Segmentation, Targeting and Positioning: Stop Treating STP as a Template

Segmentation, targeting and positioning is the strategic core of any marketing plan worth writing. It answers three questions in sequence: who exists in this market, which of them you should pursue, and why they should choose you over everyone else. Get those three answers right and almost everything downstream, from messaging to channel selection to budget allocation, becomes easier to decide.

Most marketers know the framework. Fewer apply it with any real discipline. The segmentation gets done once and never revisited. The targeting defaults to “everyone who might buy.” The positioning statement gets written, approved, filed somewhere, and quietly ignored. What follows is a more rigorous way to work through STP, grounded in how it actually functions inside a real marketing plan.

What Is Segmentation in a Marketing Plan?

Segmentation is the process of dividing a market into distinct groups of people or organisations that share meaningful characteristics. The operative word is meaningful. A segment needs to be internally coherent, meaningfully different from other segments, and commercially reachable. If you cannot distinguish how one group behaves differently from another, or if you cannot reach them through different channels with different messages, you have not segmented. You have just described your market in a different font.

There are four conventional bases for segmentation, and most good plans use a combination of them rather than relying on any single one.

Demographic Segmentation

Age, gender, income, occupation, education level, household composition. This is the most commonly used basis because the data is relatively easy to obtain and the categories are easy to communicate. The problem is that demographics describe who people are, not how they think or what they value. Two 45-year-old professionals with similar incomes can have completely different relationships with the same product category. Demographics are a useful starting point, not a finishing line.

Psychographic Segmentation

Values, attitudes, lifestyle, personality. This is harder to measure but often more predictive of behaviour. When I was working on campaigns across financial services and travel categories, psychographic differences within demographically similar groups explained far more about purchase intent than age or income alone. Someone who is risk-averse and values stability will respond to a financial product differently than someone who prioritises flexibility and growth, even if their salary is identical.

Behavioural Segmentation

Purchase frequency, brand loyalty, usage occasion, benefits sought, readiness to buy. This is arguably the most commercially useful basis because it segments people by what they actually do, not what they say or who they are. Behavioural segmentation is what powers most modern performance marketing, particularly in paid search and programmatic, where you are targeting based on signals of intent rather than assumed demographics.

Geographic Segmentation

Country, region, city, climate, urban versus rural. Relevant for businesses where geography affects product relevance, distribution, or competitive dynamics. In B2B, firmographic segmentation (industry, company size, revenue, structure) often replaces or supplements geographic and demographic bases.

If you want to go deeper on the broader discipline of product marketing strategy, including how segmentation feeds into go-to-market planning, the Product Marketing hub at The Marketing Juice covers the full landscape.

What Makes a Segment Worth Targeting?

Not every segment you identify is worth pursuing. Targeting is where strategy becomes resource allocation, and resource allocation is where most marketing plans fall apart. The temptation is always to target broadly, because narrow targeting feels like leaving money on the table. In practice, the opposite is usually true.

When I was growing an agency from around 20 people to over 100, one of the most important strategic decisions we made was to stop pitching every category and get deliberate about which client types we could genuinely serve better than our competitors. That focus did not shrink the business. It accelerated it, because our positioning became credible and our new business conversations became more efficient. The same logic applies to segment targeting.

A segment is worth targeting if it meets most of the following criteria:

• Measurable: You can quantify its size and purchasing power with reasonable confidence.
• Substantial: It is large enough to generate a return that justifies the investment required to reach it.
• Accessible: You can reach it through channels available to you, at a cost that makes commercial sense.
• Differentiable: It responds differently to different marketing stimuli. If two segments respond identically, they are the same segment.
• Actionable: You have, or can build, the capability to serve it effectively.

Beyond these filters, segment attractiveness also depends on competitive intensity. A large, accessible segment that every major competitor is already serving may be less attractive than a smaller segment where you have a genuine right to win. Competitive intelligence should inform targeting decisions, not just positioning ones.

