The STP process—Segmentation, Targeting, Positioning—helps businesses define and reach the right audience with the most suitable marketing strategies.
What is STP?
STP stands for Segmentation, Targeting, and Positioning. It is a structured approach businesses use to create focused and effective marketing strategies. By breaking down a market into distinct groups (Segmentation), choosing specific segments to serve (Targeting), and determining how to appeal to them (Positioning), businesses can deliver more relevant marketing messages, design better products, and increase their competitiveness.
This approach shifts the marketing focus from product-oriented thinking to customer-oriented thinking, which is essential in a competitive and consumer-driven marketplace.
Components of the STP Process
Segmentation – Dividing the overall market into smaller groups based on shared characteristics such as age, behaviour, income, or location.
Targeting – Evaluating the attractiveness of each segment and deciding which segment(s) the business will focus on.
Positioning – Developing a unique and appealing marketing mix to establish a product’s image and identity in the minds of consumers within the selected segment(s).
These steps are interconnected and must be aligned with the broader marketing strategy and organisational goals.
How STP Helps Businesses Understand and Reach Customers
Adopting the STP approach enables businesses to develop a deep and structured understanding of their customers and to serve them more effectively. The benefits span across strategic planning, operational efficiency, and customer relationship management.
Improved Customer Understanding
By segmenting the market, businesses can identify the distinct needs, preferences, and characteristics of different groups of customers.
This allows for personalised communication, product adaptation, and better forecasting of customer behaviour.
Businesses are better positioned to anticipate demand and innovate based on relevant insights.
For example, a company selling athletic shoes might find that younger customers value style, while older customers prioritise support and comfort. Segmenting the market helps the business to address both needs effectively through different products or messages.
Enhanced Marketing Efficiency
STP ensures that resources are invested in the most promising and relevant areas of the market.
Marketing campaigns can be tailored specifically to each segment, improving engagement and response rates.
This focused approach minimises waste and increases return on investment (ROI).
For instance, a skincare brand that segments its audience by age might run separate campaigns for teenagers (focused on acne treatment) and for older adults (focused on anti-ageing), leading to more effective communication.
Clearer Brand Differentiation
Positioning allows businesses to define a clear image of their brand in the minds of consumers.
By highlighting key differences from competitors, businesses can emphasise their strengths and increase customer loyalty.
A strong positioning strategy creates recognition and preference, which is particularly important in crowded markets.
Stronger Customer Relationships
A company that addresses customer needs directly builds trust and satisfaction.
Customers are more likely to feel that the product or service is designed for them, increasing loyalty and repeat purchases.
STP facilitates the use of personalised promotions, messaging, and service, strengthening long-term customer relationships.
Aligning STP with Marketing Strategy and Objectives
STP decisions must align closely with a business’s overall marketing strategy to ensure that all marketing activities support the same strategic goals.
Strategic Alignment with Objectives
The business must ensure that STP supports its corporate aims, such as entering a new market, launching a product, or increasing customer retention.
For example, if a business’s objective is to grow in an emerging market, it must segment that market effectively and position itself uniquely to appeal to local needs.
STP must complement and reinforce the 4 Ps of the marketing mix—product, price, place, and promotion.
Internal Capabilities and Resources
The business must assess whether it has the capacity to serve the chosen target segment effectively.
For example, a firm may identify a profitable niche but lack the supply chain infrastructure to deliver products to that region. In such cases, STP strategies must be adjusted to fit what the company can realistically achieve.
Responding to Market Conditions and Competition
Businesses must also consider the competitive landscape when choosing target segments and positioning strategies.
If a competitor already dominates a segment, a business may either position itself differently within the same segment or choose another segment where competition is less intense.
STP strategies should help the firm achieve a competitive advantage through clear differentiation or superior customer service.
Maintaining Long-Term Consistency
Positioning must be consistent with the brand identity and sustainable over time.
Sudden or frequent changes in positioning can confuse customers and damage brand equity.
However, companies must also remain flexible and open to repositioning when market dynamics or customer needs change significantly.
Step-by-Step Implementation of the STP Process
Successfully applying STP requires following a clear, methodical process. Below is a step-by-step guide to how businesses implement the model:
Step 1: Segment the Market (Segmentation)
Segmentation is the foundation of STP. It involves analysing the market to identify groups of potential customers with similar needs, characteristics, or behaviours.
To segment a market effectively, businesses typically:
Gather data from surveys, sales reports, social media, and market research.
Identify shared traits among consumers, such as age group, location, spending habits, or values.
Group these consumers into distinct market segments that are:
Measurable – Can the size and buying power of the segment be quantified?
Accessible – Can the segment be effectively reached through marketing?
Substantial – Is the segment large and profitable enough to justify investment?
Differentiable – Is the segment truly distinct and likely to respond differently to marketing?
Actionable – Can effective strategies be designed to serve this segment?
Examples of segmentation bases include:
Demographic (e.g. age, gender)
Geographic (e.g. country, climate)
Behavioural (e.g. brand loyalty)
Psychographic (e.g. lifestyle, values)
These segmentation methods are explored in detail in section 3.3.2.
Step 2: Evaluate and Select Target Market(s) (Targeting)
Once the market has been segmented, the business evaluates each segment to decide which one(s) it will serve.
The key is to identify the most attractive and suitable segments for the business. Evaluation criteria typically include:
Size and Growth Potential – Is the segment large and expanding?
Profitability – What is the potential revenue versus cost of serving this segment?
Accessibility – Can the segment be reached through existing distribution and promotional channels?
Fit with Brand Identity – Does the segment align with the business’s mission, vision, and values?
