Segmentation, Targeting, and Positioning: An Introduction

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The STP process is an important concept in the study and application of marketing. The letters STP stand for segmentation, targeting, and positioning.

Market segmentation can be defined as:
The process of splitting a market into smaller groups with similar product needs or identifiable characteristics, for the purpose of selecting appropriate target markets. Targeting (or target market selection) refers to:

An organization’s proactive selection of a suitable market segment (or segments) with the intention of heavily focusing the firm’s marketing offers and activities towards this group of related consumers. And positioning (which is sometimes referred to as product positioning) is: Positioning is the target market’s perception of the product’s key benefits and features, relative to the offerings of competitive products. STP models

There are two alternate models that help marketing students understand the STP process. The introductory model simply uses the three letters of STP to highlight the core elements of the process, namely segmentation, targeting and positioning. This approach is shown in the following diagram and discussed in the Basic STP Process section.

While this basic model is a good starting point for understanding the overall process, there are a number of smaller steps that should also be understood, which are outlined in the following diagram and discussed in the Full STP Process. By reviewing this more detailed approach, students will gain a much greater understanding of this important marketing concept.

A Step-by-step Guide to Segmenting a Market
 
How to segment a market
A step-by-step guide on how to construct market segments is provided below. However, there are a number of relevant topic discussions on the marketing study guide which may be beneficial for you. These topics are included in the side bar menu and in related topics at the bottom of this page. Depending upon your segmentation task you may need just to complete steps one to three below, or you may need steps one to six – so check what is required first. (Note: The full nine steps of segmentation, targeting and positioning are discussed in the STP process section if further information is required.)  

 
Step One – Define the market
The first step in creating market segments is to clearly define the market of interest. As discussed in the markets, sub-markets and product-markets section, it is important not to define a market too broadly. For instance, let’s assume that you are looking to segment the market for a firm that operates a chain of book stores. It would be too top-level and too awkward to define the market as all retailing consumers, as it is unlikely to lead to any meaningful segmentation. As shown in the following diagram, we need to split out the overall broad market (retailing) into its various sub-markets (such as, supermarkets, specialty stores and so on). We can also further define some of these sub-markets (if they are still too broad) as is shown for specialty stores below. And finally, we need to determine the market’s geographic boundaries. It this case a list of possibilities has been provided in the figure.  

Let’s pick the UK; so our defined product/market is book retailers in the UK.  

 
Step Two – Create market segments
Now that we have defined the product/market clearly (which we will refer to as ‘the market’ from this point on), we need to determine what types (segments) of different consumers form that overall market. To do this, we need to review the list of segmentation bases/variables and choose two or three of those variables that we think (or know from market research) affect the purchasing behavior of book consumers. Note: When segmenting a business market, please see segmentation bases for business markets instead of the above link. For this market, let’s pick three different variables from the list, as per the following table. These particular segmentation variables have been...
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