Concentrated vs. Differentiated vs. Undifferentiated Targeting

Concentrated targeting means focusing all your resources on a single segment. It is the right call for businesses with limited resources or a highly specialised offer. Differentiated targeting means pursuing multiple segments with tailored approaches for each. It requires more resource but can build broader market coverage over time. Undifferentiated targeting ignores segment differences and treats the whole market as one audience. It is rarely the right choice, but it is often what happens by default when nobody makes a deliberate targeting decision.

The choice between these is not purely strategic. It is also a function of budget, team capacity, and how well your product actually maps to different segment needs. A startup with a focused product and limited runway almost always benefits from concentrated targeting. A mature business with a broad portfolio may run differentiated strategies across several segments simultaneously.

How Does Positioning Work in Practice?

Positioning is the most misunderstood element of STP. It gets confused with branding, with taglines, with mission statements, and with messaging frameworks. It is none of those things, though it informs all of them.

Positioning is a strategic claim. It defines the specific space you want to occupy in the mind of a specific audience, relative to the alternatives they have available. The classic positioning statement structure, attributed to the work done at companies like P&G over decades, runs something like this: for [target segment], [brand] is the [category or frame of reference] that [point of difference] because [reason to believe].

That structure is not a creative brief. It is a strategic anchor. Everything you communicate externally should be traceable back to it. If a campaign idea cannot be connected to your positioning, that is a signal worth examining before you approve the budget.

I have sat in Effie Award judging sessions and seen entries where the campaign work was genuinely impressive but the strategic foundation was either absent or incoherent. Strong creative built on weak positioning tends to win attention without converting it into anything durable. The brands that consistently perform over time almost always have a clear, stable positioning that their creative executes against, rather than reinventing itself every campaign cycle.

Points of Difference vs. Points of Parity

Effective positioning requires being honest about two things: what genuinely differentiates you, and what you need to match competitors on just to be considered. Points of parity are the table stakes of your category. If you are a bank, people need to trust that your deposits are safe before they will consider anything else you offer. That is not a differentiator. It is a prerequisite.

Points of difference are the claims you can make that competitors either cannot make or have not chosen to make. They need to be relevant to your target segment, credible given your product or service, and defensible over time. A point of difference that a competitor can replicate in six months is a weak foundation for positioning.

The temptation is to claim everything: best quality, lowest price, fastest delivery, most innovative, most trusted. That is not positioning. That is a wish list. Positioning requires making choices about what you will and will not claim, and those choices should be driven by what your target segment actually values most, not by what your internal stakeholders are most proud of.

How Do Segmentation, Targeting and Positioning Connect?

STP only works as a system. Each element depends on the others. Your segmentation determines who exists in the market. Your targeting determines who you will pursue. Your positioning determines what you will say to them and why they should prefer you. Run them out of sequence and the whole thing breaks down.

The most common failure I see is positioning that was developed without a clearly defined target segment. The result is a positioning statement that tries to appeal to everyone and ends up resonating with no one. “We deliver innovative solutions that help businesses grow” is not positioning. It is noise. Positioning becomes specific and credible only when it is written for a specific audience with a specific set of needs and alternatives.

The second most common failure is targeting that was decided before segmentation was properly done. When a business says “our target is SMEs” or “our target is 25-to-40-year-olds,” that is not a targeting decision. It is a demographic description. Targeting requires knowing not just who the segment is but what they value, how they buy, what alternatives they consider, and where you have a genuine competitive advantage.

Early in my career, I worked on a campaign for a music festival through a paid search channel. The brief was relatively simple, the targeting was focused, and the campaign generated six figures of revenue within roughly 24 hours of going live. What made it work was not the execution alone. It was that we had a clear picture of who was searching, what they wanted, and what would make the offer compelling to them specifically. The STP thinking was implicit, but it was there. When I look back at campaigns that underperformed, the common thread is usually that one of the three elements was vague or missing entirely.

