What Is Segmentation, Targeting, and Positioning? STP Explained With Real Brands

Segmentation, targeting, and positioning (STP) is a three-step marketing model: you split a market into groups of similar customers, choose the groups you want to serve, and then shape how those customers see your brand compared with competitors. STP answers three questions in order: who is out there, who should we serve, and why should they choose us?

Philip Kotler made STP a core part of modern marketing education, and it still sits at the start of most marketing plans. You decide on your product, price, place, and promotion only after STP is done. Below, each step is explained in plain terms, followed by how McDonald’s, IKEA, Coca-Cola, Adidas, and Chick-fil-A use STP today.

Key Takeaways

• STP stands for segmentation, targeting, and positioning, and the three steps always happen in that order.
• Segmentation splits a market by demographic, geographic, psychographic, or behavioral traits.
• Targeting chooses which segments to serve, using one of four strategies: undifferentiated, differentiated, concentrated, or micromarketing.
• Positioning defines the place a brand wants to hold in customers’ minds compared with competitors.
• STP comes before the 4Ps, because product, price, place, and promotion depend on who you target and how you position.

What Are the 3 Steps of the STP Model?

What is STP in marketing? STP is the planning step that connects market research to the marketing mix. It turns “everyone could buy this” into a clear picture of a specific customer and a clear reason for that customer to buy.

Where did STP come from? The idea of market segmentation was first set out by Wendell Smith in a 1956 Journal of Marketing article. Positioning became popular through a 1972 Advertising Age series by Al Ries and Jack Trout, later expanded in their 1981 book Positioning: The Battle for Your Mind. Kotler and Armstrong’s Principles of Marketing combined both into the STP model taught in business schools today.

Why Is STP Important in Marketing?

STP stops a business from spending money on people who will never buy. A message written for “everyone” is usually too general to persuade anyone.

The main benefits are:

• Focused budget: ads, content, and sales effort go to the customers most likely to buy.
• Better products: knowing a segment’s needs helps you design features, sizes, and prices that fit.
• Clear messaging: one well-defined customer is easier to write for than a whole population.
• Stronger competitive position: you choose where to compete instead of fighting every rival on every front.
• Easier measurement: you can track sales, retention, and growth by segment.

How are segmentation, targeting, and positioning interrelated? Each step uses the result of the step before it. You cannot pick a target without segments to choose from, and you cannot position a brand until you know whose mind you are trying to win.

Step 1: What Is Segmentation in STP?

Market segmentation is the process of dividing a broad market into smaller groups of customers who share similar needs, traits, or buying behavior. The four main bases are:

Most brands combine several bases. A segment like “budget-conscious parents in the suburbs” mixes income, life stage, and location. For more ways to group customers, see our guides to customer segmentation and market segmentation examples.

What makes a segment useful? Kotler and Armstrong list five tests. A good segment is:

1. Measurable: you can estimate its size and buying power.
2. Accessible: you can reach it through channels you can afford.
3. Substantial: it is large or profitable enough to be worth serving.
4. Differentiable: it responds differently from other segments.
5. Actionable: you can build a marketing program that attracts it.

B2B note: business markets use similar logic with different variables, such as industry, company size, location, and buying process. This is sometimes called firmographic segmentation.

Example (hypothetical): A small fitness studio in Denver splits its local market into office workers who want early-morning classes, new parents who need childcare, college students on tight budgets, and retirees looking for low-impact workouts.

Step 2: What Is Targeting in STP?

Targeting is the process of judging each segment and choosing which ones to serve. A business compares segments on size, growth, profit, competition, and fit with its own strengths.

What are the 4 targeting strategies?

The right choice depends on your budget and your product. Small businesses often start with concentrated targeting because they cannot afford to serve every segment well. Large brands with many products tend to use differentiated targeting. Our target marketing guide covers each strategy in more detail, and our article on levels of market segmentation explains how these strategies connect to segment size.

Example (hypothetical): The fitness studio targets office workers. They are a large group nearby, they can pay full price, and early classes fill time slots that are empty today.

Step 3: What Is Positioning in STP?

Positioning is how a business wants its target customers to think about its brand compared with competitors. It is the reason a customer should pick you over the next option. Our market positioning guide covers the concept and its types in full.

A positioning statement puts this into one sentence. A common format is:

For [target customer] who [need], [brand] is the [category] that [key benefit], because [proof].

IKEA’s positioning, written in this format, could read: “For young adults and families furnishing a home on a budget, IKEA is the home furnishings store that offers well-designed, functional furniture at prices most people can afford, because flat-pack design and self-service keep costs low.” See our step-by-step guide to writing a market positioning statement.

What is a perceptual map? A perceptual map, also called a positioning map, is a simple chart with two axes, such as price and design quality. You plot your brand and competitors on it to see where the open space is. IKEA, for example, sits between discount stores that compete on price and premium brands that compete on design. Our guide to creating a market positioning strategy shows how to build one.

Example (hypothetical): The studio positions itself as “the 45-minute class that gets you to work on time,” with classes at 6 a.m. and showers on site.

How Do Real Brands Use STP?

The table below summarizes STP for five US brands, using data from our target-market breakdowns.

Two lessons stand out.

Targeting also means choosing who not to serve. Chick-fil-A closes every Sunday and does not compete on a value menu. It still made $23.9 billion in US sales in 2025, because it serves its chosen customers very well.

Mass-market brands still segment. McDonald’s and IKEA both aim at almost everyone. But each one shapes deals, menus, store formats, and messages for specific groups within that mass market.

What Is the Difference Between STP and the 4Ps?

STP and the 4Ps are two stages of the same plan. STP decides who you serve and what you stand for. The 4Ps (product, price, place, and promotion), also called the marketing mix, decide how you deliver on that promise.

If the 4Ps do not match the positioning, customers get mixed signals. A brand that claims “premium quality” but sells at the lowest price in the category confuses the market.

What Are Common Mistakes in STP?

• Segments that are too broad: “women aged 18 to 65” is not a segment. It is half the market.
• Picking segments by size alone: a large segment with strong competitors and low margins can be worth less than a small, loyal one.
• Skipping research: segments should come from real customer data, such as sales records, surveys, and website analytics, not from guesses.
• Positioning on something customers do not care about: your difference must matter to the target segment.
• Never revisiting STP: markets change. Review your segments and positioning at least once a year, or when sales patterns shift.

Bottom Line

STP is the most useful model I know for turning a vague idea of “our customers” into a plan you can act on. For me, targeting is the step where most small businesses go wrong, because they try to serve everyone and end up standing out to no one. Start with one segment you can reach and serve better than anyone nearby. Once that works, use the same three steps to add the next segment.

Frequently Asked Questions