What is segmentation, targeting and positioning (STP)?

STP is the sequence that turns a market into a strategy.

Segmentation — dividing the market into groups with distinct needs. The bases:

• Demographic — age, income, education, occupation. Easy to target, often weakly predictive.
• Geographic — location, urban or rural, climate.
• Psychographic — values, attitudes, lifestyle.
• Behavioural — usage rate, loyalty, benefits sought, purchase occasion. Usually the most predictive, because what people do beats what they are.

Targeting — choosing which segments to serve, judged on size, growth, profitability, competitive intensity, and fit with your capabilities. The options are undifferentiated (one offer for all), differentiated (tailored offers per segment), concentrated (one segment only), or micromarketing.

Positioning — the place you occupy in the target's mind relative to alternatives. Expressed in a positioning statement: for [target] who [need], [brand] is the [category] that [benefit], because [reason to believe].

Note: The discipline this framework enforces is choosing. A segment is only useful if it is measurable, substantial, accessible, and actually behaves differently — and positioning only works if it means excluding people. "Everyone" is not a target market, and being unwilling to give something up is why most positioning statements say nothing.