Look, everyone throws around these words: Segmentation, Targeting, Positioning. You hear them all the time in marketing meetings, business courses, and strategy sessions. But honestly, if you can’t tell where one step ends and the next one begins, there’s going to be wasted money on marketing that hits the wrong people.
Or worse, hits nobody at all.
It’s not just three separate ideas that you can pick and choose from; it’s actually a necessary, step-by-step process. Think of it as a funnel, maybe? You can’t target anyone until you’ve grouped them first, and you can’t position your product until you know exactly who you’re talking to. Simple, right? But people mess it up constantly. Businesses jump straight to positioning without even understanding their market segments, and then they wonder why their campaigns fall flat.
The thing is, these three steps, often called the STP framework, build on each other. They’re sequential. Respecting that order is crucial if the marketing is going to actually work.
What is the Difference between Market Segmentation Targeting and Positioning
Let’s break down this STP framework in detail, understanding what each component means and how to apply it effectively.
What is Market Segmentation?
Market segmentation is the process of dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics. It’s essentially the analytical foundation of modern marketing strategy.
At its core, segmentation acknowledges a fundamental truth: not all customers are the same. A market comprises individuals with different needs, preferences, behaviors, and characteristics. Trying to serve everyone with one generic approach rarely works well. Segmentation allows businesses to organize this complexity into manageable, understandable groups.
Why Market Segmentation Matters?
The primary purpose of segmentation is to identify groups of customers that have similar needs, buying behaviors, or characteristics. Instead of viewing the market as one massive, undifferentiated crowd, segmentation reveals distinct pockets of consumers who think alike, respond to similar messages, and have comparable pain points.
This matters for several reasons:
Resource Efficiency – Marketing budgets are finite. Segmentation helps allocate resources more effectively by understanding where different types of customers exist and what they need.
Better Product Development – Understanding distinct segments allows companies to create products or variations that truly meet specific needs rather than creating generic offerings.
More Effective Communication – Different groups respond to different messages. Segmentation enables tailored communication that resonates more deeply than broad, generic advertising.
Competitive Advantage – Companies that understand their market segments better than competitors can identify underserved niches and exploit opportunities others miss.
Types of Market Segmentation
There are several fundamental approaches to segmenting markets, and most companies use a combination of these methods:
Demographic Segmentation
This is probably the most common and straightforward segmentation approach. Demographic segmentation divides the market based on variables like:
- Age
- Gender
- Income level
- Education
- Occupation
- Family size and life stage
- Religion
- Ethnicity
Why is demographic segmentation so popular? Primarily because demographic data is relatively easy to obtain and measure. Census data, survey information, and customer databases readily provide these insights.
For example, a luxury car brand naturally segments by income brackets because not everyone can afford an $80,000 vehicle. Similarly, life insurance companies heavily segment by age because needs and risk profiles change dramatically across different age groups.
The limitation, however, is that demographic characteristics don’t always predict behavior. Two people with identical demographics might have completely different purchasing patterns and preferences.
Geographic Segmentation
Geographic segmentation divides the market based on location. This can include:
- Countries or regions
- States or provinces
- Cities versus rural areas
- Climate zones
- Urban, suburban, or rural classifications
- Population density
Location affects consumer needs and preferences more than many businesses realize. A company selling snow removal equipment obviously has little market in tropical regions. Fast food chains adjust their menus based on regional taste preferences. What’s popular in Texas might not work in Vermont.
Cultural differences between regions can be substantial. Marketing approaches that resonate in urban New York might completely fall flat in small Midwestern towns. International businesses particularly need geographic segmentation because consumer behavior, regulations, and cultural norms vary dramatically across countries.
Psychographic Segmentation
Psychographic segmentation gets into the psychological aspects of consumer behavior. This includes:
- Lifestyle
- Values and beliefs
- Personality traits
- Interests and hobbies
- Attitudes
- Social class
- Life priorities
This type of segmentation is harder to measure than demographics because it deals with less tangible factors. However, it can be incredibly powerful because it reveals why people make certain choices.
Consider two individuals: both are 35-year-old professionals earning $75,000 annually. Demographically identical. But one values outdoor adventures, sustainability, and experiences over possessions. The other prioritizes luxury goods, status symbols, and material comfort. These two people will respond to completely different marketing messages and prefer entirely different products, despite their demographic similarities.
Brands like Patagonia excel at psychographic segmentation, targeting consumers who value environmental responsibility and outdoor lifestyles regardless of their specific age or income level.
Behavioral Segmentation
Behavioral segmentation divides consumers based on their actual behavior and interactions with products or brands. Key behavioral variables include:
- Purchase frequency
- Usage rate (heavy, medium, light, or non-users)
- Brand loyalty status
- Benefits sought
- Buyer readiness stage
- Occasions (when they buy or use the product)
- User status (first-time, regular, or lapsed)
This type of segmentation is particularly valuable because it’s based on what people actually do, not just who they are or what they say they prefer.
For instance, airlines use behavioral segmentation extensively. Frequent flyers get grouped into loyalty programs with different tiers based on how much they fly. The needs of a business traveler flying weekly differ dramatically from a family taking one vacation flight per year.
E-commerce companies segment customers based on browsing behavior, cart abandonment patterns, and purchase history to create targeted remarketing campaigns.
Creating Meaningful Market Segments
Not all segmentation attempts produce useful results. For segments to be truly valuable, they should meet certain criteria:
Measurable – The size, purchasing power, and characteristics of the segment must be quantifiable. A segment defined by vague criteria that can’t be measured isn’t actionable.
Substantial – The segment needs to be large and profitable enough to be worth pursuing. A perfectly defined segment of only 50 people nationally probably isn’t viable for most businesses.
