Most business owners understand the importance of market research: Before you start a new company or launch a new product, you need to know who your customers are, identify your competitors, and understand the forces at play in your industry.
The problem is, markets can be massive. Consider the global smartphone market, for example. It represents over 5.4 billion consumers and is valued at more than $510 billion. What’s a business owner to do with that information? Where do you start?
Many businesses use something known as STP marketing to break large markets like this into smaller subgroups, identify the most promising audience segments, and develop targeted messaging strategies. Here’s what STP marketing is and how to use it to build a more effective marketing strategy.
What is STP marketing?
Segmenting, targeting, and positioning (STP) is a marketing strategy that helps businesses position products or services to meet the needs of a specific consumer group (or groups). The STP marketing model can help companies increase brand loyalty, boost sales, and deliver more personalized and effective marketing messages.
STP elements
The STP model has three steps: dividing your market into smaller groupsof consumers, identifying the most valuable customer segments, and repositioning your products or services based on what you learn. Here’s an overview of each phase:
1. Segmentation
Segmentation is the process of dividing your general audience into smaller consumer groups, or segments. Businesses can choose from multiple segmentation criteria. A company that sells organic pet food, for example, might segment customers by the type of pet they have, geographic location, income bracket, or a combination of these factors.
Here’s common criteria businesses use to segment target audiences:
- Demographics. Many businesses group customers according to demographic factors like age, gender, or income.
- Geography. Geographic segmentation groups customers by country, state, region, or metropolitan area.
- Psychographics. Psychographic segmentation focuses on personality traits linked to buying decisions, such as risk aversion or a desire to seek out new experiences.
- Behaviors. Behavioral segmentation groups customers based on engagement patterns such as purchase frequency or preferred shopping channels.
- Values. You can also segment an audience based on specific values or beliefs, like political affiliation or commitment to a specific social cause.
2. Targeting
The targeting phase involves reviewing consumer segments to identify a business’s most valuable customers. Here’s an overview of the criteria businesses use in the decision-making process:
- Size. Attractive segments are large enough to generate meaningful sales figures, though size thresholds vary by business type. A global fashion retailer will target a larger pool of potential customers than a handcrafted silk scarf business, for example.
- Profitability. Profitable segments have low customer acquisition costs (CAC) relative to the average customer lifetime value (CLV). In other words, a segment is likely to be profitable if you can afford to reach its members and they’re willing to spend money on your products.
- Benefits. You can also evaluate segments based on the benefits your company provides to the group. A meal kit delivery company, for example, might determine they can target those who would benefit most from the brand’s efficiency angle.
3. Positioning
You’ll use information about your chosen segments to develop a brand positioning strategy that resonates with your target audiences and differentiates your company within your market. These are the main positioning models:
- Symbolic positioning. Symbolic positioning supports a customer’s self-image or ego. Luxury brands like Mercedes and Rolex use symbolic positioning to associate their products with high social status.
- Experiential positioning. Experiential positioning focuses on a customer’s interaction with your products, often emphasizing fun or cognitive stimulation. Travel and hospitality companies like Airbnb and Delta Airlines use experiential positioning to encourage an emotional connection with their brands.
- Functional positioning. Functional positioning addresses how a product solves a customer’s problems. Many SaaS companies use this strategy; the task management platform Asana, for example, positions its product as a solution to workflow and process organization challenges.
How to create an effective STP marketing strategy
- Define your market
- Segment your market
- Identify segments to target
- Choose a positioning strategy
- Develop your marketing mix
The STP process can help you better understand your customers and design more effective marketing campaigns. Here’s how to get started:
1. Define your market
Start by defining your total potential target audience, also known as your target market. One popular approach starts with the TAM model, where the total addressable market (TAM) includes every individual who could potentially become a customer. From there, you look at the service available market (SAM), which represents the total number of people within the market who are a fit for your specific product type or service region. Then you can look at the serviceable obtainable market (SOM), which represents the people you can realistically expect to capture.
You can consult industry resources and review your historical performance to calculate TAM, SAM, and SOM for your business.
2. Segment your market
Next, select audience segmentation criteria and segment your market into customer groups. Many businesses apply multiple overlapping criteria to create niche segments, which allows them to develop highly personalized marketing campaigns later on.
Start by considering the factors that influence who needs your products. A company that sells kosher women’s multivitamins, for example, might use gender and religious affiliation as segmentation criteria. You can also conduct a competitive analysis to isolate market gaps or use your own customer data for insights into criteria linked to purchasing decisions. If you notice a difference in conversion rates by browsing habit, geographic region, or income level, for example, you might add these criteria to your list.
