How to Master STP in Marketing: A Guide for MBA Students

"The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself." This quote by Peter Drucker makes perfect sense once you fully understand the concept of STP in marketing. STP stands for Segmentation, Targeting, Positioning - three simple words that help marketers understand their audience and offer them the right solutions and deliver the right message.

If you’re an MBA student, you might have come across this term many times in your academic journey. In this guide, we will break down this concept with easy explanations and examples, so that you don’t have any questions left unanswered.

What is STP in Marketing?

STP in marketing is a three-step marketing model that defines who your consumers are and how you communicate your product’s benefits to them. In other words, the STP marketing model means that you segment the market, then target your selected consumer group through tailored marketing campaigns and position your products or services to meet their desires. Before we get into the details of what each term in STP mean, let’s try to understand it through an example.

Example: An ice cream company segments (S) by lifestyle and age, targeting (T) health-conscious millennials aged 25-35 who exercise regularly and have disposable income. They position (P) themselves as the guilt-free premium treat that fits an active lifestyle.

Segmentation is the first step in STP marketing model. Segmentation means dividing the whole market into various groups based on shared characteristics such as age, gender, preferences, etc. Customers having similar needs and behaviours are put together in one group.

Let’s understand it through an example - A Pizza restaurant notices that it mainly has three groups of customers coming in:

1. Families who order a large pizza and want kid-friendly options
2. College students who are looking for cheap deals
3. Office workers who mainly come in for quick lunch meals that are also healthy

Now that they’ve identified their segments, they can easily target these groups through tailored campaigns, such as custom-making large pizza boxes for families that say, "large pizzas with toppings kids love!"

Segmentation helps businesses identify which group of customers they should target.

There are four types of market segmentation:

1. Demographic Segmentation
2. Geographic Segmentation
3. Psychographic Segmentation
4. Behavioral Segmentation

1- Demographic Segmentation: Demographic segmentation is when you divide your customers based on personal factors about them.

These factors are:

• Age: How old are they?
• Gender: What gender do they identify with?
• Income: How much money do they make?
• Education: Are they well educated?
• Family size: Are they Single or married? Do they have kids?
• Job: Do they have regular office working hours or are they self-employed?

2- Geographic Segmentation: People living in different countries and regions have varied tastes and preferences. Geographic segmentation divides customers into groups based on where they live.

They can be divided into groups based on:

• Country: Which country do they live in, and where were they born
• Region: North vs South vs East vs West
• City size: Big city vs small town vs rural area
• Climate: Hot vs cold vs rainy places
• Neighborhood: Rich area vs middle-class vs budget area

3- Psychographic Segmentation: Psychographic segmentation is dividing your consumers based on who they are, not what their age or education is, but who they really are on the inside.

What psychographics include:

• Lifestyle: How do they spend their free time?
• Values: What values do they hold important?
• Personality: Are they adventurous, or are they the kind of people who like to plan everything in advance?
• Interests: What do they love doing?
• Attitudes: How do they react to situations, and how do they think about things?

4- Behavioral Segmentation: Behavioral segmentation means dividing your customers based on their buying behaviors and patterns. This involves dividing them based on how they actually behave when they buy products and use them.

What behaviors do we look at?

• How often do they buy?
• When do they buy?
• How much do they spend?
• Why do they buy?
• How loyal are they?

Netflix is a perfect example of market segmentation done right. You might have noticed how your and your friends' home pages look different. That’s because they constantly monitor your viewing patterns, where you live, what language content you usually consume, etc., and then, they customize your feed accordingly and push different content to different groups of people. Thus, Netflix has applied STP in Marketing quite successfully.

What is Targeting?

Targeting is the second step of the STP marketing model. Here, you have to take a closer look at the segments you’ve created before and determine which of those segments is going to generate the most revenue for your business and what type of marketing campaigns would appeal most to your chosen segment.

In simple words, after you’re done with the segmentation, you decide - Hey, this is the customer group I want to impress.