Accessible – There must be ways to effectively reach and serve the segment. If a perfect segment exists but there’s no practical way to communicate with them or deliver products to them, it’s not useful.
Differentiable – Segments should respond differently to different marketing mixes. If two segments respond identically to the same approach, they’re really just one segment.
Actionable – The company must be able to design effective programs to attract and serve the segment. Understanding a segment is pointless if the business lacks the capability to act on that understanding.
A Practical Example of Market Segmentation
Consider the coffee market. At first glance, it might seem like one market: people who drink coffee. But proper segmentation reveals tremendous diversity.
The Convenience Seeker – Busy commuters who need coffee cheaply and quickly. They grab it on the way to work, probably don’t even notice the taste half the time. They want convenience above everything else. They’re sensitive to price, and location matters enormously; an extra two-minute detour is a deal-breaker.
The Experience Enthusiast – Folks who spend half an hour on a fancy $7 latte, sitting in a cozy café with their laptop. They care about the experience, the ambiance, maybe the Instagram-ability of their drink. Price is less important than atmosphere and quality. They’re often working remotely or meeting friends.
The Home Brewing Aficionado – Enthusiasts who buy whole beans and own three different brewing methods. They care deeply about origin, roasting techniques, and flavor profiles. They’ll spend significantly on quality beans and equipment. They’re knowledgeable and somewhat skeptical of commercial coffee shops.
The Office Coffee Drinker – People who just need the breakroom coffee to be drinkable. They’re not particularly passionate about coffee; it’s just fuel to get through the workday. They’re not making the purchasing decision; their employer is.
The Health-Conscious Consumer – Looking for organic, fair-trade options. They care about sustainability, ethical sourcing, and health benefits. They might prefer less processed options or alternatives like matcha.
These are fundamentally different segments with different needs, different price sensitivities, and different preferred channels, and they respond to completely different marketing messages. A company trying to appeal to all of them with one approach would satisfy none of them particularly well.
Common Mistakes in Market Segmentation
Over-segmentation – Creating so many tiny segments that it becomes impossible to effectively market to them all. The segmentation becomes more complex than helpful.
Irrelevant segmentation criteria – Segmenting based on characteristics that don’t actually affect purchasing behavior. For example, segmenting by hair color probably doesn’t matter for most products.
Static segmentation – Treating segments as permanent when markets actually evolve. Segments that made sense five years ago might be irrelevant today. Regular re-evaluation is necessary.
Ignoring segment overlap – Assuming segments are completely distinct when actually customers might belong to multiple segments or move between them depending on context or occasion.
What is Market Targeting?
Market targeting (or target marketing) is the process of evaluating market segments and deciding which one or ones to focus on. After segmentation reveals the various groups that exist in the market, targeting involves making strategic choices about where to compete.
This is where strategy becomes concrete. Segmentation is analysis; targeting is decision-making. It’s about committing resources, time, and money to specific customer groups.
Why Targeting is Critical?
Without targeting, businesses fall into the trap of trying to be everything to everyone. This rarely works well, especially for companies with limited resources. Targeting forces clarity and focus.
The fundamental question targeting answers is: “Given our resources, capabilities, and goals, which customer groups should we prioritize?”
This matters because:
Resources are Limited – No company can effectively serve every possible customer. Choices must be made about where to focus effort and investment.
Competitive Positioning – Trying to compete everywhere often means winning nowhere. Focused targeting allows companies to dominate specific segments rather than being mediocre across many.
Message Effectiveness – Marketing messages crafted for a specific target audience are far more effective than generic messages aimed at everyone.
Product Development – Clear targeting guides product features, pricing, and service levels. Without targeting, product decisions become unfocused and try to accommodate too many conflicting needs.
Evaluating Market Segments for Targeting
Before selecting target segments, businesses need to evaluate each segment against several criteria:
Segment Attractiveness
Size and Growth – Is the segment large enough to be profitable? Is it growing, stable, or declining? A segment might be huge currently but shrinking rapidly, making it less attractive for long-term investment. Conversely, a smaller segment that’s experiencing rapid growth might be very attractive.
Profitability Potential – Beyond size, what are the profit margins possible in this segment? Some large segments have razor-thin margins due to intense price competition, while smaller segments might offer much healthier profitability.
Competitive Intensity – How many competitors are already fighting for this segment? Highly competitive segments require significant resources to break into and maintain position. Sometimes a less competitive segment, even if smaller, offers better opportunities.
Segment Structure – Are there powerful buyers or suppliers that could squeeze margins? Is the segment vulnerable to substitutes? These structural factors affect long-term attractiveness.
Company Fit and Capability
Alignment with Objectives – Does pursuing this segment align with the company’s overall goals and mission? Sometimes attractive segments exist that just don’t fit with where the company wants to go strategically.
Product/Service Fit – How well does the company’s offering meet this segment’s needs? A segment might be attractive in general, but if the product doesn’t truly solve their problems or meet their needs, it’s not the right target.
Resource Requirements – Can the company afford to serve this segment effectively? Different segments have different service expectations and cost structures. Enterprise-level B2B customers expect extensive support, long sales cycles, and customization. Startups with limited resources might not be able to serve them well, even if the segment is attractive.
Capabilities and Competencies – Does the company have the skills, knowledge, and capabilities needed to compete effectively in this segment? Targeting a segment that requires expertise the company lacks is risky unless those capabilities can be developed or acquired.
Distribution Access – Can the company reach this segment? Are the necessary distribution channels available and accessible? A great segment does no good if there’s no practical way to get the product to them.
Strategic Considerations
Defensibility – If the company invests in this segment and succeeds, can that position be defended? Or will success simply attract competitors who can quickly replicate the approach?
