Segmentation, Targeting, and Positioning (STP) in Marketing
Lecture context and core focus
Speaker: James Watson, senior tutor in Marketing 1001 at University of Sydney; also a consultant and practitioner with ~28 years in blue-chip companies across Australasia, Asia, Europe, and North America.
Course focus today: segmentation, targeting and positioning (STP) as the final topic before the mid-semester exam; STP overlays the marketing process rather than replaces it.
Emphasis on practical relevance: understanding STP is critical to sustain career success in marketing; misalignment between strategy and execution is costly.
Exam context mentioned: mid-semester exam scheduled for Saturday, September 13 at 12:10 PM; multiple-choice, closed-book; total questions: 46; weight: 23\%; duration: 60 minutes; content from lectures 1–6 and textbook chapters 1, 2, 3, 5, 6; preparation and pre-work emphasized.
Ground rules for the session: questions welcome; engagement through asking, participating, and using the space; “zoom thumbs up” as audience check-ins.
Encouragement to review pre-work, tutorials, and case prep; reality that some students may not be prepared, which increases risk in the exam.
Administrative note: changes to timetable communicated by announcements; students are responsible for venue and schedule updates.
The STP framework and its place in marketing
STP stands for Segmentation, Targeting, Positioning; a framework that aligns with the marketing process, overlaying it to guide strategy before tactics (the 4 Ps/7 Ps).
The marketing process sequence: audit/situation analysis (macro environment, company, customers, competitors) → strategy → tactics → execution → tracking/evaluation. STP sits between audit and tactics, guiding whom to target, how to position the offer, and how to differentiate.
Two funnels concept to illustrate decision-making under risk and resource use:
Green funnel: emphasizes volume of work and evidence-based decisions to reduce risk; more data and insight reduce risk downstream.
Red funnel: emphasizes the cost of mistakes and the rising spending required as decisions move toward execution; warns that poor input leads to poor output (crap in, crap out).
The consumer at the center: marketing aims to understand consumer values, needs, and how to capture value from them; segmentation uses consumer-based views rather than product-centric views.
The STP ladder in practice: audit (market/consumer/competitor insights) → segmentation (define groups) → targeting (choose one or more segments) → positioning (define how the brand will be perceived) → tactics and marketing mix (4P/7P) → tracking and adjustment.
Key principles of segmentation
Core idea: divide the market into groups of consumers with common needs to enable targeted, differentiated marketing.
Segments may be one or more in number; there is often a primary target audience and a secondary (optional) target audience.
Segmentation should be multi-dimensional: use two or more bases in combination to gain depth and accuracy.
Five criteria to assess segment attractiveness: ext{Measurable}, ext{Accessible}, ext{Substantial}, ext{Differentiable}, ext{Actionable}
Common segmentation bases (four core dimensions): geographic, demographic, psychographic, behavioral. These bases are often used in combination; relying on a single base tends to yield shallow insights.
Distinction between segmenting consumers (not products) and then designing products/services to meet the segment needs.
The art vs. science of segmentation: it is both a methodological process and a creative interpretation to identify unique, defensible segments.
Segmentation bases in detail
Geographic segmentation
Basis: location (country, region, city, climate, etc.).
Pros: convenient for media/promotion planning; scalable for multi-market firms.
Cons: assumes people in the same area share needs; this is not always true.
Demographic segmentation
Basis: observable population characteristics (age, gender, income, education, occupation, family status).
Pros: data is widely available and easy to measure.
Cons: does not explain the 'why' behind needs; typically non-overlapping but often insufficient alone; risk of mutually exclusive, collectively exhaustive pitfalls when not used carefully (e.g., overlapping age bands).
Psychographic segmentation
Basis: lifestyles, values, attitudes, interests, opinions, personality (often summarized with AIO: activities, interests, opinions).
Pros: rich, deep insights into motivations; can reveal why people do things.
Cons: data can be costly or unavailable for smaller firms; often relies on secondary research or databases (e.g., Roy Morgan values segments) that may need validation for the specific market defined.
Behavioral segmentation
Basis: knowledge, attitudes, uses, or responses to products (e.g., usage rates, loyalty, occasions, benefits sought).
