click for presentation: Segmentation Overview   ©

Segmentation - Targeting - Positioning Overview

STP is the process of segmenting markets, targeting an attractive segment, and positioning the product with potential customers in the target group.  

In general,a segment is a relatively homogenous group of high potential customers who make their purchases based on similar criteria and motivations, act in a substantially similar way (e.g. decision processes, shopping patterns), and can be communicated to using the same focused media (e.g. watch the same TV shows or read the same magazines).

More specifically, segmentation is the definitional process of disaggregating a mass market into compartmentalized subsets based on criteria such as demographics (e.g. age, sex, location, income), psychographics (e.g. attitudes, interests, lifestyles), usage (e.g. heavy or light users), and benefits sought (e.g. convenience, safety, power).

Strategically, the most effective segmentation is typically based on a creative slicing of the market (like benefit segmentation), rather than the application of traditional demographic variables (like age or income).  

The next step, after defining alternative segmentation schemes, is the analytically based decision process of targeting, i.e. selecting segments that are inherently attractive and that closely match the company's strengths.  

In general, the most attractive segments to target are those that are:

(a ) Prospectively profitable: the segment's characteristics (e.g. price levels, growth rate) and competitive environment (e.g. number of competitors, basis of competition) are conducive to a growing pool of profits.

(b) Homogeneous within the segment, i.e. members are relatively similar with respect to attitudes, buying criteria, media habits, etc.

(c) Heterogeneous across segments, i.e. members in different segments have fundamental differences and act accordingly.

(d) Accessible: members can be reached effectively with communications, and shop in outlets through which products can be efficiently distributed.

(e) Winnable: the company's distinctive strengths match the segment's requirements and provide an advantage versus competition, so the company can reasonably expect an acceptable share of the industry profits.