Segmentation is the process of dividing the overall market along the dimensions that best distinguish customers into groupings, both in terms of behavior and profitability.

In marketing, segmenting, targeting and positioning (STP) is a broad framework that summarizes and simplifies the process of market segmentation. Targeting is the process of identifying the most attractive segments from the segmentation stage, usually the ones most profitable for the business.

Five ways to segment markets include demographic, psychographic, behavioral, geographic, and firmographic segmentation.

Definition: Positioning defines where your product (item or service) stands in relation to others offering similar products and services in the marketplace as well as the mind of the consumer. A good position gives the product a USP (Unique selling proposition).

One technique used to identify a target market is market segmentation. The five basic forms of segmentation are demographic (population statistics), geographic (location), psychographic (personality or lifestyle), benefit (product features), and volume (amount purchased).

Positioning is broadly classified into three types:

• Functional. This is used when the brand or products provide solutions to problems and provide benefits to customers.
• Symbolic. This is useful for creating a brand image which helps create brand equity, a sense of social belongingness and ego-identification.
• Experiential.

Positioning is a marketing concept that outlines what a business should do to market its product or service to its customers. This is created through the use of promotion, price, place and product. The more intense a positioning strategy, typically the more effective the marketing strategy is for a company.

To use the model, start by segmenting your market into groups. Next, choose which of these you want to target. Last, identify how you want to position your product, based on the personality and behavior of your target market.

STP marketing (Segmentation, Targeting, and Positioning) is a three-step marketing framework. With the STP process, you segment your market, target your customers, and position your offering to each segment. What is an example of STP? The most classic example of STP marketing is the Cola Wars of the 1980s.

A few examples are positioning by: Product attributes and benefits: Associating your brand/product with certain characteristics or with certain beneficial value. Product price: Associating your brand/product with competitive pricing. Product quality: Associating your brand/product with high quality.

Market segmentation, targeting and positioning (STP) are the basic tools used by the marketers. Each customer has different needs, wants and desires. Also, each customer has a different background, education level, and experiences.

Geographical segmentation is one of the oldest and simplest methods of dividing the customer market on the basis of the geographical location of the customers. For example, lifestyle products sell very well in big cities then in small towns. People living in rural and urban region of the country have different purchasing or buying habits.

In vowing middle class customers from all segments, Big Bazaar lost out on the very important segment of upper class customers, which provide the maximum revenue to any business, due to the high premium on high class goods.

In order to be a viable target market, a segment must be identifiable (by some criteria such as demographics, lifestyles, or others), sizeable (i.e., large enough to be profitable), stable or growing, accessible (i.e., can be reached economically), and congruent with the marketer’s objectives and resources.