Future Potential – Where is this segment heading? What trends are affecting it? Sometimes, current size matters less than future trajectory.
Risk – What are the risks associated with focusing on this segment? Is it vulnerable to economic downturns? Regulatory changes? Technological disruption?
Target Marketing Strategies
Once segments have been evaluated, companies must choose their overall targeting approach. There are several strategic options:
Undifferentiated Marketing (Mass Marketing)
The undifferentiated marketing approach ignores segment differences and goes after the entire market with one offer and one marketing mix. The company focuses on what’s common in consumer needs rather than what’s different.
This strategy made more sense in earlier eras when markets were less fragmented and mass media dominated. Coca-Cola historically used this approach, creating one product marketed to everyone.
Advantages:
- Cost-efficient due to economies of scale
- Simpler to execute one product, one message
- Maximum potential market size
Disadvantages:
- Difficult to satisfy diverse needs with one offering
- Vulnerable to competitors who target specific segments better
- Increasingly impractical in fragmented modern markets
- Hard to create distinctive positioning
This approach now works mainly for products with truly universal appeal and companies with massive resources to achieve broad reach.
Differentiated Marketing (Multi-Segment Marketing)
Unlike undifferentiated marketing, the differentiated strategy targets several different segments with separate offers and marketing mixes for each. The company adapts its approach to match different segment needs.
This is what most large companies do today. Automobile manufacturers offer different models targeting different segments: economy cars for budget-conscious buyers, SUVs for families, luxury sedans for affluent consumers, and sports cars for performance enthusiasts. Each has different features, pricing, and marketing.
Advantages:
- Better meets diverse customer needs
- Can capture larger total market share across segments
- Reduces risk by not depending on one segment
- Creates multiple revenue streams
Disadvantages:
- Higher costs due to product modification and marketing variations
- More complex to manage multiple strategies
- Risk of cannibalization if segments aren’t truly distinct
- Can dilute brand identity if not managed carefully
Hotels exemplify this well. Marriott International operates multiple brands targeting different segments: Ritz-Carlton for luxury travelers, Courtyard for business travelers, Residence Inn for extended stays, Fairfield Inn for budget-conscious customers. Each brand has distinct positioning, pricing, and service levels.
Concentrated Marketing (Niche Marketing)
This strategy focuses on one or a few segments, becoming highly specialized. The company pursues a large share of a smaller segment rather than a small share of a large market.
This is often the smartest approach for smaller companies or those with limited resources. Rather than spreading efforts thin across many segments, all resources focus on deeply understanding and serving one segment exceptionally well.
Advantages:
- Strong position in the chosen segment
- Deep understanding of segment needs
- More efficient marketing-focused message to a defined audience
- Often higher margins due to specialization
- Practical for companies with limited resources
Disadvantages:
- Higher risk is dependent on one segment’s success
- Vulnerable if the segment declines or preferences shift
- Limited growth potential unless expanding to new segments
- Can be difficult to pivot if the strategy doesn’t work
Rolex exemplifies concentrated marketing. They focus exclusively on the luxury segment, making no attempt to sell affordable watches. This focus has made them dominant in that segment with extremely strong brand positioning.
Tesla initially used concentrated marketing, focusing entirely on environmentally conscious, tech-savvy, affluent consumers. Only after establishing strong positioning did they begin expanding to broader segments.
Micromarketing (Local or Individual Marketing)
Micromarketing tailors products and marketing programs to suit very specific individuals or local customer groups. This can be divided into:
Local Marketing – Adapting to the needs of specific geographic areas. Retailers might vary inventory based on neighborhood demographics. Restaurants adjust menus to local tastes.
Individual Marketing – Customizing for individual customers. This is increasingly feasible with digital technology and data analytics. Amazon’s personalized recommendations, Netflix’s customized content suggestions, and Spotify’s individual playlists are all examples.
Advantages:
- Maximum relevance to customer needs
- Can command premium prices
- Strong customer relationships
- Competitive differentiation
Disadvantages:
- Expensive and complex to execute
- Reduces economies of scale
- Requires sophisticated data and technology
- Can raise privacy concerns
This approach has become more practical with digital marketing capabilities, but it’s still resource-intensive and not suitable for all business models.
Making the Targeting Decision
The targeting decision is fundamentally strategic and should consider:
Current Position – Where is the company now? Startups likely need concentrated marketing to establish a foothold. Established companies with resources might pursue differentiated strategies.
Competitive Landscape – Where are competitors focused? Sometimes the best opportunities are in segments competitors are ignoring.
Company Resources – What can realistically be executed well? Ambition must be tempered by capability.
Product Nature – Some products naturally lend themselves to certain strategies. Highly specialized products suit concentrated marketing. Products with broad appeal might support differentiated or undifferentiated approaches.
Market Variability – How different are customer needs? Highly diverse needs require differentiated approaches. Relatively homogeneous needs might allow undifferentiated strategies.
Targeting Example: The Coffee Business
Going back to the coffee market example, after identifying those five distinct segments, a targeting decision must be made.
Option 1: Target Convenience Seekers
Why?
This segment is growing as more people return to office work and commuting. There’s competition, but differentiation is possible through strategic location and speed. Resources are modest, so focusing on one segment makes sense. The business can establish small-format locations at transit hubs with streamlined operations.
Option 2: Target Experience Enthusiasts
Why?
The owner has deep coffee knowledge and relationships with specialty roasters. This segment values quality over price, offering higher margins. Competition exists, but differentiation through a unique atmosphere and superior product quality is achievable. Requires fewer locations but more investment per location.
Option 3: Target Home Brewing Aficionados
Why?
This could be approached through an online retail model selling specialty beans and equipment. Lower overhead than physical locations. The segment is passionate and willing to pay premiums for quality. Requires expertise in sourcing and curation.
