STP (Segmentation, Targeting, and Positioning) –

How to do it right?
March 20, 2021March 20, 2021
I have a friend named Anna. She has plans to start a business of Bluetooth earphones.
One day I asked her, whom does she plan to target with her product?
Anna replied, everyone.
On one thought, it might look great to have the expectation that every person might be interested in buying
Bluetooth earphones. But, if we give a second thought, we can easily eliminate a lot of people to whom we would
not want to try selling.
I mean, do you really wanna talk to a 50+ years old person living in the remote parts
of the country to buy this product? Probably this person has not even tried a wired
earphone.
It’s not impossible to sell to this person, in fact, he/she might actually see the value in
it. But the same amount of effort if made on youngsters living in the urban spaces of
the country would create more impact.
Plus, Anna does not have enormous amount of money to put in her marketing. She
needs to work smartly here, its important to generate maximum revenue with
minimum spend.
If you notice, we tried to identify people who would be interested in buying a
Bluetooth earphone. This set of people are whom we call the market for a product.
But, there are so many companies out there selling Bluetooth earphones. What
different or unique are you offering? And amidst the people who want to buy
Bluetooth earphones, who do you wanna target basis that uniqueness?
It is very imperative to have the answers to these questions before placing your
product out there in the market. And the Process of STP does exactly the same. Let’s
see how.
STP – Segmentation, Targeting, and
Positioning
STP (Short for Segmentation, Targeting and Positioning) is a process that helps a
business:
 Have a keen look at its consumers/market
 Break the consumers into homogeneous groups
 Decide which groups (or combination of groups) to target
 Decide on what and how to communicate with the selected target market
STP is performed to identify the most attractive customer groups keeping both present
and future objectives of a company in mind. The company must be practical in the
present and aspirational for the future.
Let’s take them one-on-one now.
How is Segmentation Done
Here we will discuss one of the most popular methods of
segmentation which talks about 4 ways or types which are:
 Geographic
 Psychographic
 Behavioral
 Demographic
Geographic Segmentation – Where
does the customer live?
This is a segmentation performed on the basis of geographical
locations or borders.
Dividing a market in terms of countries, states, cities, regions,
climate, population density, etc. comes under geographic
segmentation.
Now, it depends upon the business/product on how they want to
segment the market basis the geographical variables.
A company producing swimwear and beach equipment would
want to segment the market basis regions closer to coastal areas
or regions which have a hotter climate.
PepsiCo’s Lays chips segments customers basis countries,
regions, cities, etc. It might plan differently for different
countries and even within countries, it can adjust basis regions
such as South India Vs North India.
Gender, Income, Social class, occupation, education, etc.
One example is that Anna can create segments on the basis of age: 15-30 years, 30-45
years, and 45-60 years
Another way to segment the market can be on the basis of Disposable Income – Low,
Average, and High (Anna might choose to produce only high quality and expensive
products and thus she might want to segment her audience basis their ability to spend)
Psychographic Segmentation – What are the values
and beliefs of your customer?
Psychographic segmentation moves beyond where customers live or how much they
earn.
The talk is about understanding the following about the customers:
Why they behave the way they do?
What kind of lifestyle they have?
What are their beliefs and values?
What are their interests and opinions?
What kind of attitude they have towards several things?
This kind of segmentation is more qualitative than quantitative unlike the other 2 ways
mentioned earlier.
For a company that produces healthy food products would like to focus on segmenting the
market basis exercise habits to effectively focus on those people who exercise regularly.
Our friend Anna might want to focus on the different opinions customers have about Bluetooth
earphones. Why do some customers prefer wired earphones over wireless ones or vice versa?
How comfortable are they using it in public as it runs the risk of keeping the Bluetooth On?
One of the most popular ways of doing psychographic segmentation is VALS (Values, Attitudes,
and Lifestyles) Survey. This Survey consists of numerous situational questions to which
customers have to agree or disagree. As per the responses received, each customer is placed into
one of the eight buckets – Innovators, Thinkers, Achievers, Experiencers, Believers, Strivers,
Makers, and Survivors.
Behavioral Segmentation – How does the customer makes
his/her buying decisions?
The questions to be asked here are:
What benefits does a customer seek from the product?
How often (usage rate) and how much (usage quantity) of the product is he using?
How loyal the customer is to the brand?
What is the customer’s purchasing behavior? Is he price-conscious or a smart buyer who likes to
compare values with the price? Is he an impulsive buyer or likes to dedicate a good amount
of time to decide?
Here, Anna might want to segment her customers basis their loyalty towards a brand or basis
their purchasing behavior. She might not want to focus on a person who is price conscious if her
Behavioral Segmentation – How does
the customer makes his/her buying
decisions?
The questions to be asked here are:
What benefits does a customer seek from the product?
How often (usage rate) and how much (usage quantity) of the
product is he using?
How loyal the customer is to the brand?
What is the customer’s purchasing behavior? Is he price-
conscious or a smart buyer who likes to compare values
with the price? Is he an impulsive buyer or likes to dedicate
a good amount of time to decide?