Example: Let’s take the same pizza restaurant example as earlier. We saw that they had identified three customer groups. Now, they’ll assess factors such as, which group comes more often than others, which group spends more, and which group brings in more customers through word of mouth, etc. After assessing, they find out that office workers are the customers who come in almost every day are likely to spend more, and also bring their other colleagues. Now, they’ll specifically target them by launching healthier options on their menu.

Targeting is important so that a business doesn’t spend its time and resources on the wrong group of people through the wrong means and thus, get no return on investment.

There are many ways to target customer groups. The type of targeting you choose depends on your business and profit goals, and it varies from business to business:

1- Concentrated Targeting (Single Target)

• Pick ONE specific group and focus everything on them
• Example: A gaming company targets only hardcore PC gamers
• Good for: Small businesses, startups, specialized products

2- Differentiated Targeting (Multiple Targets)

• Target several different groups with different approaches for each
• Example: Nike targets athletes, casual fitness people, AND fashion-conscious youth with different product lines
• Good for: Big companies with resources

3- Undifferentiated Targeting (Mass Market)

• Target everyone with the same approach
• Example: Coca-Cola markets the same way to almost everyone
• Good for: Products everyone needs/wants

4- Micromarketing (Hyper-Focused)

• Target very tiny, specific groups
• Example: A store selling only left-handed golf clubs
• Good for: Niche products, luxury items

What is Positioning?

Positioning is the third and final step of the STP marketing model. Positioning means to place your product or service in your target customer’s mind, so that your product looks superior compared to other similar products in the market. There are a lot of businesses that sell similar products to that you do; hence, you need to find something that’s different and can make you stand out even when the market is cluttered. The way you position your product depends primarily on the size of your target market.

There are 3 positioning factors that can help you gain a competitive edge when you’re applying STP in marketing:

Symbolic positioning: This type of positioning is done to enhance the image or boost the ego of your customer. They are a definition of status. A Birkin Bag is a great example of this. It serves the same purpose as any other bag, but people still spend a lot on it just because they believe it enhances their image.

Functional positioning: This positioning is done to show customers that your product can truly solve their problem and add value to their lives.

Experiential positioning: This positioning focuses on the connection that consumers have with a certain brand. It can be an emotional connection to a certain product or nostalgia.

Apple is a great example of excellent positioning. They do not compete on price as there are many Android phones that are cheaper. They do not compete on technology, as Samsung has better technology, like their camera. Over the years, they have positioned themselves as a symbol of luxury and status, and that’s why people go crazy when Apple launches a new iPhone model.

How to Structure STP Analysis Assignment

MBA students are often asked to read about STP in marketing and write STP Analysis papers as a part of their coursework. Let’s see how you can write a perfect STP analysis assignment and impress your professors by giving them exactly what they want:

Standard Paper Structure:

1- Executive Summary

• Company background (2-3 sentences)
• Key segmentation findings
• Target recommendation
• Positioning strategy
• Expected impact

2- Market Overview

• Industry context and market size
• Competitor landscape
• Current challenges/opportunities

3- Segmentation Analysis

• Segmentation criteria used (demographic, behavioral, etc.)
• 3-5 distinct segments with clear names
• Detailed segment profiles with size and characteristics
• Segment evaluation matrix rating attractiveness

4- Targeting Strategy

• Primary target selection with justification
• Targeting approach (concentrated/differentiated)
• Resource and capability fit analysis

5- Positioning Strategy

• Competitive positioning map
• Clear positioning statement: "For [target], [brand] is the [category] that [benefit] because [reason]."
• Differentiation from competitors

6- Implementation

• Marketing mix implications
• Timeline and success metrics
• Risk assessment

The above structure will surely help you when writing your next STP analysis assignment. Make sure to support your recommendations with data and use executive language instead of academic jargon. It’s always a good idea to include visual elements like charts and tables, and don’t forget to connect everything back to the business objective. Remember, showing your strategic thinking is more important than concept knowledge. If you’re still confused about STP in marketing and are not sure how to start your STP assignment, you can reach out to us anytime. At India Assignment Help, we have 100+ experts who hold an MBA in marketing from prestigious universities. They will be happy to assist you with careers and even work on your assignment from scratch!