Each choice leads to completely different business models, locations, pricing, marketing, and operational requirements. That’s why the targeting decision is so critical; it shapes everything that follows.
What is Market Positioning?
Market positioning is the process of establishing the image or identity of a brand or product so that consumers perceive it in a certain way relative to competitors. It’s about occupying a distinct place in the target customer’s mind.
Here’s the crucial insight: Positioning isn’t what a company does to its product. It’s what the company does to the mind of the prospect. It’s about perception, not just reality.
Understanding Positioning Fundamentals
Positioning is Relative – A product is never positioned in isolation. It’s always positioned relative to alternatives. Consumers naturally compare and categorize. When BMW positions itself as “The Ultimate Driving Machine,” it’s implicitly positioning against Mercedes (luxury/comfort) and other premium brands.
Positioning is Perceptual – What matters isn’t just the physical attributes of the product but how consumers perceive those attributes. Two products might be objectively similar, but if consumers perceive one as higher quality, that perception becomes the reality that drives behavior.
Positioning Must Be Distinctive – If a product doesn’t occupy a unique position in consumers’ minds, it becomes a commodity. When everything seems the same, price becomes the only differentiator, leading to margin erosion.
Positioning Must Be Relevant – The distinctive position must matter to the target segment. Being different in ways customers don’t care about accomplishes nothing.
Positioning Requires Consistency – Positions develop over time through repeated, consistent messaging and experience. Constantly changing positioning just confuses consumers and prevents any position from taking hold.
Components of an Effective Position
A solid positioning strategy typically includes:
Target Segment – Who specifically is this positioned for? (This comes from the targeting decision.)
Frame of Reference – What category or competitive set is the product part of? This provides context for comparison.
Point of Difference – What makes this offering uniquely valuable? What does it do better than alternatives?
Reason to Believe – Why should customers believe the point of difference claim? What evidence supports it?
These elements often come together in a positioning statement (usually internal, not customer-facing): “For [target segment], [brand] is the [frame of reference] that [point of difference] because [reason to believe].”
Common Positioning Strategies
There are multiple ways to position products effectively:
Attribute or Benefit Positioning
Position based on a specific product attribute or customer benefit. The company essentially owns that attribute in customers’ minds.
Examples:
- Volvo: Safety
- FedEx: Reliability (“When it absolutely, positively has to be there overnight”)
- Bounty: Absorbency (“The quicker picker-upper”)
This works when the attribute matters significantly to the target segment and the company can credibly claim superiority. The challenge is that competitors can potentially copy the attribute, and consumer priorities can shift.
Price/Quality Positioning
Position based on where the product sits on the price-quality spectrum.
Premium Positioning – High price signals high quality, exclusivity, and status. Luxury brands like Rolex, Louis Vuitton, and Tesla (for electric cars) use this approach. The high price itself becomes part of the value proposition.
Value Positioning – Offering good quality at competitive prices. This is the “best bang for your buck” position. Brands like Toyota and IKEA exemplify this solid quality without premium pricing.
Economy Positioning – The lowest price option. Dollar stores, Spirit Airlines, and store-brand products occupy this space. The positioning is straightforward: you’re sacrificing some quality or features for affordability.
The key is consistency. Companies get into trouble when their pricing and quality don’t align with their positioning.
Use or Application Positioning
Position based on how or when the product is used, or what problem it solves.
Examples:
- Gatorade: The sports drink for athletes during physical activity
- Red Bull: Energy for when you need alertness and performance
- Nyquil: Nighttime cold medicine that lets you sleep
This creates a mental association between the use occasion and the brand. When consumers encounter that situation, the brand comes to mind first.
User Positioning
Associate the product with a specific type of user, creating an aspirational or identification-based appeal.
Different car brands do this effectively:
- Subaru: Outdoorsy, practical, individualistic
- BMW: Performance-oriented drivers who appreciate engineering
- Volvo: Safety-conscious, family-focused, pragmatic
- Tesla: Tech-forward, environmentally aware, innovative
Whether these stereotypes are accurate doesn’t really matter. What matters is the perception exists, and it influences both purchase decisions and how people feel about owning the brand.
Competitor-Based Positioning
Explicitly position relative to a competitor, either directly or implicitly.
Avis famously used this with “We’re number two, so we try harder,” acknowledging Hertz’s market leadership while framing their own position as an advantage, more motivated, better service.
Pepsi has long positioned against Coke, sometimes directly (taste tests) and sometimes through challenger brand imagery appealing to younger consumers.
This can be effective but risky. It can raise awareness of the competitor, and if the competitor is stronger, the comparison might not be favorable.
Category Positioning
Sometimes the most powerful positioning involves creating or claiming an entirely new category.
Uber didn’t position itself as a better taxi service; it positioned itself as “ride-sharing” a new category with different rules and expectations. This allowed them to avoid direct comparison with taxis and establish themselves as category leader.
Red Bull created the energy drink category, essentially owning it in many consumers’ minds despite later competitors.
This is powerful but requires significant investment to educate consumers about the new category and establish its value.
Developing a Positioning Strategy
The positioning development process typically involves:
1. Identify Competitor Positions: Understand how competitors are currently positioned. What attributes or benefits do they own? Where are they vulnerable?
2. Understand Customer Perceptions and Priorities: What matters most to the target segment? What attributes drive their decisions? How do they currently perceive various brands?
Research methods include surveys, focus groups, interviews, and analysis of online reviews and social media discussions.
3. Identify Positioning Opportunities: Look for gaps in attributes that matter to customers but no competitor strongly owns. Or consider ways to reframe the category or emphasize attributes where the company has natural strengths.
