STP in Marketing: Segmentation, Targeting, Positioning

A campaign that gets clicks and no sales often failed before anyone wrote the ad. Nobody decided who it was for, which of those people mattered most, or why they should choose this over the alternative. STP is the name for making those three decisions, in that order.

What is STP in marketing?

STP stands for segmentation, targeting and positioning, the three-step model at the core of most marketing textbooks, including Kotler and Armstrong's Principles of Marketing. Segmentation splits a market into groups of buyers with similar needs. Targeting chooses which groups to serve. Positioning decides how you want those buyers to see your offer compared with the alternatives.

The order is the point. Positioning without targeting is a message addressed to nobody in particular, and targeting without segmentation is a guess.

What is segmentation?

Segmentation divides a market into groups that would respond differently to what you offer. The usual ways to cut it:

Demographic: age, income, life stage, job.
Geographic: city, region, climate, urban or rural.
Behavioural: how often they buy, what they buy now, what triggers a purchase.
Psychographic: values, attitudes, how they see themselves.
For B2B, firmographic: company size, industry, who signs the cheque.

The useful segments are the ones that need something different. "Women aged 25 to 34" is a demographic. "People who already own a coffee grinder" is a segment, because they want different beans from people who don't.

What is targeting?

Targeting is choosing the segment or segments you will lead with. Judge each one on four things: how big it is, how easily you can reach it, how well your offer fits its need, and what each customer is worth. A small business usually leads with one segment it can win, rather than spreading the budget thinly across four.

What is positioning?

Positioning is the place you want to hold in your target buyer's mind compared with the alternatives. The idea was popularised by Al Ries and Jack Trout in Positioning: The Battle for Your Mind (1981). A positioning statement makes it concrete: for [target segment], [brand] is the [category] that [benefit], because [reason to believe].

STP example: a coffee roaster

An illustration, not a client. A small coffee roaster in Ahmedabad sells beans online.

Segmentation. Its possible buyers fall into home brewers who grind their own beans, people who buy ground coffee for convenience, offices buying for staff, cafés buying wholesale, and gift buyers.
Targeting. It leads with home brewers. They buy every few weeks, care where the beans come from, gather in a few online communities that are easy to reach, and pay for freshness. Offices and cafés can come later.
Positioning. "For home brewers who grind their own, we roast single-estate Indian coffee to order and ship it the same week, so it reaches you at its freshest."

Every later decision follows from those three: what to stock, what to charge, where to sell and what to say. That is where the 4Ps take over.

Is STP still relevant?

Yes, with one honest caveat. Byron Sharp's How Brands Grow (2010) argues, from purchase data across many categories, that brands grow mainly by reaching more of all the buyers in a category, not by targeting narrowly. The two views fit together better than they first appear. STP tells you whom to design the product and the message for. Sharp warns you not to stop there when you buy media. Lead with a segment, and don't starve the brand of reach.

Questions

What is the difference between segmentation and targeting?

Segmentation describes the market: the groups that exist and how they differ. Targeting is a decision: which of those groups you will serve. You can segment a market without choosing, but you can't target well without segmenting first.

What is a positioning statement?

A one-sentence summary of how you want your target buyers to see you: who it is for, what category you compete in, the benefit you deliver and why they should believe it. It is an internal tool for keeping decisions consistent, not a tagline for the website.

What comes after STP?

The marketing mix: the product, price, place and promotion that deliver the positioning to the chosen segment. STP decides who and why; the mix decides what, how much, where and how.

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