Kateb University

Master of Business Administration

Subject: Advanced Marketing

Management
Lecture: Third Lecture
Lecturer: Musa Farooqi
Talking Points of Third Lecture:
Introduction to Segmentation, Targeting &
Positioning (STP)
Segmentation
Effective Segmentation Criteria
Targeting
Criteria Consider When Choosing Target
Segment
Positioning
Examples of Market Positioning
A Perceptual Map in Market Positioning
How to Build an STP Marketing Strategy
STP Case Studies
 Introduction to Segmentation,
Targeting & Positioning (STP)
 Do you know the secret behind the success
of Apple, Nike, BMW? It is a perfect mixture
of the market segmentation positioning and
targeting.
 There’s a common saying in the business
world, “If you try to be everything to everyone,
you’ll end up becoming nothing to anyone.”
 Reaching the right people with your business’s
message is key.
 STP marketing is an acronym
for Segmentation, Targeting, and Positioning –
a three-step model that examines your
products
3 or services as well as the way you
 Introduction to STP
 STP is a strategy that helps businesses figure
out who their most important customers are,
focus their marketing efforts on these groups,
and make sure their brand stands out from the
competition.
 STP marketing is like a roadmap for selling
products or services. It's about splitting the
market into different groups (segmentation),
choosing which groups to sell to (targeting),
and making your product appeal specifically to
those groups (positioning)
 "There is only one winning strategy. It is to
carefully
4
define the target market and direct a
superior offering to that target market.“ Philip
 Segmentation
 Segmentation refers to the process of
dividing the whole market into small
subgroups based on certain
characteristics like age, gender, taste,
preferences etc. Customers having
similar needs and behaviors are to
be put together. A market segment
is a portion of the whole market that is
expected to respond similarly to a given situation.
This process allows you to group your individual
audience members into similar groups so you can
better communicate your products, features, and
benefits that may be most relevant to them.
5
 Segmentation
 The four main types of audience
segmentation include:
 Geographic segmentation: Dividing your
audience based on country, region, state,
province or even city specific.
 Demographic segmentation: Dividing your
audience based on age, gender, education level,
occupation, gender, income etc.
 Behavioral segmentation: Dividing your
audience based on how they interact with your
business: purchase pattern, how often they buy,
what they browse, customer loyalty, purchase
behavior , occasion or timing etc.
6
 Psychographic segmentation: Dividing your
 Segmentation
 Audience segmentation requires knowledge
of your audience, which can be achieved
through solutions like Sales force CDP
(Customer Driven Platform) that unify data
from various touch points and use AI to
extract valuable insights. By enriching this
data with first-party data from platforms like
social media and websites, marketers can
create a comprehensive view of their
audiences. With accurate population counts
and AI-enabled features, highly targeted
and customized audience segments can be
created
7 efficiently.
 Effective Segmentation Criteria
 Followings are the effective
segmentation criteria;
 Measureable: The size, purchasing
power and characteristics of segment.
 Substantial: Segment should be large
and profitable enough to serve
 Accessible: Segments can be effectively
reached and accessible.
 Differentiable: Difference in segment.
Segment must respond differently to
different
8
market mix program.
 Targeting
 The process of evaluating market segments
and choosing the best to target. In simple
terms, it is a process of choosing the best
target audience for the product/service and
declaring the other segments to be useless
for a particular kind of product/service.
 A business must determine the target audience
after thorough research; otherwise, the business
is going to end up wasting time and resources
with no return on investment.
 Your ideal segment is one that is actively
growing, has high profitability, and has a low cost
9
of acquisition.
 Criteria Consider When Choosing
Target Segment
 You should ideally consider the
below criteria to choose your
targetable segments:
 Size: Consider how large your
segment is as well as its future
growth potential. Your audience
segments must have enough
potential customers to be
worth marketing to. If your
segments are too small, you may not get
enough conversions to justify your marketing
efforts.
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 Criteria Consider When Choosing
Target Segment
 Reachability: Consider how easy or difficult
it will be for you to reach each segment with
your marketing efforts. Consider customer
acquisition costs (CACs) for each segment.
Higher CAC means lower profitability.
 There are limitless factors to consider when
selecting an audience to target. So be sure
that everything you consider fits with your
target customer and their needs.
 Profitability: Consider which of your
segments are willing to spend the most
money on your product or service. Determine
the
11 lifetime value of customers in each
 Criteria Consider When Choosing
Target Segment
 Difference: There should be a measurable
difference between any two segments. The
lack of it leads to unnecessary duplication of
efforts.
 Benefits: Different benefits attract
different segments. In a milk based product
example, Segment A would go for dairy-milk
and Segment B would go for non-dairy milk.
 Knowing which audience segments to target
comes from having all-around visibility of
those segments in one place. This makes
comparing segments and weighing the pros
12
and cons of targeting some segments over
 Positioning
 The final step in this framework is positioning,
which allows you to set your product or services
apart from the competition in the minds of your
target audience.
 In positioning, you use the insights gained from
segmentation and targeting to decide how
you’re going to communicate your product to
chosen audience segments.
 While segmentation and targeting are about
customers, positioning is about your product
from the customer’s perspective. You can
consider positioning as the bridge that connects
your product with the audience. This is the
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stage where you perform competitor analysis,
 Positioning
 Followings are positioning strategies/factors
that can help you gain a competitive edge:
 Product attributes and
benefits: Associating your brand/product
with certain characteristics or with certain
beneficial value/high quality.
 Product price: Associating your
brand/product with competitive pricing.
 Product use and application: Associating
your brand/product with a specific use.
 Competitors/ Competitive
Advantage: Making consumers think that
your
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brand/product is better than that of your
 Examples of Market Positioning
A ladies' shoe company might
position its products as a status
symbol.
 A fast-food chain that serves
sandwiches might position itself as
the healthier fast-food option.
 A car company might position itself
as the safest option for a family.
A smart-phone company
may
15 position its product as having
 A Perceptual Map in Market
Positioning
 A perceptual map is used to show
consumer perception of certain
brands. The map allows you to
identify how competitors are
positioned relative to
you and to identify
opportunities in the
marketplace. An example
of consumers perception
of price and quality of brands in the
automobile industry are mapped below:
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 How to Build an STP Marketing
Strategy
 Step 1: Define your market
 The world may be your

