Market Segmentation, Targeting and Positioning
The STP sequence
Segmentation divides a heterogeneous market into homogeneous groups; targeting selects which to serve; positioning creates a distinct place in the target's mind. Candidates must know the criteria for effective segmentation: measurable, accessible, substantial, differentiable, actionable (MADSA or similar).
Bases of segmentation
- Consumer: geographic, demographic, psychographic (lifestyle, VALS), behavioural (usage rate, benefits sought, loyalty).
- Business: industry, company size, location, purchasing criteria.
Benefit segmentation is often the most powerful because it links directly to positioning. Targeting strategies run from undifferentiated (mass) through differentiated (multiple segments) to concentrated (niche) and micromarketing (local or individual). Choice depends on resources, segment variability, competitor coverage and product life-cycle stage.
Positioning uses perceptual maps, points of difference and points of parity, and a positioning statement of the form: for [target], our [brand] is the [category] that [benefit], because [reason to believe]. Repositioning is risky and costly.
Traps in questions
- Confusing segmentation (dividing the market) with targeting (choosing segments).
- Assuming demographic segments are automatically meaningful - they must predict behaviour.
- Treating niche as inferior; it suits limited resources.
- Writing a positioning statement that lists features rather than a single differentiating benefit.
- Forgetting that segments must be reachable through available channels.
Worked example
A gym finds members split into "time-poor professionals", "budget families" and "serious athletes". It has one site and modest capital. Concentrated targeting on time-poor professionals - premium pricing, early hours, personal training - is the fit; differentiated targeting would overstretch resources.
Rule of thumb
Segment, then check MADSA; if a segment cannot be reached or measured, discard it before choosing a targeting strategy.