MKB1700 · Fundamentals Of Marketing
Segmentation, Targeting & Positioning
STP is where the subject pivots from understanding the market to acting on it. No firm can satisfy everyone, so it cuts the market into groups (Segmentation), picks which to chase (Targeting), then designs a clear, distinct image for each chosen group (Positioning). The order is fixed — you cannot position before you target or target before you segment. Anchored in Levitt's 'Marketing Myopia', STP forces a customer-first view. You learn the five consumer segmentation bases (geographic, demographic, psychographic, behavioural and the signature benefit base, which is causal), the four tests of an effective segment (S-M-A-P: substantial, measurable, accessible, practicable), targeting as attractiveness × company fit, and positioning as a perception relative to rivals — mapped on a perceptual map, gap-found, then delivered by the whole mix. The flagship case is Kmart's 'cut-price chic' repositioning. On your concept map STP is the hinge: environment and buyer behaviour feed into it, and all four Ps flow out of it.
What this chapter covers
- 015.1 Why segment? Levitt's Marketing Myopia
- 025.2 The Target Marketing Process (3 fixed stages)
- 03Segmentation bases — geo, demo, psycho, behavioural, benefit
- 045.4 Effective segmentation — S-M-A-P
- 055.5 Targeting: attractiveness × company fit
- 06Coverage strategies (undifferentiated / differentiated / concentrated)
- 07Positioning, perceptual maps & the Kmart case
- 085.10 The value proposition
Worked example: picking a target the right way, then handing off to positioning
- +1(a) Base & segment: use benefit sought (causal, strongest) — e.g. the weight-watcher snacker seeking low-calorie indulgence.
- +1(b) Profile it: layer demographics and psychographics on top so you know who they are and how to reach them — turning an abstract benefit into an addressable group.
- +1(c) Test S-M-A-P: is it substantial, measurable, accessible and practicable (does it respond differently from, say, the indiscriminate snacker)? If yes, it is a real segment.
- +1(d) Attractiveness × fit: big and growing (attractive) and matched to a firm that already makes light snacks (fit) → target it.
- +1(e) Hand off: the benefit you targeted ('guilt-free') becomes the heart of the position and the brief for the 4 Ps.
Key terms
- Market segment
- A group of potential customers similar in some way and likely to respond similarly to a given marketing mix. Good segmentation maximises similarity within a group and difference between groups.
- Benefit segmentation
- Grouping buyers by the core benefit they seek (Haley 1968) rather than by a descriptive trait. It is causal — the benefit explains the behaviour — so it predicts response to the mix better than a demographic profile.
- Effective segmentation (S-M-A-P)
- The four tests a segment must clear to be worth targeting: Substantial (big and profitable enough), Measurable (buyers can be identified and counted), Accessible (the firm can reach and serve them) and Practicable / responsive (distinct, and respond differently to the mix).
- Targeting
- Selecting one or more segments to serve effectively and profitably, framed as a two-axis choice: segment attractiveness (competition, potential, substitutes) and company fit (the firm's objectives, resources, skills and likely profitability). You want both.
- Positioning
- Creating, in the target customer's mind, an image of the brand relative to competitors. It is not what you do to the product but what the customer believes about it; the whole marketing mix must then deliver that promise.
Segmentation, Targeting & Positioning FAQ
What does STP stand for and why is the order fixed?
Segmentation, Targeting and Positioning. The order is fixed because each stage depends on the previous one: you divide the market into segments first, then choose which to serve (you cannot target a segment you have not identified), then craft a position for the chosen target (you cannot position before you know who you serve). On a map it is a three-node chain with directional, labelled arrows — 'divides into', 'selects', 'designs mix for'.
What are the five segmentation bases?
Geographic (where buyers are), demographic/social (quantifiable traits like age, gender, income), psychographic (lifestyle, values, personality), behavioural (usage, loyalty, occasion, benefits sought) and benefit (the core benefit the buyer chases). The first two describe who/where the buyer is; the behavioural and benefit bases get closer to why people buy, where the most useful segments live.
How do you know if a segment is worth targeting?
Apply the four effective-segmentation criteria, S-M-A-P: the segment must be Substantial (big and profitable enough), Measurable (buyers can be identified and counted), Accessible (reachable and serviceable) and Practicable / responsive (distinct, and responding differently to the mix). Fail any one and it is not a segment worth having.
What is a perceptual map and what is the Kmart case about?
A perceptual (positioning) map plots brands on two axes representing attributes customers care about (e.g. price vs style) and reveals crowded zones and the gaps a valued segment wants. Kmart's flagship case repositioned into the 'stylish and cheap' gap as 'cut-price chic', realigning the whole mix to the new position — positioning driving the 4 Ps — turning a near-break-even business into a strong profit.
Exam move
Draw STP as a three-node chain with labelled arrows, not three loose bubbles — the arrow labels carry the marks. Learn the five bases and be able to argue that benefit (causal) beats a demographic profile (descriptive). Memorise the S-M-A-P test and the targeting formula (attractiveness × fit) as one-liners you can recite then apply to a named brand, which is an examiner's favourite follow-up. For positioning, practise reading a perceptual map for the gap, and keep the Kmart sequence ready as proof that the chosen position dictates the value proposition and the 4 Ps. STP is the concept you are most likely asked to walk a link through in the oral.
