ROI [🔏CLASSIFIED FILE] No. X049 | What is STP Analysis

Detective's Notes: The three-stage market conquest strategy "STP Analysis," systematized by Philip Kotler, the father of marketing. While many mistakenly understand it as merely "a market research technique," its true identity is a "strategic transition system from indiscriminate attack to precision sniping." Why does Toyota create products for "specific segments" rather than "everyone," and why did Apple establish positioning through "beauty and experience" rather than "high performance"? Segmentation (market segmentation), Targeting (target market selection), and Positioning (establishing unique position)—the competitive advantage called differentiation, woven through these three steps. Abandoning the illusion of "selling to everyone" and delivering overwhelming value to "a specific someone"—this strategic concentration enables market dominance with limited resources. The ROI Detective Agency unveils the true nature of this fundamental yet ultimate marketing strategy.

What is STP Analysis - Case Overview

STP Analysis, formally known as the "Three-Stage Strategic Framework of Market Segmentation, Target Selection, and Positioning Establishment," is a marketing strategy planning methodology systematized by marketing scholar Philip Kotler. Composed of three steps—Segmentation (dividing the market into meaningful customer groups), Targeting (selecting the market where the company can contribute most), and Positioning (clarifying differentiation from competitors)—it is recognized among clients as a method for strategically determining "to whom, what, and how to deliver." However, in actual practice, it is often superficially understood as "customer classification work," with the majority of companies failing to grasp its true strategic value: the strategic decision-making process that concentrates limited management resources for maximum effect, and the construction of sustainable competitive advantage through clear differentiation from competitors.

Investigation Notes: STP is not merely "market research" but "strategic concentration decision-making." Why does "selling to everyone" lead to failure, and why is focusing on "a specific someone" the shortcut to growth? We must elucidate this foundational theory of modern marketing that systematizes the "minimum target customer" selection of MVP and constructs the strategic premise of 4P Analysis.

Basic Structure of STP Analysis - Evidence Analysis

Primary Evidence: Strategic decision-making for three-stage market conquest

S: Segmentation (Market Segmentation)

Definition: The process of dividing the entire heterogeneous market into multiple groups with similar needs, behaviors, and characteristics

Four Segmentation Criteria:

1. Geographic Variables

Segmentation Criteria: - Country, region, city, climate - Population density (urban, suburban, rural) - Cultural sphere, linguistic sphere

Case Study:

Starbucks:
- North America: Large stores, drive-through emphasis
- Japan: Compact stores, high-density deployment
- China: Large flagship stores, experiential outlets

Reasons:
- Differences in urban structure
- Differences in transportation methods
- Differences in consumption behavior

2. Demographic Variables

Segmentation Criteria: - Age, gender, family composition - Income, occupation, education - Generation (Baby Boomers, Millennials, Gen Z)

Case Study:

Toyota's Segment-Based Products:
- Young/Single: Yaris (compact, low price)
- Families: Sienna (minivan, multi-passenger)
- High-income: Lexus (luxury, status)
- Seniors: Corolla (reliability, ease of use)

The same "car" but completely different products per segment

3. Psychographic Variables

Segmentation Criteria: - Lifestyle, values - Personality, interests - Social class, self-image

Case Study:

Apple vs Microsoft:

Apple Customer Psychographics:
- "Want to be innovative and creative"
- "Value design and beauty"
- "Status and sense of belonging"

Microsoft Customer Psychographics:
- "Value practicality and efficiency"
- "Compatibility and stability"
- "Business and productivity"

The same "computer" but different psychological segments

4. Behavioral Variables

Segmentation Criteria: - Purchase frequency, usage volume - Loyalty (brand loyalty) - Purchase motivation, benefit pursuit - Usage situation, decision-making process

Case Study:

Airline Segmentation:

Frequent Flyers (Business):
- High price tolerance, value flexibility
- Emphasize lounges and mileage
→ Premium service, high price

Infrequent Flyers (Leisure):
- Price-conscious, planned booking
- Value entertainment and experience
→ Low-cost carriers (LCC), low price

