Running a small business means making choices – about your time, your money, and who you’re really trying to serve. That’s where segmentation, targeting and positioning comes in. It’s a simple way to focus your marketing so it reaches the people who are most likely to buy from you.
You won’t need a marketing degree or expensive tools. This guide breaks everything down in simple terms, so you can apply each step of segmentation, targeting and positioning to your business – regardless if you’re just starting or refining what you already do.
If you’re looking for a deeper explanation of how segmentation works on its own, have a look at our article Market Segmentation for Non-Marketers – A Beginner’s Guide. Otherwise, read on – we’re about to take you through the full STP process, step by step.
What Is Segmentation, Targeting and Positioning in Marketing?
Segmentation, targeting and positioning (STP) is a marketing approach that helps businesses divide their audience into smaller groups, choose which group to focus on, and create the right message for that group.
Here’s how each part works:
- Segmentation is about dividing your overall market into smaller groups of people with something important in common, such as similar needs, values, lifestyle, or spending habits. It helps you make sense of who’s out there, instead of treating “everyone” as your customer.
- Targeting means choosing the group or groups you want to focus on. This isn’t just about who’s most likely to buy from you. It’s also about who’s the best fit for your business, based on budget, access, values, or long-term potential. Good targeting helps you use your time and energy where it matters most.
- Positioning is about deciding how you want your product or service to be seen by your target group. It shapes the words, tone, and the offer you use so it feels right for them. Positioning helps your business stand out not by changing what you sell, but by changing how you talk about it.
You may already be doing parts of this without realising. STP just helps you be more deliberate. When you do it well, everything from your emails to your pricing becomes clearer and more effective.
The Main Steps of Segmentation, Targeting and Positioning for Small Business Owners
Step 1 – Start with a Broad View of Your Market
Before you break your audience into smaller groups, take a step back and think about the bigger picture. Who is this product or service generally for? Don’t worry about details just yet. This is your chance to figure out what kind of person or business would need what you offer and why.
Start by thinking about the problem your product or service solves:
- Who usually has that problem?
- What type of person or business is actively looking for this solution?
- Are there any clear trends, gaps, or shifts happening in your market?
If you already have customers, look at who’s buying from you now. What do they have in common?
If you’re starting from scratch, study your competitors. Read reviews, check social media comments, browse forums or Reddit threads, or look at questions on Amazon for similar products. Pay attention to the words people use, such as “easy to use,” “affordable,” or “great for beginners.” These are clues that tell you what customers really care about.
This step helps you avoid guessing and gives you a stronger foundation for the rest of the STP process.
Step 2 – Understand What Influences Buying Decisions
Once you have a rough picture of who your customers might be, dig a bit deeper into why they make the choices they do. This step is about finding out what drives people to buy and what might stop them.
Ask yourself:
- How often would they need this product or service?
- How much are they willing or able to spend?
- What matters most – price, speed, eco-friendliness, convenience?
If you’re already in business, look at what customers have said in reviews, feedback emails, or messages. What helped them decide? If you’re starting out, try asking in Facebook groups, forums, or via a simple survey. Even 5–10 replies can give you a clearer picture than guessing.
You’re looking for repeated themes. Do people complain about the price? Talk about timesaving? Mention quality? These are signs that help you understand what really matters to them.
This step is about listening and using what you hear to shape your segments. In the next step, you’ll use these patterns to divide your audience into groups that make sense for your business.
Step 3 – Group Customers into Clear Segments
Now, take what you’ve learned and start sorting your audience into 2 or 3 clear groups. These should be based on real differences, like what people care about, how they shop, or what problem they’re trying to solve.
For example:
- Are some price-sensitive, while others value speed?
- Do some shop weekly, and others once a year?
- Are some buying for themselves and others for their families?
Group these people in a way that would let you speak to them differently. Then give each group a simple, memorable label like Budget-conscious parents or Time-poor professionals. This will help you stay focused when you’re writing content, pricing products, or planning campaigns.
You’re not choosing a segment yet, just organising your audience based on real patterns, so you can decide where to focus in the next step.
Step 4 – Choose the Right Group to Focus On
Once you’ve created a few customer segments, it’s time to decide which one to prioritise. You don’t need to target everyone. In fact, trying to serve all groups at once often leads to vague marketing and weak results.
Instead, choose one or two groups that seem the most promising for your business right now. You can always return to the others later.
To help you decide, give each group a simple score (1 to 5) based on:
- Size: Are there enough people in this group to make it worth targeting?
- Spending power: How much are they willing or able to spend on your type of product or service?
- Ease of reach: Can you easily connect with them (online or locally)?
- Competition: Are lots of other businesses already targeting this group?
- Strategic fit: Does this group align with your long-term goals or values?
Add up the scores. The group with the highest total is usually the best one to start with. Focusing here lets you tailor your offer more clearly, spend less on guesswork, and get better results from your time and budget.
Step 5 – Create a Clear Customer Profile
Once you’ve chosen the group you want to focus on, the next step is to bring that group to life. This is where you create a simple customer profile – a short description of a typical person from that segment.
Think about:
- What do they want?
- What’s getting in their way?
- What would make them choose you?
You don’t need anything fancy. Just write down a few key points that describe a real human being. Give them a name if that helps you picture them. For example:
Emma, 33, first-time mum. Wants to get fit again but feels too tired for long workouts. Worries she won’t fit in at the gym. Uses Instagram and WhatsApp.
Now add a short statement about why they should choose your business and how you solve their specific problem. For example:
We help new mums feel strong and energised with quick, at-home workouts that fit around nap times. No gym, no pressure.