4. Select and Develop the Position: Choose a position that’s distinctive, relevant, credible, and sustainable. Develop the supporting evidence and messaging.
5. Implement Across the Marketing Mix: Positioning must be reflected consistently across all marketing mix elements: product features, pricing, distribution, and communication. Inconsistency undermines positioning.
6. Monitor and Adjust: Track how the position is perceived over time. Markets evolve, competitors respond, and consumer priorities shift. Periodic assessment ensures the position remains strong and relevant.
Using Perceptual Maps
Perceptual maps are visual tools that help with positioning decisions. They plot how consumers perceive different brands on key attributes.
Typically, a perceptual map uses two axes representing important attributes. For automobiles, it might be price (low to high) on one axis and performance (economy to luxury) on the other. Or for coffee shops, it might be price versus atmosphere quality.
Current competitors get plotted on the map based on consumer perceptions. This reveals:
- Where competition is concentrated
- Gaps that might represent opportunities
- How your brand is currently perceived versus where you want to be
- Whether your positioning is distinctive
The goal is to find a position that’s both desirable to consumers and not crowded with competitors. Though sometimes the best strategy is to challenge an established leader in a crowded position if there’s a clear way to do it better.
Positioning in Action: The Coffee Example Continued
If the business targeted busy commuters (from the targeting stage), positioning decisions might look like:
Position: “The fastest, most reliable coffee on your commute”
This position emphasizes speed and convenience, directly addressing what matters most to the target segment.
Supporting the position across the marketing mix:
Product: Streamlined menu focusing on popular items. Pre-brewing during rush hours. Quality is good enough, but speed is prioritized. Grab-and-go packaging.
Price: Competitive, not premium. Value pricing that makes daily purchases feel reasonable. Maybe a loyalty program rewarding frequency.
Place: Strategic locations right on major commute routes near transit stations, on busy streets between residential areas and business districts. Small-format stores optimized for quick service.
Promotion: Messaging focuses on speed and reliability. “Ready before you arrive” mobile ordering. Emphasizing consistency, “Same great coffee, every morning, no wait.” Advertising at transit locations and during morning drive time.
Everything aligns to reinforce that one position: fastest, most reliable option for busy commuters.
Alternatively, if the business targeted experience enthusiasts:
Position: “Artisanal coffee crafted by passionate experts”
Product: Carefully sourced specialty beans with origin stories. Multiple brewing methods. Seasonal offerings. Knowledgeable baristas who can discuss coffee. Comfortable seating, quality wifi, aesthetic design.
Price: Premium pricing that signals quality. $6-8 lattes are expected in this segment. Price reinforces the premium position.
Place: Locations in areas with the right atmosphere, walkable neighborhoods, near universities, and cultural districts. Spacious cafés designed for lingering, not rushing.
Promotion: Storytelling about coffee origins, farmer relationships, roasting process. Beautiful photography. Focus on craft, quality, experience. Word-of-mouth from coffee enthusiasts matters more than broad advertising.
Notice how different these are? Same product category coffee, but completely different positioning based on different target segments. The positioning shapes every decision.
Common Positioning Mistakes
Underpositioning – Consumers have only vague awareness of the brand with no distinct position. The brand is just another option without clear differentiation. This often happens when companies try to appeal to everyone and end up standing for nothing specific.
Overpositioning – The position is too narrow, causing consumers to have an overly limited view of the brand. They might not realize the full range of products or applications. Luxury brands sometimes face this positioned so exclusively that potential customers assume it’s “not for them.”
Confused Positioning – Inconsistent messages create uncertainty about what the brand stands for. This happens when positioning changes frequently or when different marketing efforts convey different positions.
Doubtful Positioning – Claims that consumers simply don’t believe. The position might be desirable, but there’s insufficient proof, or it contradicts consumers’ experience or perceptions. If a brand known for poor quality suddenly positions itself as premium, skepticism is natural without strong evidence of change.
Irrelevant Positioning – The distinctive position doesn’t actually matter to the target segment. The company might successfully own an attribute, but it’s not one that drives purchase decisions.
The Need for Consistency and Patience
Perhaps the most critical aspect of positioning: it takes time and consistency.
Strong positions develop over years, not months. Every interaction, every advertisement, every product experience either reinforces or undermines the intended position.
Brands that constantly shift their positioning confuse consumers and never develop a strong position. Think about the brands with the strongest positions: Volvo and safety, FedEx and reliability, Apple and innovation. These associations developed through decades of consistent messaging and delivery.
This requires discipline. When a positioning strategy is working but growth seems slow, there’s a temptation to change things up. But repositioning should only happen when the market has fundamentally changed, when the current position is clearly failing, or when expanding to new segments requires it.
How Segmentation, Targeting, and Positioning Work Together?
These three elements form a connected system, not separate activities. Each builds on the previous one:
Segmentation provides the menu of options for all the possible customer groups that exist in the market.
Targeting makes the strategic choice of which of those groups to focus on based on attractiveness and fit.
Positioning determines how to win with the chosen target what distinctive place to occupy in their minds.
Running these out of order creates problems. Positioning without targeting means not knowing who the position is for, resulting in generic messaging. Targeting without segmentation means choosing blindly without understanding all options. Segmentation without targeting means analyzing endlessly without making strategic decisions.
Example 1: How Toyota Used STP?
Toyota’s launch of Lexus demonstrates the STP framework perfectly:
Segmentation: Toyota analyzed the automobile market and identified multiple segments, including a luxury segment of affluent buyers willing to pay premium prices for sophisticated, high-quality vehicles.
Targeting: They selected this luxury segment as their target, recognizing it was large, growing, and profitable. They also identified a specific opportunity: buyers wanted luxury without the pretension or maintenance issues associated with European luxury brands. They were looking for reliable, high-quality luxury.
