Marketing Exam > Marketing Notes > Foundations: How Great Brands Win Customers > CheatSheet:Segmentation, Targeting, Positioning (STP)
CheatSheet:Segmentation, Targeting, Positioning (STP)
1. Market Segmentation
1.1 Core Concept
| Term | Definition |
|---|---|
| Market Segmentation | The process of dividing a heterogeneous market into distinct groups of buyers with similar needs, characteristics, or behaviors who might require separate products or marketing mixes. |
| Market Segment | A group of consumers who respond in a similar way to a given set of marketing efforts. |
1.2 Segmentation Variables
1.2.1 Geographic Segmentation
- Nations, regions, states, cities, neighborhoods
- Population density (urban, suburban, rural)
- Climate and topography
1.2.2 Demographic Segmentation
| Variable | Examples |
|---|---|
| Age | Children, teens, young adults, middle-aged, seniors |
| Gender | Male, female, non-binary |
| Income | Under $25K, $25K-$50K, $50K-$100K, over $100K |
| Education | High school, some college, bachelor's, graduate degree |
| Occupation | Professional, skilled worker, retired, student |
| Family Life Cycle | Young single, married no children, married with children, empty nesters |
| Generation | Baby Boomers, Gen X, Millennials, Gen Z |
1.2.3 Psychographic Segmentation
| Variable | Description |
|---|---|
| Lifestyle | Activities, interests, and opinions (AIO); how people spend time and money |
| Personality | Traits such as ambitious, outgoing, authoritarian, sociable |
| Values | Core beliefs and ethical principles guiding behavior |
| Social Class | Upper class, middle class, working class, lower class |
1.2.4 Behavioral Segmentation
| Variable | Description |
|---|---|
| Purchase Occasion | Regular, special, seasonal occasions that trigger buying |
| Benefits Sought | Quality, service, economy, convenience, speed |
| User Status | Non-users, ex-users, potential users, first-time users, regular users |
| Usage Rate | Light, medium, heavy users (80/20 rule: 20% of customers generate 80% of sales) |
| Loyalty Status | Hard-core loyals, split loyals, shifting loyals, switchers |
| Buyer Readiness Stage | Unaware, aware, informed, interested, desirous, intending to buy |
| Attitude | Enthusiastic, positive, indifferent, negative, hostile |
1.3 Requirements for Effective Segmentation
| Criterion | Description |
|---|---|
| Measurable | Size, purchasing power, and characteristics can be quantified |
| Accessible | Segments can be effectively reached and served |
| Substantial | Segments are large or profitable enough to serve |
| Differentiable | Segments are conceptually distinguishable and respond differently to marketing mix elements |
| Actionable | Effective programs can be designed to attract and serve the segments |
1.4 Segmentation Approaches
| Approach | Description |
|---|---|
| A Priori Segmentation | Segments defined before research based on known variables (e.g., age, gender) |
| Post Hoc Segmentation | Segments emerge from research data through clustering techniques |
| Single-Variable | Uses one basis for segmentation (e.g., age only) |
| Multi-Variable | Combines multiple variables for more precise segments |
2. Market Targeting
2.1 Definition and Process
| Term | Definition |
|---|---|
| Market Targeting | The process of evaluating each market segment's attractiveness and selecting one or more segments to enter. |
| Target Market | A set of buyers sharing common needs or characteristics that the company decides to serve. |
2.2 Evaluating Market Segments
2.2.1 Segment Attractiveness Criteria
- Segment size and growth potential
- Segment structural attractiveness (competition level, substitute products, buyer/supplier power)
- Company objectives and resources alignment
- Profit potential and ROI expectations
- Market access and distribution capabilities
2.2.2 Porter's Five Forces Application
- Competitive rivalry within segment
- Threat of new entrants
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitute products
2.3 Target Market Strategies
| Strategy | Description |
|---|---|
| Undifferentiated (Mass) Marketing | One offer for the entire market; ignores segment differences; focuses on common needs |
| Differentiated (Segmented) Marketing | Targets several segments with separate offers for each; higher sales but higher costs |
| Concentrated (Niche) Marketing | Targets a large share of one or few segments; deep market knowledge and specialization |
| Micromarketing | Tailoring products and programs to specific individuals or local customer segments |
