income and space, which might not make them the best target for high-end fitness equipment.
The adults with higher incomes who value a healthy lifestyle make an attractive segment because they have the financial resources and motivation to buy fitness equipment.
Older adults also could be a viable segment. However, catering to them might require developing or modifying products to meet their specific needs, which could be costly.
Gyms and fitness centers represent a lucrative segment, but they often have specific needs and high standards for durability. Competing in this space might require a considerable investment.

After evaluating these options, the company might target the second segment (adults 25-45 with higher incomes who value a healthy lifestyle) because it has the financial resources, motivation, and space for its products. They might also target the fourth segment (gyms and fitness centers), but they recognize that they must invest in developing more durable, commercial-grade equipment.

By choosing specific segments to target, the company can focus its marketing efforts on the consumers who are most likely to purchase their products, leading to higher sales and better returns on their marketing investment.

Positioning

Positioning is the final step in the STP (Segmentation, Targeting, and Positioning) process. It involves creating a unique, consistent, and recognized customer perception of a brand or a product in the target market. It’s about crafting the brand’s image so the target customers can distinguish it from the competitors’ offerings.

The main goal of positioning is to create a unique impression in the customer’s mind so that the customer associates something desirable and different with your brand that they do not associate with other brands.

There are several ways a brand or product can be positioned:

By Product Attributes: A product can be positioned based on its attributes or qualities. For example, a car might be the most fuel-efficient car in the market.
By Benefits: The product can also be positioned based on the benefits it offers to customers. For instance, a shampoo might be positioned as the one that makes your hair the shiniest.
By Use or Application: A product can be positioned based on its use. For instance, a coffee brand might be the perfect start to your day.
By User: Positioning is done by associating a product with a user or class of users. For instance, a clothing brand might position itself as the brand for the adventurous and outdoorsy.
By Competitor: Positioning can also be done relative to the competition. A brand might position itself as superior to competitors on certain key aspects. For example, a smartphone might be positioned as having a better camera than its competitors.
By Price or Quality: Lastly, products can be positioned based on price or quality. A brand might position itself as an affordable or luxury, high-quality option.

To establish effective positioning, a company often uses a positioning statement or a unique selling proposition (USP) to communicate the unique benefits or characteristics of the product, service, or brand to the targeted segment. It’s vital that this positioning is consistent across all marketing efforts and touchpoints to create a coherent and recognizable brand image.

Explain of Positioning

Let’s continue with our hypothetical fitness equipment company as an example for positioning.

Let’s say the company has decided to target two segments: adults aged 25-45 with higher incomes who value a healthy lifestyle and gyms/fitness centers that need durable, commercial-grade equipment.

Now, the company needs to position its products to appeal to these segments and differentiate them from competitors.

For the individual consumer market (adults aged 25-45): The company might position its fitness equipment as a “home luxury fitness” brand. Their marketing messages could focus on their products’ high quality, durability, and advanced features. They could emphasize how their equipment supports a healthy lifestyle without having to leave home and how investing in their products is an investment in long-term health and well-being. They might also highlight their sleek design that fits well in a modern, upscale home.
For the commercial market (gyms and fitness centers): The company could position its products as “commercial-grade fitness equipment that withstands the test of time.” Their messaging could emphasize their products’ durability, reliability, and cost-effectiveness over time. They could also highlight features that might be important to this segment, such as easy maintenance, warranty, and excellent customer service.

In both cases, the company must ensure that its positioning is reflected in every aspect of its marketing mix (product, price, place, and promotion) and is consistent across all marketing channels. This helps to build a strong, recognizable brand image that resonates with their target customers and sets them apart from their competitors.

Remember, the goal of positioning is not just to differentiate the product but to make it stand out as superior in certain meaningful ways in the minds of the target consumers.