Positioning: Lexus positioned itself as refined, reliable luxury. Not the flashiest or most status-driven, but the most dependable premium option. Their famous positioning phrase “The Relentless Pursuit of Perfection,” communicated both luxury and reliability. Everything supported this exceptional build quality, outstanding customer service, dealership experience designed around customer comfort, and marketing emphasizing both sophistication and dependability.
The result? Lexus became the best-selling luxury brand in the United States for over a decade, establishing a strong position distinct from both Toyota’s mainstream image and European luxury competitors.
Example 2: How Dollar Shave Club Disrupted?
Dollar Shave Club’s success also illustrates the STP framework:
Segmentation: They recognized the razor market had multiple segments. One segment was men frustrated with expensive razors, unnecessary features, and inconvenient purchasing.
Targeting: They targeted this segment of practical, budget-conscious men who viewed razors as a commodity, not a sophisticated grooming product. This segment was underserved. Gillette’s positioning was premium innovation, which left price-sensitive buyers feeling overcharged.
Positioning: Dollar Shave Club positioned itself as no-nonsense, affordable quality delivered conveniently. Their viral launch video perfectly communicated this position: humorous, straightforward, mocking the overpriced complexity of competitor products. “Our blades are f***ing great” became memorable because it captured the position perfectly, quality without pretension or premium pricing.
Their positioning was reinforced through every element: simple product line, subscription model for convenience, direct-to-consumer distribution avoiding retail markups, and humorous, irreverent marketing.
Practical Application: Getting Started with STP
For businesses looking to apply this framework, here’s a practical approach:
Starting with Segmentation
Gather Data: Look at current customers if they exist. What patterns emerge? Use analytics tools to understand website visitors or social media followers. Survey potential customers. The data is probably more available than it seems.
Identify Segmentation Variables: Based on the business and industry, determine which segmentation approaches matter most. B2B companies might focus on firmographic segmentation (company size, industry). Consumer brands might emphasize psychographic and behavioral factors.
Define Segments: Group customers into segments that are measurable, substantial, accessible, differentiable, and actionable. Don’t overcomplicate; even basic segmentation is better than none. Start with 3-5 meaningful segments rather than trying to identify every possible micro-segment.
Profile Each Segment: For each segment, develop a detailed profile. What are their characteristics? What do they need? What are their pain points? How do they currently solve problems? What are their buying behaviors?
Moving to Targeting
Evaluate Each Segment: Score segments on the criteria discussed: size, growth, profitability potential, competitive intensity, fit with company capabilities, resource requirements, and accessibility.
Be Honest About Resources: Don’t target segments that require capabilities or resources beyond what’s realistically available. Better to dominate a smaller segment than be mediocre across several.
Consider Starting Narrow: Especially for newer or smaller companies, concentrated marketing often makes most sense. Win decisively in one segment before expanding. It’s easier to expand from a strong position than to establish simultaneous positions in multiple segments.
Make the Strategic Choice: Based on evaluation, select the target segment(s). Document the rationale for this choice; it will guide many future decisions.
Developing Positioning
Research Target Perceptions: Understand how the target segment currently perceives the category, competitors, and (if applicable) your brand. What matters to them? What are competitors’ positions?
Identify Positioning Opportunities: Look for gaps in attributes that matter to the target segment but that competitors don’t strongly own. Or consider how to credibly challenge an existing position if there’s a clear way to do it better.
Craft the Position: Develop a clear, distinctive position that’s relevant to the target segment and credible given the company’s capabilities. It should be simple enough to articulate in one sentence.
Test the Position: Before fully committing, test the positioning with real people from the target segment. Does it resonate? Do they understand what makes the offering different? If responses are lukewarm or confused, the positioning needs refinement.
Align Everything: Once the position is set, ensure every element of the marketing mix supports it. Product features, pricing strategy, distribution channels, and all communication should consistently reinforce the intended position.
Monitor and Maintain: Track how the position is perceived over time. Are competitors responding? Is the target segment’s perception aligning with the intended position? Markets change, so periodic reassessment is necessary, but avoid constant repositioning.
Why Companies Fail at STP?
Understanding the framework is one thing. Executing it well is another. Here are common reasons companies struggle:
Skipping Steps
The most frequent mistake is jumping ahead without completing earlier steps. A company might rush to positioning because it’s the exciting, creative part of crafting messages, designing campaigns, and building brand identity. But without proper segmentation and targeting first, that positioning has no foundation.
Similarly, some companies do superficial segmentation, identify a few obvious groups, but never rigorously evaluate and choose among them. They sort of target everyone, which really means targeting no one specifically.
Lack of Commitment
Targeting requires commitment, which means saying no to some opportunities. This is psychologically difficult, especially for entrepreneurs and salespeople who hate turning down potential revenue.
A small software company might identify three distinct segments but then try to serve all three because they don’t want to “leave money on the table.” The result is a product that’s mediocre for all three segments, marketing messages that are generic and unconvincing, and resources spread too thin to win decisively anywhere.
The fear of missing out prevents the focus necessary for success. But trying to be everything to everyone usually means being nothing to anyone in particular.
Insufficient Research
Good segmentation and targeting require a real understanding of the market and customers. Some companies base decisions on assumptions, intuition, or what they hope is true rather than actual research.
Maybe the founder assumes they understand the market because they’re part of it, but their personal experience isn’t representative. Or they segment based on demographics because that data is easy to get, without considering whether those demographics actually predict different needs or behaviors.
The solution doesn’t necessarily require expensive market research. Customer interviews, surveys, analysis of existing data, and even careful observation can provide valuable insights. The key is grounding decisions in reality rather than assumptions.