Same route but different services per behavioral segment

Five Conditions for Effective Segmentation:

1. Measurable
   Segment size and purchasing power can be measured

2. Accessible
   Segment can be effectively reached

3. Substantial
   Segment has sufficient size and profitability

4. Differentiable
   Segments show clearly different responses

5. Actionable
   Segment-specific initiatives can be implemented

T: Targeting (Target Market Selection)

Definition: The process of strategically selecting which market(s) to enter and concentrate on from multiple segmented markets

Three Targeting Strategies:

1. Undifferentiated Marketing

Characteristics: - Ignores segment differences - Attacks entire market with single product, single strategy - Mass marketing

Advantages: - High cost efficiency (economies of scale) - Simple operations

Disadvantages: - Difficult to differentiate from competitors - Cannot meet specific needs - Tends toward mediocre products

Application Example:

Coca-Cola in the past:
- Single product "Coca-Cola" only
- For everyone
- Mass production, mass advertising

Now shifted to diversification (Zero, Diet, etc.)

2. Differentiated Marketing

Characteristics: - Targets multiple segments - Different products and strategies per segment - Maximizes market coverage

Advantages: - Serves broad customer base - Expands market share - Risk diversification

Disadvantages: - Increased costs - Complex operations - Resource dispersion

Application Example:

Toyota Motor Corporation:
- Young adults: Yaris
- Families: Sienna
- High-income: Lexus
- Eco-conscious: Prius

Different products for multiple segments

3. Concentrated Marketing

Characteristics: - Concentrates on single or few segments - Pursues deep expertise and uniqueness - Niche strategy

Advantages: - Strategic concentration of resources - Differentiation through expertise - High customer loyalty - Possible with limited budget

Disadvantages: - Concentrated risk - Market size constraints - Vulnerability to market changes

Application Example:

Rolls-Royce:
- Targets ultra-high-net-worth individuals only
- Manufactures only ultra-luxury cars
- Annual production of several thousand units

Small scale but ultra-high profit margins

Target Selection Evaluation Criteria:

1. Segment Attractiveness:
   - Market size and growth potential
   - Profitability and profit margin
   - Competitive situation

2. Company Fit:
   - Management resource alignment
   - Technology and know-how possession
   - Consistency with corporate philosophy

3. Competitive Advantage:
   - Differentiation potential
   - Ability to construct entry barriers
   - Sustainability

P: Positioning

Definition: The process of establishing a unique position clearly differentiated from competitors in the target customer's mind

Essence of Positioning:

Not the physical attributes of the product
but the position in the customer's "perception and recognition"

Examples:
- Volvo: "The safest car"
- BMW: "The ultimate driving machine"
- Tesla: "Mobility of the future"

Same "car" but different positions in customers' minds

Positioning Map (Perceptual Map):

      High Price
          |
          | Lexus
          |
Practical --+-- Status
          |
          | Toyota
          |
      Low Price

Position competitors on two axes perceived by customers
Discover white space (gaps)

Conditions for Effective Positioning:

1. Important
   Provides benefits important to customers

2. Distinctive
   Clearly differentiated from competitors

3. Superior
   Better than competitors

4. Communicable
   Can be clearly conveyed to customers

5. Preemptive
   Difficult for competitors to imitate

6. Affordable
   Customers can afford the price

7. Profitable
   Brings profit to the company

Evidence Analysis: The innovation of STP Analysis lies in abandoning the illusion of "all customers" and concentrating management resources on "specific customers," thereby achieving overwhelming differentiation and competitive advantage even with limited budgets.