market, but breaking it

down into manageable
segments is how you
conquer it. To know the
market segment in which
you can hit the bullseye,
you start by defining your
Total Available Market (TAM)
, Serviceable Available Market (SAM), and
Serviceable Obtainable Market (SOM). Let’s look at
what
17 each of these is:
 How to Build an STP Marketing
Strategy
 Total Available Market (TAM): TAM is the total
market demand for a product or service. In other
words, it’s the biggest available market for the
brand. TAM is the maximum revenue that a
business can generate if it achieves 100% of its
market share.
 Serviceable Available Market (SAM): SAM is a
subset of TAM, that is, a portion of the total
available market that fits your product or service.
You can define SAM by geographical or product
specialization constraints.
 Serviceable Obtainable Market (SOM): SOM is
a subset of SAM, that is, the segment of the
serviceable
18 available market that you can
realistically reach after considering factors like
 How to Build an STP Marketing
Strategy
 Step 2: Create Audience Segments: Now that
you’ve defined your market, divide it further
based on demographics (age, income),
geographic (location), psychographics (interests,
lifestyle) as well as behavioral patterns (purchase
history, website visits). The more levels deep this
goes; more accurate will be different segments
within your audience.
 Step 3: Develop Segment Profiles:
 You should develop detailed profiles for each of
your viable market segments. These should
include descriptions of their needs, behaviors,
demographics, brand preferences and how they
shop.
19 This will enable you to compare them and
 How to Build an STP Marketing
Strategy
 Step 4: Evaluate Segment Attractiveness:
Collate findings from market data and client
studies against each other in order to evaluate
the attractiveness of different segments.
Important things to think about are the size of
each segment, its growth rate, price sensitivity
as well as brand loyalty levels shown by
members of these segments towards certain
products or services. Identify the segments with
the highest potential return on investment (ROI).
 Step 5: Select Target Audience(s): From your
research and segment attractiveness, select the
target audience(s) which best fit into
your
20 business strategy as well as overall
 How to Build an STP Marketing
Strategy
 Step 6: Develop a Positioning Strategy:
Devise what sets you apart from other
players in your industry that will also be
appealing to those you want to reach out to
with this message. This can include but not
limited to:
 Competitor-based positioning: where you
show in what aspects better than your
competitor.
 Consumer-based positioning: how well
your product aligns with consumer needs.
 Price-based positioning: how you’re
competitively
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priced and give customers
 How to Build an STP Marketing
Strategy
 Step 7: Choose Your Marketing
Mix: The final step is to implement
your STP marketing strategy. Develop
a “marketing mix” that fits where you
have position your brand plus gets the
attention of the people you have
identified as your consumers. The
mixture of marketing stands for
Product (features, design, quality);
Price (pricing strategies, discounts);
Place
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(distributive channels); and
 STP Case Studies
 McDonald’s
 Segmentation – McDonald’s segments its market
based on several factors:
 Demographics: They consider age, gender,
income, and family size. For instance, they have
offerings like Happy Meals for children and Value
Meals for budget-conscious consumers.
 Psychographics: McDonald’s taps into consumers’
lifestyles and personalities. For example, they
offer healthy options for health-conscious
individuals and late-night hours for those seeking
convenience.
 Behavioral: They target customers’ buying
behavior, through the frequency of visits and order
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preferences. They have tailored options for regular
 STP Case Studies
 McDonald’s
 Targeting – McDonald’s primary target audience
includes:
 Families: They provide a family-friendly
atmosphere with play areas and offerings like
Happy Meals, targeting parents and children.
 Young Adults: The menu offers a range of
products that are appealing to young adults,
from classic burgers to trendy items like wraps
and salads.
 Teens: They attract teenagers with affordable
items, quick service, and a place to hang out.
 Children: Through Happy Meals, toys, and
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colorful packaging, they create an appealing
 STP Case Studies
 McDonald’s
 Positioning: McDonald’s positions itself using the
following strategies:
 Convenience: They emphasize fast service, drive-
through options, and extended hours, positioning
themselves as a quick and convenient dining option.
 Affordability: McDonald’s offers value menus and
combo meals at reasonable prices, targeting budget-
conscious consumers.
 Variety: Their diverse menu caters to different
tastes, from classic burgers to salads and healthier
options, appealing to a broad range of preferences.
 Consistency: McDonald’s maintains a consistent
quality and taste across its global locations, creating a
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sense of familiarity and reliability.