This profile becomes your guide. You’ll use it when writing content, setting prices, choosing where to advertise, and shaping your message in the next step.
Step 6 – Adjust Your Offer Based on Their Needs
Once you’ve defined who you’re talking to, make sure your product or service actually meets their needs and feels right for them.
You don’t need to change everything. Often, a few small tweaks can make a big difference.
A simple way to do this is to look at the 4 Ps of marketing:
- Product: Can you add something this group values? Or simplify what you offer? (e.g. a starter pack, a beginner-friendly guide, a flexible option)
- Price: Does your pricing fit their budget or expectations? Can you offer a smaller version, a premium tier, or a loyalty deal?
- Place: Are you selling where they already shop or spend time? That could be online marketplaces, social platforms, or local shops.
- Promotion: Are you using the language they understand and the channels they trust? Think email, WhatsApp, flyers, Facebook, or LinkedIn – depending on the group.
Example:
If your target group is “eco-conscious students,” you might switch to plastic-free packaging (Product), offer a £5 budget bundle (Price), sell through TikTok Shop (Place), and use student influencers to spread the word (Promotion).
These changes show your audience that you understand them and make it easier for them to say yes.
Step 7 – Test, Learn and Improve
Marketing is never one-and-done, and that’s a good thing. Once you’ve chosen your target group and adjusted your offer, try something small, see how it works, and build from there.
You don’t need a big budget to test an idea. Start with something simple:
- Run two versions of a Facebook or Instagram ad with different images or messages
- Try two email subject lines to see which gets more opens
- Offer a small promotion to your chosen group and see how they respond
Track just a few useful things, like clicks, sales, replies, or repeat visits. Look at what’s working and what’s not. If something connects, do more of it. If it flops, drop it and try something else.
Also, remember – people change. Needs shift. Budgets go up and down. It’s worth reviewing your customer segments and messaging every few months to make sure you’re still speaking to the right people, in the right way.
Common Mistakes to Avoid in Market Segmentation, Targeting and Positioning
Even with the best intentions, it’s easy to make mistakes when trying to define your audience and shape your message. Here are some common pitfalls and how to avoid them:
1. Trying to reach everyone
If you aim your message at everyone, it often connects with no one. Focus on the people who are the best fit for what you offer and speak directly to them.
2. Over-segmenting
Dividing your audience into too many micro-groups can be tempting, but it often leads to confusion and wasted time. Keep it simple. Two or three well-defined segments are usually enough.
3. Guessing instead of listening
Avoid building segments or messages based on assumptions. Use real feedback, reviews, or even small surveys. A few honest comments can teach you more than pages of theory.
4. Choosing the wrong group to focus on
Sometimes businesses target a group that’s popular or trendy, rather than one that fits their strengths. Make sure your chosen segment aligns with your goals, values, and what you do best.
5. Weak or unclear positioning
Saying you’re “high-quality and affordable” doesn’t help you stand out. A good positioning message should be specific, believable, and focused on what matters to your chosen group.
6. Sending the same message to everyone
Even after defining segments, some businesses still send out one-size-fits-all emails, posts, or ads. A few small tweaks in language, offers, or images can make a big difference in how people respond.
7. Forgetting to review and adjust
Your audience’s needs change over time, and so should your messaging. Revisit your customer segments and positioning every few months to keep things relevant.
8. Ignoring privacy and consent
If you’re collecting customer data, even simple things like email addresses or survey answers, make sure you’re following UK GDPR rules. Be clear about what you’re collecting and why and always offer an easy opt-out.
Final Thoughts
Segmentation, targeting and positioning doesn’t have to be complicated. At its core, it’s just a way to focus your time, your budget, and your message on the people who are most likely to value what you offer.
By breaking your market into smaller groups, choosing the right one to focus on, and shaping your message to match, you give your business a much better chance of standing out even in a crowded space.
You don’t need big tools or big budgets to do this. Just a bit of structure, a few good questions, and the willingness to learn from your customers as you go.
If you’d like help defining your audience or building a clearer marketing message, get in touch with Social Matrix. We’re here to support small businesses just like yours.
Marketing Segmentation, Targeting and Positioning FAQs
What is segmentation, targeting and positioning in marketing?
Segmentation, targeting and positioning (STP) is a three-step marketing approach that helps businesses divide their audience into groups, choose which group to focus on, and create a message that fits that group’s needs.
How does STP help small businesses?
STP helps small businesses use their limited time and budget more effectively by focusing only on the most relevant customers and avoiding one-size-fits-all marketing.
What’s the difference between targeting and positioning?
Targeting is about choosing which customer group to focus on. Positioning is about how you want that group to see your product or service compared to others.
Do I need all three: segmentation, targeting and positioning?
Yes. Each step builds on the other. Segmentation helps you understand your audience, targeting helps you choose who to focus on, and positioning helps you speak to them in the right way.
How do I choose the right customer segment to focus on?
Score each segment based on size, spending power, ease of reach, competition, and fit with your business goals. The highest-scoring group is usually the best place to start.
Can I have more than one target audience?
Yes — but if you’re just starting out, it’s better to focus on one group first. Once that’s working, you can expand to others with different messages or offers.
What is a positioning statement and why does it matter?
A positioning statement is a short summary of why your product is the right choice for your target group. It keeps your message clear and helps you stand out in the market.
How often should I update my segmentation or positioning?
Review your segments and messaging at least once or twice a year — or sooner if your market, customer needs, or business goals change.
What’s the simplest way to get started with STP?
Start by thinking about what problem you solve, who needs it most, and what they care about. Group similar customers together, pick one group to focus on, and shape your message to fit.