STP Analysis Implementation Procedures - Investigation Methods

Investigation Discovery 1: Airbnb's Market Redefinition Strategy

Case Evidence (New Market Creation Through Existing Market Segmentation):

Phase 1: Market Redefinition (Segmentation)

Traditional lodging market perception:

Everything lumped together as "hotel market"
- Business hotels
- Resort hotels
- Luxury hotels

Airbnb's market segmentation:

Segmented lodging needs by behavior and psychology:

Segment 1: "Local Experience Seekers"
- Local lifestyle, not tourist destinations
- "Stay like a local," not hotels
- Interaction with locals

Segment 2: "Cost-Conscious Long-Stay Travelers"
- Cheaper than hotels
- Kitchen for self-catering
- Stays of one week or more

Segment 3: "Unique Experience Pursuers"
- Castles, treehouses, boats
- Instagram-worthy
- "The stay itself" is the purpose

Visualized segments previously invisible

Phase 2: Target Market Selection (Targeting)

Selection Strategy:

Initial Target: Segment 1 (Local Experience Seekers)

Reasons:
- Unmet needs by existing hotels
- Differentiation through experience, not price
- High word-of-mouth and SNS diffusion potential
- Hosts also value "interaction"

→ Concentrated marketing strategy

Execution:

2008: Democratic Convention in Denver
- Hotels fully booked
- Need for "staying in locals' homes" manifested
- 80 bookings acquired

2009: SXSW (Music Festival)
- Concentrated on "event × local experience" segment
- Community formation

Gradually expanded to other segments

Phase 3: Positioning Establishment (Positioning)

Positioning Strategy:

"Belong Anywhere"

Differentiation axes from competitors (hotels):
- Hotels: "Service, cleanliness, security"
- Airbnb: "Experience, connection, uniqueness"

Position in customers' minds:
- Hotels = A place to stay
- Airbnb = A living experience

Functional value < Emotional value
Accommodation < Experience

Visual Positioning Map:

    Experience-Focused
           |
           | Airbnb
           |
 Low Price ----+---- High Price
           |
           | Hotel Chains
           |
    Function-Focused

Results:

2008: Founded, no annual revenue 2010: Established position in Segment 1 2015: 1.5 million listings in 191 countries 2020: IPO, market cap exceeds $100 billion

Critical Insight:

Avoided competition in existing market (hotels)
Created new segment (local experience seekers)
→ Established monopolistic position in competitor-free market

Investigation Discovery 2: Uniqlo's Strategic Positioning Transformation

Case Evidence (Revival Through Positioning Reset):

Phase 1: Initial Positioning Failure (Late 1990s)

Original Positioning:

"Low-price casual wear"

Problems:
- Caught in price competition
- "Cheap and low-quality" image
- Declining brand value
- Difficult differentiation from competitors (Shimamura, etc.)

Phase 2: Segment Redefinition (2000s)

Market Segmentation Review:

Previously: Segmented by price range
- High-price brands
- Mid-price brands
- Low-price brands

New: Segmented by lifestyle
- "Fashion clothing" segment
- "Functional daily wear" segment ← Focus here
- "Cheapest clothing" segment

Phase 3: Target Reset

New Target:

Segment seeking "functional daily wear"

Characteristics:
- Quality and functionality over trends
- Basic items wearable daily
- Reasonable price (not cheap but not cheap goods)
- Simple, timeless design

"Lifestyle" segment transcending age and gender

Phase 4: Positioning Transformation

New Positioning:

"LifeWear: Ultimate Everyday Clothing"

Differentiation axes:
- Low-price brands: "Cheapness" only
- High-price brands: "Fashion"
- Uniqlo: "Functionality × Quality × Reasonable Price"

Backed by technological innovation:
- HEATTECH (heat retention)
- AIRism (moisture absorption/quick drying)
- Ultra Light Down (lightweight)

Positioning as "functional materials," not "clothing"

Visual Positioning Transformation:

Before:
      High Quality
          |
    Brand |
          |
Low Price ---+--- High Price
          |
          | Uniqlo (low-price, low-quality)
          |
      Low Quality

After:
      High Quality
          |
          | Uniqlo (functional, reasonable price)
          |
Low Price ---+--- High Price
          |
Low-price | Brand
          |
      Low Quality

Results:

2002: Sales and profit both stagnant 2010: Top domestic market share 2020: World's 3rd largest apparel company Annual revenue exceeds 2 trillion yen

Critical Insight:

Same product but value changes with positioning
"Cheap clothes" → "Functional daily wear"
Shifted from price competition to function competition

Power of STP Analysis - Investigation Report

Power 1: Strategic Concentration of Management Resources

Before STP:
- Same product for all customers
- Resource dispersion
- Difficult differentiation