Inconsistent Execution
A well-chosen position means nothing if it’s not consistently executed. This happens when different parts of the organization aren’t aligned.
The marketing team positions the product as premium quality, but operations cuts costs in ways that reduce quality. Sales offers aggressive discounts that undermine premium positioning. Product development adds features that dilute the focused position.
Or the positioning is clear internally but marketing communications are inconsistent. One campaign emphasizes one attribute, the next campaign emphasizes something different. Without consistency, no clear position develops in customers’ minds.
Impatience
Building a strong market position takes time. Companies sometimes change their approach too quickly, before it’s had time to take hold.
Perhaps the initial results are slower than hoped. Or a competitor does something that seems threatening. The temptation is to change course, try a different segment, adjust the positioning. But this prevents any position from solidifying.
Strong positions are built through consistency over time. Volvo has been positioned on safety for decades. That association didn’t happen in a year; it developed through sustained, consistent messaging and product delivery.
Obviously, if a strategy is clearly failing, changes need to be made. But “failing” and “taking longer than we’d like” are different things. Patience and discipline are required.
Ignoring Market Changes
On the flip side, some companies stick with their STP strategy long after the market has changed. Segments evolve. What was once a growing, profitable segment might decline. Consumer priorities shift. New competitors emerge. Technology creates new possibilities.
Successful companies regularly reassess their segmentation and targeting. Are the segments still viable? Is the positioning still relevant and distinctive? This doesn’t mean constantly changing strategy, but it does mean monitoring and adapting when warranted.
Kodak’s failure to adapt to digital photography is a classic example. They had strong positioning in film photography, but they clung to that segment even as it became clear the market was moving to digital. Their existing STP strategy became a liability because they didn’t adapt it.
Following Rather Than Leading
Some companies just copy competitors’ STP strategies. If a competitor targets a certain segment, they target the same segment. If a competitor positions on a certain attribute, they try to position on that same attribute.
This rarely works well. The competitor probably got there first and already owns that position. Playing “me too” puts the company at a disadvantage, they’re always being compared to the leader on the leader’s terms.
Better to find a different segment or position where the company can be first, can be distinctive, can own something competitors don’t. Sometimes the best opportunities are segments that major competitors are ignoring.
When to Revisit Your STP Strategy?
The STP framework isn’t something to set once and forget. Periodic review is necessary. Here are situations that call for reassessment:
Market Changes: Significant shifts in the overall market, new technology, changing consumer preferences, economic shifts, and regulatory changes might make current segments less attractive or create new segmentation opportunities.,
Performance Issues: If the business isn’t meeting goals despite good execution, the problem might be the STP strategy itself. Maybe the targeted segment isn’t as attractive as initially believed. Maybe the positioning isn’t resonating.
Competitive Shifts: When major competitors change their strategies, enter new segments, or reposition, it affects the landscape. What was once a clear positioning might become crowded.
Company Evolution: As companies grow and gain resources and capabilities, strategies that made sense initially might become limiting. A startup that wisely used concentrated marketing might be ready to expand to additional segments once it has the resources.
Segment Evolution: The segments themselves change. A demographic segment ages. A behavioral segment adopts new technologies. A geographic segment experiences demographic shifts. Segments that were distinct might converge, or new segments might emerge.
Expansion Opportunities: When considering new products, new markets, or geographic expansion, the STP framework should be applied to these new contexts. The strategy that works in one market might need adjustment in another.
The question isn’t whether to revisit the STP strategy, but how often. For most businesses, annual review makes sense, with more frequent monitoring for fast-changing markets.
STP in Different Contexts
The STP framework applies across different business contexts, though the specifics vary:
B2B vs. B2C
B2B companies often emphasize firmographic segmentation (industry, company size, location) and behavioral segmentation (purchase processes, usage patterns). Targeting decisions might focus on which industries or company sizes fit best with the solution. Positioning often emphasizes tangible business benefits ROI, efficiency, and risk reduction.
B2C companies frequently use psychographic and behavioral segmentation more heavily. Emotional benefits and lifestyle fit often matter more in positioning. The buying process is typically simpler, with fewer decision-makers, so messaging can be more direct.
But the fundamental STP process remains the same: segment the market, select attractive targets, position distinctively for those targets.
Products vs. Services
Service businesses face some unique positioning challenges because services are intangible and variable. For example, a content marketing service provider in the U.S, tries positioning often emphasizes the experience, the relationship, or the outcomes rather than physical attributes.
Professional services firms might position themselves on expertise, reliability, or approach. They can’t show the tangible product, so reputation, testimonials, and case studies become crucial for supporting the positioning.
Product businesses can demonstrate tangible attributes more easily, though positioning still shouldn’t just be about features; it’s about what those features mean to the customer.
Startups vs. Established Companies
Startups typically benefit from concentrated marketing, focusing intensely on one segment to establish a foothold. They often position against established competitors by serving an underserved segment or positioning on attributes the incumbents ignore.
Established companies have more resources and can pursue differentiated strategies across multiple segments. But they also face challenges; existing positions can become constraints, and it’s harder to reposition when there’s an established perception in the market.
Local vs. Global
Local businesses might have fewer, more homogeneous segments and can position based on personal relationships, local knowledge, or community connections.
Global companies face much more complex segmentation because cultural, economic, and regulatory differences across countries create very different segments. A segment approach that works in one country might fail in another. Global companies often use geographic segmentation heavily, then apply other segmentation types within regions.
The Role of Digital Marketing in STP
Digital marketing has transformed how STP is executed, though the fundamental principles remain unchanged.
Enhanced Segmentation Capabilities
Digital marketing tools provide much more granular data about customer behavior. Website analytics, social media data, and purchase history allow behavioral segmentation that was previously impossible.
