How to Conduct STP Analysis: A Guide to Segmentation, Targeting, and Positioning
STP analysis is a core marketing strategy framework for dividing the overall market, narrowing down the target customers, and defining your unique position. Named after the initials of Segmentation, Targeting, and Positioning, it translates the environment captured by 3C analysis or PEST into a concrete answer to "who, what value, and how should they perceive us".
This article systematically explains what STP analysis is, the concepts and frameworks for each of the three elements, the differences and combinations with other frameworks such as 3C, SWOT, and 4P, a practical six-step approach, industry-specific examples for B2B SaaS, D2C, and restaurants, ready-to-use templates, and common mistakes with countermeasures. Use it as a guide that directly drives decisions for practitioners and leaders struggling with "unclear target customers and value proposition" in new business launches, existing business reviews, or new product strategy planning.
STP analysis is a framework that determines the direction of marketing strategy through three steps: Segmentation (dividing the overall market into meaningful units), Targeting (narrowing down which market segments to pursue), and Positioning (defining your standing relative to competitors).
Its purpose is to define the foundation of strategy—"who, what, and how to deliver"—based on logic and customer understanding. No matter how excellent a product or service is, if its value does not reach the right customers with the correct perception, it will not lead to sales. STP analysis ties together value, customer, and perception, creating the foundation for concrete tactical design with frameworks like 4P and 4C.
STP analysis was systematized by Philip Kotler, often called the father of modern marketing. Throughout the 1960s and 1970s, Kotler organized the developing theory of market segmentation and formalized the three-stage process of "segment the market, select a target, and establish a unique position" as the standard model for strategy formulation.
In an era when marketing centered on mass marketing—"how to sell products as widely as possible"—STP brought a paradigm shift: "do not try to sell the same thing to all customers." In today's mature market with diversified consumer values, its importance has only grown. Kotler's book Marketing Management has become the global standard textbook for marketing, with STP at its core.
In the modern era, where consumer choices have exploded and information leadership has shifted to consumers via search, social media, and word of mouth, brands that cannot clearly state "the number one for whom" are not remembered. STP analysis serves as a thinking framework for concentrating limited management resources on customers who deliver the highest returns and continuing to be chosen through a unique position.
STP follows the order "Segmentation → Targeting → Positioning." The order matters because each step uses the output of the previous step as input. Here we organize the meaning of each element and the key points to keep in mind.
Segmentation is the process of dividing the overall market into groups of customers who are similar in terms of needs, attributes, and behaviors. The goal is not to "chop the market into tiny pieces," but to divide it by "differences that are meaningful for marketing."
Typical axes for segmentation are as follows.
In practice, the basic approach is not to use a single axis but to combine multiple axes. For example, only a combination such as "women aged 30-40 (demo) × raising children (life stage) × values sustainability (psycho) × experienced subscription users (behavior)" produces a meaningful segment.
As conditions for good segmentation, Kotler lists five requirements: Measurable, Substantial, Accessible, Differentiable, and Actionable. Do not stop at "interesting cuts"—always check whether all five are met.
Targeting is the process of selecting which segments to concentrate management resources on, from the multiple segments cut out in Segmentation. "Targeting all segments" tends to be substantively the same as "targeting no segment," and the quality of targeting greatly influences business results.
The three representative strategy patterns for targeting are as follows.
When evaluating segments, Kotler's "6R" framework is useful. Score each segment along six axes—Realistic Scale, Rate of Growth, Rival, Reach, Response, and Rank/Ripple Effect—and choose the most attractive one.
For mid-sized companies and startups to beat the giants, the concentrated strategy is almost always the correct first move. Choosing "narrow and deep" over "wide and shallow" allows you to build an overwhelming position with limited resources.
Positioning is the process of defining "how your company differs from competitors" in the minds of target customers, designing the reasons to be chosen. The essence of positioning is that it is an activity to create "a position in the customer's perception" rather than a physical functional difference.
To create strong positioning, you need to clearly articulate the following elements.
A representative tool for visualizing positioning is the positioning map. By taking two axes that customers prioritize at the time of purchase (e.g., price vs. quality, function vs. experience, expertise vs. approachability) and plotting your company and competitors, white space and overlaps with competitors become immediately visible.
The three conditions of good positioning are: (1) it is meaningful to the target (importance), (2) it is clearly different from competitors (differentiation), and (3) the company can truly deliver it (credibility). Missing any one of these results in failing to resonate, failing to communicate the difference, or making exaggerated claims.
STP analysis is not self-contained—it serves as a hub connecting upstream environmental analysis with downstream tactical design. Here we organize the differences with frameworks that are easily confused, and how to combine them in practice.
3C analysis is an environmental analysis framework that organizes the business environment from three perspectives—Customer, Competitor, and Company—while STP analysis is a strategic framework that uses the results of that environmental analysis to narrow down "target customers and how to win." The roles, not the perspectives, differ.
The standard practical flow is "3C to grasp the environment → STP to determine strategic direction → 4P/4C to translate into tactics." Design your work assuming 3C and STP will be used as a set.
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