After STP:
- Concentration on specific segment
- Deep expertise
- Overwhelming differentiation

Effect: Maximum market impact with limited budget

Power 2: Dramatic Improvement in Marketing Efficiency

Undifferentiated Marketing:
- Ad to 1 million people → 1% response = 10,000 acquired
- Cost: $1 million
- Customer acquisition cost: $100/person

Targeted Marketing:
- Ad to 100,000 people → 10% response = 10,000 acquired
- Cost: $200,000
- Customer acquisition cost: $20/person

Same results at 1/5 the cost

Power 3: Clear Differentiation from Competitors

Strategic decision-making through positioning maps: - Avoid densely competitive areas - Discover white space - Establish unique position

Power 4: Consistent Brand Building

Clear positioning → - Consistent messaging - Clear customer perception - Improved brand loyalty

Limitations and Precautions of STP Analysis - Investigation Warnings

Limitation 1: Excessive Segmentation

Warning: The micro-segmentation trap

Problem:
- Segments too small for profitability
- Operating costs > Revenue
- Confusion from complexity

Countermeasure: Verification of substantiality is essential

Limitation 2: Slow Response to Market Changes

Warning: The danger of fixed STP

Problem:
- Changes in customer needs
- Entry of new competitors
- Market reorganization from technological innovation

Countermeasure: Regular STP review (at least annually)

Limitation 3: Gap Between Positioning and Reality

Warning: Expectation-reality gap

Problem:
- Positioning: "High quality"
- Actual product: Mediocre
→ Customer disappointment and criticism

Countermeasure: Product development to realize positioning is essential

Precaution 4: Risk of Excessive Concentration

Warning: Fragility of concentrated strategy

Risks:
- Target market shrinkage
- Changes in customer needs
- Competitor entry

Countermeasure: Risk diversification, consideration of alternative markets

Related Case Files - Investigation Records

Important cases related to this investigation:

• X013_4P Analysis - Marketing mix strategy executed after STP
• X036_MVP - Directly connected to initial target customer selection
• X039_HEART - UX measurement for target customers
• X040_NPS - Verification metric for positioning success

Industry-Specific STP Practice Cases - Investigation Records

B2B SaaS:

Slack:
S: Segmented enterprise communication market by "size, industry, technology orientation"
T: Concentrated on development teams in IT companies and startups
P: "The tool that kills email" → Innovator of asynchronous communication

Retail:

Costco:
S: Segmented retail market by "purchase volume, frequency, values"
T: Middle-class and above families willing to buy in bulk
P: "Membership wholesale" → Overwhelming value and treasure-hunting experience

Food & Beverage:

Starbucks:
S: Segmented cafe market by "visit purpose, price sensitivity"
T: Urban white-collar workers seeking "third place"
P: Not "a store selling coffee" but "a place selling experience"

Investigation Summary - ROI Detective Agency Conclusion

The essence of STP Analysis is the decision-making of "strategic concentration." While many companies fail trying to sell to "all customers," successful companies narrow down to "a specific someone" and provide overwhelming value to those customers.

Segment the market (Segmentation), select the market where your company can contribute most (Targeting), and establish a position clearly differentiated from competitors (Positioning)—this three-stage process is the strategic decision-making itself that concentrates limited management resources for maximum effect.

Airbnb redefined the existing hotel market and created a new segment called "local experience seekers." Uniqlo transformed its positioning from "low-price brand" to "functional daily wear" and escaped price competition.

What's important is that STP is not a one-time decision but requires continuous review in response to market changes. Customer needs change, competitors enter, and technology evolves. Regular STP reviews are the source of sustainable competitive advantage.

The ROI Detective Agency declares—abandon the illusion of "selling to everyone" and concentrate on "a specific someone." There lies the path to true differentiation and sustainable growth.

[🔏CLASSIFIED FILE DESIGNATION] This report contains critical information regarding the construction of strategic competitive advantage in the market. Appropriate understanding and practical application are recommended.

Case Record Closed - ROI Detective Agency