Companies can identify micro-segments based on browsing patterns, content engagement, and past interactions. This enables more precise targeting.
More Flexible Targeting
Digital advertising allows targeting specific segments with unprecedented precision. Facebook, Google, and other platforms enable targeting by demographics, interests, behaviors, and even custom audiences based on existing customer data.
This makes differentiated and even micromarketing strategies more practical. A company can show different messages to different segments without needing completely separate advertising campaigns.
Dynamic Positioning
Digital channels allow more responsive positioning. A company can test different positioning approaches, see what resonates, and adjust relatively quickly. A/B testing lets businesses compare different positioning messages and optimize.
However, this flexibility can be a double-edged sword. The ease of changing things can lead to insufficient consistency. Just because you can constantly adjust doesn’t mean you should.
Direct Customer Insights
Social media, online reviews, and direct digital communication provide real-time insights into customer perceptions. Companies can monitor how their positioning is being received, what customers value, and how they compare to competitors.
This feedback loop allows more informed STP decisions and faster course correction when needed.
Measuring STP Effectiveness
How do you know if your STP strategy is working? Several metrics and approaches can help:
For Segmentation
Segment Distinctiveness: Are the identified segments actually behaving differently? If all segments respond similarly to marketing efforts, they might not be truly distinct.
Segment Stability: Are segment members relatively consistent over time, or is there constant movement between segments? Some movement is natural, but excessive fluidity suggests segments aren’t well-defined.
Predictive Power: Can segment membership predict behavior? If knowing someone’s segment doesn’t help forecast their purchasing or response to marketing, the segmentation isn’t useful.
For Targeting
Market Share Within Target Segment: How well is the company penetrating the chosen segment? Growing share in the target segment indicates the targeting decision was sound.
Customer Acquisition Cost: Is it becoming easier and more efficient to acquire customers in the target segment? Declining acquisition costs suggest the target is well-chosen and positioning is resonating.
Customer Lifetime Value: Are customers from the target segment profitable over time? High lifetime value validates the targeting decision.
Competitive Position: How does the company rank within the target segment compared to competitors? Strong relative position indicates effective targeting and positioning.
For Positioning
Awareness and Recall: Do target customers know the brand? When they think of the category or need, does the brand come to mind? Top-of-mind awareness indicates positioning is taking hold.
Perceived Differentiation: Do customers perceive the brand as distinct from competitors? Can they articulate what makes it different? If the brand is seen as indistinguishable, positioning is weak.
Attribute Association: Do customers associate the brand with the intended positioning attributes? If positioning is based on reliability, do customers think of the brand as reliable?
Preference and Purchase Intent: Do customers in the target segment prefer the brand? Are they likely to choose it over alternatives? Ultimately, positioning should drive preference.
Price Premium Ability: Can the brand command higher prices than undifferentiated competitors? Strong positioning often allows premium pricing.
These metrics should be tracked over time. Improvements indicate the STP strategy is working; stagnation or decline suggests problems need addressing.
Final Thoughts: STP as Strategic Foundation
The STP framework, Segmentation, Targeting, Positioning, isn’t just a marketing tool. It’s a strategic foundation for the entire business.
Once targeting decisions are made, they influence product development priorities. What features matter to the target segment? What problems need solving? Product roadmaps should align with target segment needs.
Targeting affects operational decisions. What service levels do target segments expect? What distribution channels do they use? Operations should be designed to effectively serve the chosen segments.
Targeting guides sales strategy. Where should sales efforts focus? What’s the value proposition for target customers? Sales approaches should be tailored to target segment characteristics.
Positioning influences pricing strategy. What price point signals the intended position? What does the target segment expect? Pricing should reinforce positioning. Premium positioning requires premium pricing; value positioning requires competitive pricing.
In this way, the STP framework becomes more than just a marketing exercise. It’s a strategic lens that brings coherence across the organization. Everyone understands who the customer is, what matters to them, and how the company should be perceived.
Companies with clear STP strategies make better decisions because they have a framework for evaluating options. When considering a new feature, the question becomes: “Does this serve our target segment and reinforce our positioning?” When evaluating a partnership opportunity: “Does this help us reach our target segment effectively?”
Without this framework, decisions become ad hoc, reactive, and inconsistent. Resources get spread across too many initiatives. Marketing messages lack coherence. The brand becomes fuzzy and indistinct.
With a strong STP strategy, there’s clarity and focus. Resources concentrate on what matters most. Messages consistently reinforce the intended position. Over time, this builds a strong, distinctive brand that resonates deeply with the chosen segments.
Is STP the only thing that matters for success? Of course not. Execution quality, product excellence, customer service, and operational efficiency all matter enormously. But STP provides the strategic direction that ensures all those efforts are aimed in the right direction.
The businesses that win aren’t necessarily those with the best products or the biggest budgets. They’re often the ones with the clearest understanding of who they serve, what those customers need, and how to position themselves distinctively in those customers’ minds.
That clarity comes from rigorous, thoughtful application of the STP framework. Segment first to understand the landscape. Target strategically based on fit and opportunity. Position distinctively to win in the chosen segments.
It sounds simple. Perhaps it is, conceptually. But simple doesn’t mean easy. It requires research, analysis, difficult choices, and disciplined execution. It means saying no to opportunities that don’t fit. It means patience while positions develop. It means consistency even when there’s temptation to chase the latest trend.
But for companies willing to do this work, the payoff is substantial: focused strategy, efficient resource allocation, stronger brand positioning, and ultimately, sustainable competitive advantage in chosen markets.
That’s the power of the STP framework. Not flashy, maybe. But foundational. And in business, a solid foundation matters more than almost anything else.