Once you’ve selected your criteria, use market research strategies like conducting focus groups or reading industry publications to create audience segments. You can also simplify the process using market segmentation tools.
3. Identify segments to target
Evaluate your segments for size, profitability, reachability, and benefits, and choose one or more target audience segments. Many businesses also consider differences between segments during this phase. If your target segments are too similar, you won’t be able to adequately differentiate your positioning and marketing communications for specific segments. Consider combining groups or applying different segmentation criteria to differentiate groups instead.
4. Choose a positioning strategy
Evaluate positioning strategies and determine the best approach for your chosen market segment. Here are five popular strategies:
- Competitor-based positioning. This positioning strategy outlines your company’s advantages relative to other similar brands in the market.
- Price-based positioning. Price-based positioning involves highlighting the value you provide relative to cost, whether that’s higher, lower, or at the prices of competitors.
- Attribute-based positioning. Attribute-based positioning emphasizes a particular value proposition or unique selling point for your product.
- Consumer-based positioning. This positioning strategy focuses on the fit between your product or service and your target customer’s needs.
- Prestige-based positioning. This strategy positions your brand as exclusive, offering a status or ego boost to consumers who purchase your products.
You can also use a product positioning map (or matrix) to visualize your market position relative to your major competitors.
5. Develop your marketing mix
The STP marketing process redefines your target customer base and your brand positioning. You’ll have a better idea of who you’re selling to, a narrower target audience, and a new approach to differentiation within your market.
You can use this information to assemble a marketing mix, a framework that helps businesses develop targeted messaging and deploy it within a larger marketing plan. A marketing mix consists of four elements: product, price, place, and promotion.
A tailored marketing mix forms the foundation of a solid marketing strategy. It can support message consistency, and help you identify the best channels for your digital marketing efforts.
STP marketing example
Brooklyn-based superfood company Golde successfully used the STP process to refine its positioning. CEO and cofounder Trinity Mouzon Wofford discusses how Golde leveraged market and customer research while maintaining an authentic brand identity. “In the first couple of years, our strategies were very organic,” she says. “We didn’t set out with surveys and data points. We were really just telling our story.”
Here’s how it ended up working out:
Gradual integration of STP
Trinity credits the brand’s early success to this strategy, adding that the company integrated STP tactics later on: “As we matured, there was a sense of, okay, who’s coming to us? Let’s measure that with interviews and data collection. We found that one of the big reasons customers use our products is that they love the ritual. It’s very experiential. There are absolutely customers that use our product because they say, well, I have this problem and I need this solved, but if you look at their feedback they’re also saying it’s just so delicious, and I just love it, and I look forward to it.”
Feedback leads to adjusted positioning
Golde used this feedback to adjust its positioning, integrating messages like, “Your feel-good ritual starts here,” into its brand materials and releasing aesthetically pleasing accessory products like a papaya-glaze Matcha bowl and bamboo whisk. “What really differentiates our brand offering is people just taking the time to make the product and making it their own, and we found that that sort of messaging also can be really impactful,” Trinity says.
Initial successes lead to new insights
Trinity also cites the company’s best-selling product Pineapple Debloat Ade as an STP success. “We were seeing in our data that our customer was very concerned with gut health, so that was one of the reasons why we ended up launching Debloat, which is now one of our top sellers,” she says.
At the same time, she cautions against letting market research and customer feedback distract you from your authentic brand identity: “It’s super valuable to get certain data points from your customers, but there is that balance of where are we going to let the customer lead us, and then where are we also going to offer our perspective and draw our line in the sand.”
Sticking to a segmentation plan
By narrowing down your audience, you’re more likely to make a lasting connection. “It comes back to segmentation,” says Trinity. “If you try to please everyone, you don’t really have any differentiation. You don’t have a point of view, and it’s just not going to capture the attention of a potential customer.”
STP marketing FAQ
What is STP in marketing?
STP stands for segmenting, targeting, and positioning. It can provide a competitive advantage by helping companies identify the most profitable target audiences and design more effective marketing strategies at a reduced marketing cost.
What is an STP marketing example?
Brooklyn-based superfood company Golde successfully used the STP process to refine its positioning.
What are the three steps involved in STP marketing?
STP marketing focuses on three steps: segmenting, targeting, and positioning. This can help businesses identify niche markets and reposition their companies for success.