Level of Competition – Are competitors already serving this segment, and if so, how strong are they?
Once segments are evaluated, businesses choose one of the following targeting strategies:
Undifferentiated (Mass) Marketing – Targeting the entire market with one offer.
Differentiated Marketing – Targeting several segments with different offers for each.
Concentrated (Niche) Marketing – Targeting one or a few segments with a highly tailored offer.
Micromarketing – Targeting individuals or small groups with highly personalised messages (e.g. through email marketing or social media ads).
The choice of strategy depends on the business's goals, resources, and product type.
Step 3: Decide on Product Positioning (Positioning)
Positioning is the process of creating a specific image of the product in the customer’s mind, so that it stands out from competitors and appeals to the chosen segment.
This involves identifying:
The core benefit that the product offers the target customer.
The unique selling proposition (USP)—what makes it different or better.
The values and messages to be communicated through marketing.
A good positioning strategy should be:
Clear – Easy for the customer to understand.
Distinctive – Different from competitors.
Relevant – Meets the needs of the target segment.
Sustainable – Can be maintained over time.
Examples of positioning include:
A luxury watch brand positioning itself as a symbol of prestige.
A discount supermarket positioning itself on price and value.
The positioning strategy should then be communicated consistently across all marketing activities.
Step 4: Align the Marketing Mix with Positioning
Once the positioning is defined, the business must ensure that all elements of the marketing mix (4 Ps) support this strategy:
Product – The features, quality, design, and packaging must align with the chosen position.
Price – Pricing must reflect the value proposition. A premium product should not be priced cheaply.
Place – The distribution strategy should ensure that the product is available where the target segment shops.
Promotion – Advertising and sales promotions must communicate the right message, using media that reach the target segment.
Consistency across all aspects of the marketing mix reinforces the intended positioning.
Step 5: Monitor, Evaluate, and Adjust
Market conditions, customer preferences, and competitor strategies can change. Therefore, the STP strategy must be monitored regularly.
This includes:
Tracking key performance indicators (KPIs), such as sales volume, customer satisfaction, and market share.
Gathering feedback from customers and frontline employees.
Analysing whether the positioning still resonates with the target segment.
Making adjustments to segmentation criteria, target markets, or positioning strategies if necessary.
A flexible approach ensures that businesses remain competitive and responsive to changes in the market.
FAQ
Some businesses avoid the full STP process due to limited resources, time constraints, or the nature of their product or market. For instance, companies selling basic commodities like salt or flour may see little value in segmenting or positioning, as demand is universal and undifferentiated. Small firms may lack the data or marketing budget to implement a detailed STP strategy effectively. In fast-changing markets, the time taken to analyse segments may cause businesses to miss opportunities, making reactive strategies more appealing.
In B2B (business-to-business) markets, STP tends to be more focused on organisational characteristics such as company size, industry type, purchasing volume, or buyer behaviour. The segmentation is often narrower but more complex, involving fewer customers with higher transaction values. In contrast, B2C (business-to-consumer) markets segment based on personal traits like age, lifestyle, or income. Positioning in B2B markets usually focuses on efficiency, reliability, or cost savings, whereas B2C positioning often appeals to emotions, lifestyle, or status.
Common positioning mistakes include lack of clarity, overcomplicating the message, and failing to differentiate. Some businesses try to appeal to too many segments at once, diluting their brand identity. Others base their positioning on internal beliefs rather than customer perceptions, leading to mismatched messaging. Ignoring competitor positioning is another error, as it may result in overlapping or indistinct brand identities. Finally, inconsistency across marketing channels can confuse customers and weaken the intended market image.
Yes, STP is highly relevant for non-profits and public sector services. These organisations often serve diverse user groups and need to tailor their outreach to specific audiences. For example, a public health campaign might segment by age or health status, target high-risk groups, and position its message to emphasise urgency or relevance. Even without a profit motive, STP helps ensure that resources are allocated effectively, the intended users are reached, and messages resonate with the target audience.
Digital marketing enhances STP by providing detailed data and highly targeted tools. Online platforms offer insights into customer behaviour, preferences, and demographics in real time, improving segmentation accuracy. Social media and digital ads allow for precise targeting, even down to individual user profiles (micromarketing). Positioning messages can be tailored for different segments and tested through A/B campaigns. Overall, digital tools make the STP process more dynamic, measurable, and adaptable, especially for businesses seeking cost-effective and scalable marketing strategies.
Practice Questions
Explain how the STP process can help a business improve its marketing effectiveness. (6 marks)
The STP process helps a business improve marketing effectiveness by enabling it to focus on specific customer groups. Through segmentation, the firm identifies distinct needs and preferences within the market. Targeting allows the business to select the most profitable or suitable segments, ensuring resources are used efficiently. Positioning ensures the product is perceived in a way that resonates with the target audience. This focused approach increases the relevance of marketing messages, enhances customer satisfaction, and reduces wasted expenditure. As a result, the business is more likely to gain competitive advantage and improve overall marketing performance.
Analyse the importance of aligning STP decisions with a business’s overall marketing objectives. (9 marks)
Aligning STP decisions with overall marketing objectives is essential to ensure strategic coherence. For example, if a business’s objective is market growth, segmentation and targeting must identify expanding or underserved segments. Positioning must reinforce the brand identity and support long-term customer loyalty. Without alignment, the business may attract the wrong customers or create confusion in the market. A consistent approach ensures that the marketing mix reinforces the positioning, resulting in more effective promotions, appropriate pricing, and product features that meet customer expectations. Ultimately, it helps the business achieve its goals more efficiently and build a stronger market presence.