 STP Case Studies
 Apple
 Apple has nailed the STP model. It positions
itself as a lifestyle, targeting those audience
segments with a keen design aesthetic, who
want to stand out from the crowd, and are
well-off. Apple follows a “closed” software
ecosystem with an emphasis on security. In
doing so, it creates an aura of exclusivity
that makes people feel privileged to own
Apple products. Apple’s STP model works so
well that the brand name has become
synonymous with expensive, high-
performance,
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luxury gadgets.
 STP Case Studies
 Coca-Cola
 Coca-Cola is one brand that has the entire world
as its market. But it also has cut-throat
competition in the form of another brand, Pepsi.
To gain a competitive edge over Pepsi, it
introduced new variants such as Diet Coke and
Coke Zero to target niche, health-conscious
audience segments. It also brought in more
flavored variants to target the younger,
experiential population.
 Beyond segmentation and targeting, Coca-Cola
positions itself as a drink that brings families and
friends together. This is evident from its
advertisements,
27 which typically feature get-
 Benefits of STP marketing
 Segmentation, targeting, and positioning (STP) is
a marketing strategy that helps businesses
effectively reach their desired audience. Here are
the benefits of each component:
 Segmentation
 1. Better Understanding of Customers:
Segmentation allows businesses to identify
distinct groups within a market based on
demographics, psychographics, behavior, or
geography. This leads to a deeper understanding
of customer needs and preferences.
 2. Tailored Marketing Efforts: By segmenting
the market, companies can create more targeted
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marketing campaigns that resonate with specific
 Benefits of STP Marketing
 3. Resource Optimization: Businesses can
allocate resources more efficiently by focusing on
high-potential segments rather than trying to
appeal to the entire market.
4. Increased Customer Satisfaction:
Understanding different segments enables
companies to tailor products and services that
better meet the specific needs of each group.
 Targeting
 1. Focused Strategy: Targeting allows
businesses to concentrate their marketing efforts
on the most promising segments, increasing the
likelihood of conversion and sales.
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 2. Competitive Advantage: By identifying and
 Benefits of STP Marketing
 3. Enhanced Customer Loyalty: Tailored
offerings that meet the specific needs of
target segments can lead to stronger
customer relationships and loyalty.
4. Higher Return on Investment (ROI):
Targeted marketing campaigns typically
yield better results, as they are designed to
appeal directly to the chosen audience.
 Positioning:
 1. Clear Brand Identity: Effective
positioning helps establish a clear and
distinct identity for a brand in the minds of
consumers,
30
making it easier for them to
 Benefits of STP Marketing
 2. Value Proposition Clarity: Positioning
communicates the unique benefits and
value that a product or service offers,
helping customers see why they should
choose it over competitors.
 3. Improved Market Perception: A
strong positioning strategy can enhance
how customers perceive a brand, leading to
increased trust and credibility c
4. Guided Marketing Communication:
Positioning provides a framework for all
marketing messages, ensuring consistency
across
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channels and touch points.
End of the Third Chapter

Thank you

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