2.4 Micromarketing Approaches
| Type | Description |
|---|---|
| Local Marketing | Tailoring brands and promotions to local customer groups (cities, neighborhoods, stores) |
| Individual Marketing | Customizing products and programs to individual customers (one-to-one marketing, mass customization) |
2.5 Selecting Target Markets
2.5.1 Factors Influencing Strategy Choice
- Company resources (limited = concentrated; extensive = differentiated)
- Product variability (uniform products = undifferentiated; variable = differentiated)
- Product life cycle stage (new = undifferentiated or concentrated; mature = differentiated)
- Market variability (similar preferences = undifferentiated; varied = differentiated)
- Competitor strategies (follow or counter competitor approaches)
2.6 Socially Responsible Targeting
- Avoid targeting vulnerable populations exploitatively (children, elderly, disadvantaged)
- Consider ethical implications of targeting strategies
- Avoid harmful products promoted to at-risk segments
3. Market Positioning
3.1 Core Concepts
| Term | Definition |
|---|---|
| Positioning | Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. |
| Value Proposition | The full mix of benefits upon which a brand is positioned; answers why customers should buy the product. |
| Perceptual Map | A visual representation showing consumer perceptions of brands on important buying dimensions. |
3.2 Positioning Strategies
| Strategy | Description |
|---|---|
| Product Attributes | Position on specific features or characteristics (e.g., durability, size, ingredients) |
| Benefits | Position on the benefits or problem solutions provided |
| Use/Application | Position based on how, when, or where product is used |
| User Category | Position for a specific type of user or user group |
| Against Competitors | Position directly against or away from a competitor |
| Product Class | Position relative to a product category |
| Quality/Price | Position on value for money at a particular price point |
3.3 Value Proposition Framework
| Price/Benefits Combination | Description |
|---|---|
| More for More | Premium products with premium prices (luxury positioning) |
| More for the Same | Superior quality at competitive prices (value advantage) |
| More for Less | High quality at low prices (often unsustainable long-term) |
| Same for Less | Comparable quality at lower prices (discount positioning) |
| Less for Much Less | Basic products at very low prices (economy positioning) |
3.4 Developing a Positioning Strategy
3.4.1 Identifying Competitive Advantages
- Product differentiation (features, performance, style, design)
- Service differentiation (delivery, installation, training, consulting, repair)
- Channel differentiation (coverage, expertise, performance)
- People differentiation (hiring, training better employees)
- Image differentiation (symbols, atmosphere, events, brand personality)
3.4.2 Selecting Competitive Advantages
| Criterion | Description |
|---|---|
| Important | Delivers a highly valued benefit to target buyers |
| Distinctive | Competitors do not offer it, or company can offer it more distinctively |
| Superior | Superior to other ways customers might obtain the same benefit |
| Communicable | Can be communicated and visible to buyers |
| Preemptive | Competitors cannot easily copy it |
| Affordable | Buyers can afford to pay for the difference |
| Profitable | Company can introduce the difference profitably |
3.4.3 Number of Differences to Promote
- Unique Selling Proposition (USP): Promote one benefit aggressively
- Multiple benefits: Position on multiple advantages (risk of confusion or disbelief)
- Rule of thumb: Focus on 1-3 key differentiators
3.5 Positioning Statement
| Component | Description |
|---|---|
| Format | To (target segment) our (brand) is (concept) that (point of difference) |
| Target Segment | Specific group of consumers the brand serves |
| Frame of Reference | Product category or competitor set |
| Point of Difference | How the brand is superior to alternatives |
| Reason to Believe | Evidence supporting the point of difference claim |
3.6 Communicating and Delivering Position
- Align all marketing mix elements (4Ps) with chosen position
- Ensure consistency across all touchpoints and communications
- Train employees to deliver the promised position
- Monitor customer perceptions through research
- Adjust positioning over time as markets evolve
3.7 Positioning Errors to Avoid
| Error | Description |
|---|---|