Here, Anna might want to segment her customers basis their
loyalty towards a brand or basis their purchasing behavior. She
might not want to focus on a person who is price conscious if
her products are priced higher as compared to several other
players.
TARGETING
Once we have divided our market into segments, the next step is to decide the segment
(or segments) which should be targeted.
A target segment can either be chosen just from one type, for example, people in the
age group of 20 to 30 can be a target segment. Or it can be defined using an
intersection of multiple types, for example, a set of people who are females, age
between 20 to 30, living in Rural India. Here we took an intersection of gender, age,
and location to create one segment.
To identify a healthy segment, it must perform well on the following paramters:
Measurable – It must be possible to measure the segment in terms of size.
Profitable – A segment must be substantially profitable.
Sustainable – The segment must remain sizeable and profitable in the long run too.
Differentiable – The segment must be internally homogeneous but externally distinct.
Reachable – It must be easy to reach the potential customers in the segment.
Competition – A segment must not have a lot of competition. A lot of players targeting
the same set of people can make a lucrative segment ineffective.
Basis a company’s objectives and budget, a company may follow one of the two
strategies:
Concentration Strategy
The firm can decide to target a single segment. This strategy allows the firm to focus all
its efforts on one segment. But at the same time, this is also a risk as the firm in a way is
choosing to put all its eggs in one basket.
Multi-Segment Strategy
With this strategy, the firm decides to target multiple distinct segments at the same time.
The targeting strategy is different for each segment. This strategy requires the firm to
allocate a higher marketing budget.
In the case of Anna, she might want to target her audience with characteristics such as:
 Lying in the age group of 22-35
 Living in urban/semi-urban regions of India
 Are not price-conscious
 Have average to high disposable Income (since her earphones are going to get highly-
priced) etc.
POSITIONING
So, you have identified the person whom you want to sell, but
what are you gonna say to him?
This is the step where a product becomes a Brand.
Positioning is the process of defining a company’s/product’s
key offerings and gain a substantial image in the minds of the
customers.
Colgate is the most famous and widely used toothpaste product
in the world, but the moment someone encounters dental issues
such as gum problems or sensitive teeth, he/she switches on to
Sensodyne. What might be the reason?
A key reason is that this is how Sensodyne has positioned itself
as a brand. It targets those people who have dental problems
and chooses to speak primarily to them via its advertisements.
Coca Cola is just a soft drink, but we associate the product with
happiness, celebration and inclusiveness. Don’t you think Coca
Cola’s “Open Happiness” campaign has some role here?
I am sure by now you must be getting numerous other examples of great advertising campaigns in your head,
but before getting into the art of how to communicate, let’s talk a bit about the science of deciding what to
communicate i.e. what should be the core message.
Value Proposition
Value Proposition is all about one question – why should the target customer buy your product?
Value Proposition is about the value a company promises to deliver to the customers.
While defining the value proposition, it is very important to define and deliver both the basic expectations
from the product as well the USP i.e. unique selling point of the product.
The basic expectations are those attributes of a product that are not unique and are offered by almost all the
players. Due to this, the customers would always expect these basic attributes in your product too. We can
call these attributes – Points of Parity (POP)
The USP is/are those attributes of a product that make it stand out from all other players/competitors in the
market. We call these attributes – Points of Difference (POD). For example, a cell-phone company launches
a smartphone whose battery can last for more than a week on a single charge. This could be a USP or a POD
for the company/brand.
Perceptual Maps
A perceptual map is a visual depiction of how a
brand/product/company is perceived by the target customer.
This method plots or places the products on a graph basis their
perception along 2 or more axis. We place several players on
the same map to identify where they lie and what kind of
customer they are trying to target.
Perceptual Maps help a company identify gaps in the market,
gain insights over competition, monitor its own products, etc.
For example: Suppose Anna plotted a perceptual map for
Bluetooth earphones with two dimensions – Quality and Price.
She has identified 4 major players or competitors whom she
would ot.
SUMMARY
Let’s look again at what we learnt in this article.
We started with trying to understand the need for STP i.e. to be able to identify whom we
want to target with our products. And thus we understood why STP is done.
Then we dived towards Segmentation – The definition and the 4 types (Demographic,
Psychographic, Geographic, and Behavioral).
After we segmented the market, the next step is to choose or identify those segments
which we would want to target. Here, we described the method of identifying a healthy
segment basis the factors of Measurability, Profitability, Sustainability, Reachability,
Differentiability, and competition.
We also discussed about the two strategies of Targeting – Concentration Strategy and
Multi-Segment Strategy
Then we finally talked about Positioning – What to say and how to say to the customer
about the product.
Here we firstly focused on the ‘WHAT’ i.e. the process/method of identifying a Value
Proposition for the product (why should the target customer buy our product?). We also
talked about Perceptual Maps and how they can be used to identify opportunities for both
new and existing products.
Once we understood the ‘WHAT’, we moved onto the ‘HOW’ i.e. the process of crafting a
positioning statement. To understand it better we took examples of some famous brands
such as Sensodyne and Under Armour.