Segmentation, targeting and positioning (STP) is a framework for deciding which customers to serve and how an offering should be understood relative to alternatives.
1. Segmentation #
Divide a broad market into groups with relevant differences. Common bases include:
- Demographic: age, household, role or business size where relevant and appropriate.
- Geographic: region, climate, urban/rural context or service area.
- Psychographic: interests, values, motivations and lifestyle.
- Behavioural: usage, purchase frequency, benefits sought, readiness or loyalty.
- B2B firmographic: industry, organisation size, maturity and buying structure.
2. Targeting #
Evaluate segments for size, growth, needs, accessibility, competitive intensity, profitability and fit with company capabilities. Select one or more priority segments. A segment should be measurable enough to understand, reachable through practical channels, and meaningfully different from others.
3. Positioning #
Define the value the offering promises to the chosen audience and the reason to believe it. A positioning statement commonly identifies the target customer, category or need, key benefit and meaningful point of difference. The promise must be credible and deliverable.
Example #
A bookkeeping service might segment small businesses by complexity and support needs, target growing service firms without an in-house finance team, and position itself around clear monthly reporting and responsive support rather than being the cheapest option.
Validate STP #
- Use customer interviews, analytics, sales data and market research.
- Check that the segment’s need is important enough to motivate action.
- Test positioning language with the intended audience.
- Align product, price, distribution and promotion to the position.
- Measure qualified demand, conversion, retention and profitability.
Common mistakes #
Segments that are too broad, stereotypes unsupported by evidence, targeting audiences the business cannot serve, and positioning claims that are indistinguishable or unsubstantiated weaken strategy. Revisit STP when customer needs or market conditions shift.