Pros: directly tied to consumer behavior and product interaction; useful for mature markets and products with distinctive features.
Cons: may not capture underlying motivations or values; needs to be used in combination with other bases for depth.
Practical note: always use two or more bases in combination to produce meaningful, actionable segments; avoid mixing bases haphazardly (the slide shows a bad example to illustrate the point).
Building segments and moving to targeting
Step 1: Identify multiple segments using two or more segmentation bases (geographic, demographic, psychographic, behavioral).
Step 2: Develop basic profiles for each segment (e.g., for a sports shoes category: elite athletes, couch potatoes, everyday fitness enthusiasts, shoe collectors).
Step 3: Evaluate segment attractiveness using the five criteria (measurability, accessibility, substantiality, differentiability, and actionability).
Step 4: Select one or more target segments to pursue as the primary target (and consider secondary targets that may overlap in values but differ in priority).
Step 5: Develop a positioning strategy for the chosen target(s); ensure a clear, differentiating message.
Step 6: Create a customer profile for the target segment to guide tactics and touchpoints.
Targeting: primary vs secondary audiences
Primary target audience: the segment around which the organization concentrates most of its resources and communications.
Secondary target audience: additional segments that may overlap in values or benefits but differ in priority or importance.
Rationale: even if the primary audience is the main revenue driver, others may still respond to communications; do not ignore secondary audiences.
Example approach: universities typically target recent school leavers as the primary audience, but mature students or career changers can be secondary audiences with overlapping values.
Real-world implication: build messaging and touchpoints that can resonate across both primary and secondary audiences while keeping focus on the primary segment.
Positioning: creating a memorable and defendable position
Definition: positioning is how consumers perceive a brand or product in their minds; it is the basis for differentiation and messaging.
The marketer's job: align consumer perception with the intended brand image; if perception differs, reframe messages and experiences to restore alignment.
Value proposition vs positioning:
Value proposition: the bundle of benefits offered to the target segment; the actual offer in the market.
Positioning: how the brand is perceived; the image or identity the brand aims to own in the consumer’s mind.
They work together but are not identical; a strong value proposition must be supported by a coherent, differentiating positioning.
Points of difference (PoD) vs points of parity (PoP):
PoD: what you offer that competitors do not (distinctive advantages).
PoP: minimum required features or benefits to be considered a viable option (entry requirements).
Positioning statement structure (template with target, need, brand, and benefit):
To [target segment] who [need], [Brand] is [concept] that [benefits] while [differences from competitors].
Example: To busy mobile professionals who need always to be in the loop, Brand X is a wireless connectivity solution that gives you an easier, more reliable way to stay connected to data, people and resources while on the go.
Practical example: Kellogg Special K – positioning as a “no guilt snack” for dieting/health; value proposition includes low calories, health, taste, and brand trust; PoD relates to calories and low-fat attributes; PoP includes basic snack functionality.
Repositioning: brands evolve positioning over time to stay relevant (e.g., Amazon’s evolution from bookstore to marketplace; KFC’s repositioning in response to market dynamics).
Touchpoint integration: positioning must be reflected in tactics, marketing mix, and channel choices; the four Ps (and extended Ps) must work in an integrated fashion to bring the positioning to life.
The marketing mix (4Ps/7Ps) and the link to STP
Four core Ps (and extended seven Ps) must align with the positioning and value proposition:
Product: align with consumer values and the defined segment; translate insights into the actual offering.
Price: reflect the positioning (e.g., low-price vs premium); consider how price supports the overall image and value.
Place (distribution): ensure channels are consistent with where the target segment shops and consumes media.
Promotion: select messaging and channels that reach the target segment at the right time and place; ensure consistency with the positioning.
The aim: an integrated marketing mix where each P supports the value proposition and positioning, maximizing value capture and profit.
Profile-driven targeting and profiling tools
Consumer profiling: create detailed segment profiles to guide tactics; include name, needs, values, and reach points (touchpoints).
Example profile: “Scent Seeker” – target audience name; needs include awesome fragrance, great product experience, making the user feel good; touchpoints include social media presence (YouTube, Instagram) and other channels depending on the audience.