How to Build STP Into a Marketing Plan

STP is not a section of a marketing plan. It is the foundation the plan is built on. The practical question is how to structure the work so that the analysis actually informs decisions rather than sitting in an appendix that nobody reads after the plan is approved.

Start With Market Research, Not Assumptions

Segmentation that is based purely on internal assumptions about customers tends to reflect the biases of whoever wrote it. Good segmentation draws on a combination of quantitative data (purchase behaviour, web analytics, CRM data) and qualitative insight (customer interviews, sales team feedback, customer service patterns). The goal is to identify segments that reflect how customers actually differ in their needs and behaviours, not how the business prefers to think about them.

Competitive intelligence is an important input at this stage. Understanding which segments competitors are targeting, and how they are positioning against them, shapes both your targeting choices and your positioning options. Tools that surface competitor positioning and messaging can be useful here, as can social competitive analysis to understand how competitors are communicating with different audiences in practice.

Prioritise Segments by Commercial Value, Not Just Size

The largest segment is not always the most valuable one. When building out targeting decisions, it is worth modelling each segment across multiple dimensions: estimated revenue potential, cost to acquire, likely retention rate, strategic fit with your product roadmap, and competitive intensity. A smaller segment with high retention and low acquisition cost can be more valuable over a three-year horizon than a large segment with high churn and expensive acquisition.

Test Positioning Before Committing to It

Positioning statements are hypotheses until they are tested. Before committing significant budget to a positioning direction, it is worth validating the core claims with real customers. This does not require expensive research. It requires talking to enough people in your target segment to understand whether your claimed point of difference maps to something they actually care about, and whether your reason to believe is credible to them.

Landing page tests, message testing in paid channels, and structured customer interviews are all practical ways to pressure-test positioning before it becomes the foundation of a major campaign. The goal is to arrive at a positioning that is grounded in what customers value, not just what the business wants to be known for. This connects directly to how product adoption accelerates when messaging aligns with real customer motivations rather than internal assumptions.

Translate Positioning Into Execution

The positioning statement is the strategic anchor. The creative brief, the channel plan, the content strategy, and the sales enablement materials are all translations of that anchor into specific executional contexts. Each translation should be traceable back to the positioning. If a creative concept cannot be connected to the positioning, that is worth questioning before it goes into production.

This is where many businesses lose the thread. The positioning gets approved at a senior level, then handed to an agency or a creative team who interpret it through their own lens, and by the time it reaches the customer it bears little resemblance to the original strategic intent. Keeping positioning visible and central throughout the execution process, not just at the briefing stage, is one of the most practically important things a marketing leader can do. Sales and marketing alignment is particularly important here, because positioning that the sales team does not understand or believe in will not survive contact with a customer conversation.

When Should You Revisit Your STP?

STP is not a one-time exercise. Markets shift. Competitors reposition. Customer priorities evolve. A positioning that was accurate and differentiated three years ago may be neither of those things today, either because the market has moved or because competitors have caught up.

There are specific triggers that should prompt a formal STP review: a significant change in the competitive landscape, a major product change or new product launch, entry into a new market or geography, a sustained decline in conversion rates or market share, or a significant shift in customer feedback. Outside of these triggers, an annual review of the targeting and positioning assumptions built into the marketing plan is a reasonable minimum.

The review does not always result in change. Sometimes it confirms that the existing segmentation and positioning remain sound. But doing the review forces the discipline of checking assumptions against current evidence rather than running on inertia. I have seen businesses operating on positioning that was developed for a market that no longer existed, because nobody had formally asked whether it still held. The positioning had not been wrong when it was written. It had just never been updated.

When a new product launch is on the horizon, STP often needs to be rebuilt from scratch rather than inherited from an existing product line. The product launch planning process is a natural forcing function for revisiting segmentation and positioning assumptions, because a new product may serve different segments or require a different competitive frame than the existing portfolio.

The broader context for all of this sits within product marketing as a discipline. If you are working through how STP connects to go-to-market strategy, messaging architecture, and competitive positioning, the Product Marketing section of The Marketing Juice covers those connections in detail.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

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