The Segmentation, Targeting and Positioning (STP) Marketing Model

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Use the STP Model to focus your sales and marketing efforts where they'll have the biggest payoff.

Sofia has just started a new job as a marketing manager for a fashion outlet. She conducts a careful analysis of sales data within the first few weeks, and quickly identifies a profitable opportunity with a particular group of high-value customers.

So, she brainstorms several ideas with her team, and they come up with an exciting new product which has the potential to be a real success for the company.

But how can Sofia check whether her idea will really work? How can her team members develop the perfect product for their target market? And how should they communicate its benefits?

In this article, we'll look at the Segmentation, Targeting and Positioning (STP) Marketing Model, an approach that you can use to identify your most valuable market segments, and then sell to them successfully with carefully targeted products and marketing.

What Is the STP Marketing Model?

The STP Marketing Model can help you to analyze your product offering and the way you communicate its benefits and value to specific groups.

STP stands for:

• Segment your market.
• Target your best customers.
• Position your offering.

The model is useful because it helps you to identify your most valuable types of customer, and then develop products and marketing messages tailored to them. This allows you to engage with each target group more effectively, personalize your messaging, and – ultimately – increase your sales.

STP Marketing: An Example

Marriott International® owns a number of different hotel chains that target specific consumer groups.

It splits its hotel portfolios into five key groups, each designed to target a different sub-set of consumer:

1. Luxury – targets the luxury consumer. These facilities provide bespoke, luxury experiences and include iconic brands such as The Ritz-Carlton, St Regis, JW Marriott, and W Hotels.
2. Premium – targets younger couples and business consumers. Premium brands offer sophisticated, chic hotels, and include classic brands such as Marriott Hotels and Sheraton, as well as more distinctive brands like Le MERIDIEN and Westin.
3. Select – targets seasoned travellers, and provides smart and modern amenities. Select brands include Courtyard Hotels, Four Points, Aloft Hotels and Moxy Hotels.
4. Longer Stays – targets families with children. These amenities are designed for longer vacations that mirror the comforts of home, and include brands such as Marriott Executive Apartments, TownePlace Suits, element, and Homes & Villas by Marriott International.
5. Collection – targets very high-end, luxury consumers looking for a special and unique experiences. Collection accommodations offer distinctive, luxurious experiences, and include brands such as Autograph Collection Hotels, Design Hotels, and the Tribute Portfolio.

As you can imagine, Marriott International doesn't communicate the same marketing message to all of its customers. Each hotel is designed and positioned to appeal to the unique wants and needs of a specific group.

Applying the STP Model

Follow the steps below to apply the STP Model in your organization. For each step, we've also provided a worked example using the fictitious travel firm, the Adventure Travel Company.

Step 1: Segment Your Market

Your organization, product or brand can't be all things to all people. So, use market segmentation   to divide your customers into groups of people with common characteristics and needs. This allows you to tailor your approach to meet each group's needs effectively, and gives you a huge advantage over competitors who use a "one size fits all" approach.

There are many different ways to segment your target markets:

• Demographic – by personal attributes such as age, marital status, gender, ethnicity, sexuality, education, or occupation.
• Geographic – by country, region, state, city, or neighborhood.
• Psychographic – by personality, risk aversion, values, or lifestyle.
• Behavioral – by how people use the product, how loyal they are, or the benefits that they are looking for.

Example:

The Adventure Travel Company is an online travel agency that organizes worldwide adventure vacations. It has split its customers into three segments, because it's too costly to create different packages for more groups than this:

• Segment A is made up of young married couples, who are primarily interested in affordable, eco-friendly vacations in exotic locations.
• Segment B consists of middle-class families, who want safe, family-friendly vacation packages that make it easy and fun to travel with children.
• Segment C comprises upscale retirees, who are looking for stylish and luxurious vacations in popular locations, such as Paris and Rome.

Step 2: Target Your Best Customers

Next, you need to decide which segments to target by identifying the group that will offer the largest return and will be the most profitable. There are several factors to consider here:

1. The profitability of each segment. Which customer groups contribute most to your bottom line?
2. The size and potential growth   of each customer group. Is it large enough to be worth addressing? Is steady growth possible? How does it compare with other segments? (Make sure that you won't be reducing revenue by shifting your focus to a niche market that's too small.)
3. How well your organization can service this market. For example, are there any legal, technological or social barriers that could have an impact? Conduct a PEST Analysis   to understand the opportunities and threats that might affect each segment.

Example:

The Adventure Travel Company analyzes the profits, revenue and market size of each of its segments. These are its findings:

• Segment A has profits of $8,220,000.
• Segment B has profits of $4,360,000.
• Segment C has profits of $3,430,000.

So, it decides to focus on Segment A, after confirming that the segment size is big enough (it's estimated to be worth $220,000,000/year.)

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Step 3: Position Your Offering

Finally, you need to identify how you should position your product to target the most valuable customer segments. Then, select the marketing mix   that will be most effective for each of them.

Consider why customers should purchase your product rather than those of your competitors. Do this by identifying your unique selling proposition   , and draw a positioning map   to understand how each segment perceives your product, brand or service. This will help you determine how best to position your offering.

Also, look at the wants and needs of each segment. A good way to do this is by pinpointing the problem that your product solves for these people. Create a value proposition   that clearly explains how your offering will meet this requirement better than any of your competitors' products, and then develop a marketing campaign that presents this value proposition in a way that your audience will appreciate.

Example:

The Adventure Travel Company markets itself as the "best eco-vacation service for young married couples" (Segment A).

It hosts a competition on Instagram® and Pinterest® to reach its desired market, because these are the channels that these target consumers tend to favor. It asks its followers on these channels to send in interesting pictures of past eco-vacations, and the best one wins an all-inclusive trip.

The campaign goes viral and thousands of people send in their photos, which helps build the Adventure Travel Company mailing list. The company then creates a monthly e-newsletter full of eco-vacation destination profiles.

* Originator unknown. Please let us know if you know who the originator is.