| Underpositioning | Failing to position the brand clearly; customers have vague idea of the brand |
| Overpositioning | Too narrow positioning; customers have too limited perception of the brand |
| Confused Positioning | Frequent changes or contradictory messages create unclear brand image |
| Doubtful Positioning | Claims are not believable given product features, price, or manufacturer |
4. Points of Parity and Points of Difference
4.1 Definitions
| Term | Definition |
|---|---|
| Points of Parity (POPs) | Associations that are not unique to the brand but shared with other brands; necessary to compete in category |
| Points of Difference (PODs) | Attributes or benefits strongly associated with a brand, positively evaluated, and believed to be unmatched by competitors |
4.2 Types of Points of Parity
| Type | Description |
|---|---|
| Category POPs | Attributes/benefits consumers view as essential for legitimate category offering |
| Competitive POPs | Associations designed to negate competitors' points of difference |
| Correlational POPs | Negative associations to overcome when establishing a positive association |
4.3 Criteria for Points of Difference
- Desirable to consumer: Personally relevant and important
- Deliverable by company: Feasible and affordable for firm to create/maintain
- Differentiating from competitors: Distinctive and superior to competition
4.4 Strategic Application
- Establish category POPs to be considered legitimate player
- Create competitive POPs to neutralize competitor advantages
- Develop strong PODs to win preference and loyalty
- Balance POPs and PODs for optimal positioning
5. Brand Mantras and Essence
5.1 Brand Mantra
| Component | Description |
|---|---|
| Definition | 3-5 word articulation of the heart and soul of the brand; internal positioning statement |
| Purpose | Guides employees and partners in brand-building decisions |
| Structure | Brand function + descriptive modifier + emotional modifier |
| Example: Nike | "Authentic athletic performance" |
| Example: Disney | "Fun family entertainment" |
5.2 Characteristics of Effective Brand Mantras
- Communicate: Define category of business and boundaries
- Simplify: Memorable and short
- Inspire: Relevant and meaningful to internal stakeholders
6. Repositioning
6.1 When to Reposition
- Changing customer preferences or needs
- New competitors entering the market
- Declining market share or sales
- Outdated or stale brand image
- Expanding to new target segments
- Negative associations harming the brand
6.2 Repositioning Strategies
| Strategy | Description |
|---|---|
| Strengthen Current Position | Reinforce existing position with more aggressive communication |
| Reposition Competition | Alter perceptions of competitors rather than own brand |
| Change Target Market | Appeal to different segment with adjusted positioning |
| Add New Associations | Layer additional benefits without abandoning core position |
| Complete Repositioning | Fundamentally alter brand position (high risk, high cost) |
6.3 Repositioning Challenges
- Existing customer alienation risk
- High costs of changing perceptions
- Time lag between strategy and perception shift
- Internal resistance from employees and stakeholders
- Consistency needed across all marketing activities
7. STP Integration and Application
7.1 STP Process Flow
- Market Segmentation: Identify segmentation variables → Develop segment profiles
- Market Targeting: Evaluate segment attractiveness → Select target segments
- Market Positioning: Identify positioning concepts → Select and develop positioning → Communicate position
7.2 Alignment with Marketing Mix
| 4P Element | STP Alignment |
|---|---|
| Product | Design features and benefits matching target segment needs and supporting position |
| Price | Set price levels consistent with segment willingness to pay and value proposition |
| Place | Select distribution channels accessible to target segment and reinforcing position |
| Promotion | Craft messages resonating with target segment and communicating position clearly |
7.3 Key Success Factors
- Base segmentation on actionable, measurable variables
- Select segments offering sustainable competitive advantage
- Develop clear, distinctive, believable positioning
- Ensure consistency across all brand touchpoints
- Monitor and adapt as market conditions evolve
- Align organizational resources and capabilities with strategy
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Apr 26, 2026 Last updated
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