Touchpoints and channels: know where the target spends time and how to reach them effectively; avoid wasting budget on irrelevant channels (e.g., assuming all target groups are equally active on TikTok; consider older demographics who may prefer TV, newspapers, or radio).
Profile data sources: primary research and secondary databases (e.g., Roy Morgan values segments); use these as starting points and validate with market-specific research.
Practical note: the profile informs tactics, timing, and channel selection to support the positioning and value proposition.
Case illustrations and practical examples
Sports shoes example (four segments as starting point):
Segments: elite athletes, couch potatoes, everyday fitness enthusiasts, shoe collectors.
Values: high performance, comfort/cost, aesthetics/versatility, exclusivity/status.
Strategic choices: each segment offers different volumes, margins, and reach; the business context will shape which segment to target (e.g., high-volume, low-margin vs high-margin, niche segments).
Kellogg cereals: multiple brands targeting different dimensions (gender, age, lifestyle/psychographics); demonstrates multi-dimensional segmentation in practice.
Kellogg Special K example: value proposition focuses on health and no-guilt snacking; positioning builds on calories, low-fat attributes, health orientation, and trusted brand.
Heineken during COVID: illustrates the need to adapt marketing plans when external environment changes (outlets closed, new product formats like Heineken Zero emerged).
Coca-Cola and Facebook: classic examples of broad mass-market appeal; both have evolved over time in response to market changes.
Post-it notes: example of a product with a primary business audience but secondary household applications; demonstrates the need to recognize multiple target audiences in communications.
Important notes on execution and practical skill development
So what to do in group assignments: focus on a clear primary target audience, but acknowledge potential secondary audiences and design communications to touch both without neglecting the primary driver of revenue.
Customer profiling in practice: build a concrete, nameable segment (e.g., “scent seeker”) with needs, touchpoints, and behavior in mind; this profile should be used across teams to coordinate execution.
Touchpoints and channel strategy: useful to map where the target spends time (digital and traditional channels) to ensure messages are seen at the right time and place; consider the role of non-digital channels for broader age groups.
AI and positioning: AI can help with ideation, but positioning statements must come from the preceding work (situation analysis, strategy, and profiling) to preserve logical flow; avoid generating positioning in isolation without linkages to the analysis.
Common exam trap: misapplying bases or providing weak linkage between segmentation, targeting, positioning, and the marketing mix; ensure a coherent narrative from audit through to tactics.
Summary of key concepts and workflow (compact)
STP integrates with the marketing process: audit → segmentation → targeting → positioning → tactics → tracking.
Always use two or more segmentation bases in combination to create depth and meaningful segments; assess segments with measurable, accessible, substantial, differentiable, and actionable criteria.
Define a primary target audience and consider secondary audiences; build a detailed customer profile to guide tactics and touchpoints.
Positioning should create a sustainable differential advantage (PoD) and align with a coherent value proposition; ensure the positioning statement is clear, succinct, and easy for the whole organization to apply.
The marketing mix (4Ps/7Ps) should be integrated to deliver the value proposition and reinforce the positioning across channels and touchpoints.
Real-world examples (Dove, Kellogg Special K, Vegemite ice cream, Amazon, KFC) illustrate how positioning, PoD/PoP, and the value proposition interact with tactics and brand equity over time.
Key dates and exam-related reminders (for quick reference)
Mid-semester exam date: ext{Saturday, September 13}
Time: 12{:}10\text{ PM}
Exam format: 46 MCQs, closed book, duration 60 minutes, worth 23\% of final marks, content from lectures 1–6 and textbook chapters 1, 2, 3, 5, 6.
Preparation guidance: complete pre-work, review tutorials, study chapter readings, and complete mock exams in week six; use the weekend to bridge any gaps.
Closing guidance for exam readiness
Prioritize understanding of segments, target selection, and positioning as the core structure for the exam questions.
Be ready to justify segment attractiveness and the rationale for selecting a primary target audience.
Be prepared to articulate a positioning statement and connect it to a clear value proposition and to the marketing mix decisions.
Remember the pragmatic cautions: avoid relying solely on one segmentation base; ensure that the consumer perspective drives segmentation; maintain alignment across audit, strategy, and tactics; and adapt positioning to context as needed.