The debate between shareholder primacy and stakeholder theory concerns the legal obligations of corporate directors. Introduction A corporation is never just a machine for making money. It is a legal institution, a social system, and a vehicle for allocating power, risk, and responsibility. That is why one of the most important debates in corporate governance continues to divide scholars, executives, regulators, and investors: should corporations exist primarily to maximize shareholder value, or should they balance the interests of all the people and institutions affected by their actions? This debate is commonly framed as shareholder primacy vs. stakeholder theory. Shareholder primacy says the corporation's central obligation is to its owners, the shareholders. Stakeholder theory says the corporation owes duties to a wider circle of affected parties, including employees, customers, suppliers, creditors, communities, and sometimes society at large. This is not a purely academ...
This post examines segmentation, targeting, and positioning as a practical marketing framework, using Nike and Safaricom as documented case illustrations. It covers the STP sequence, the conventional segmentation bases, targeting strategy, and positioning, and it distinguishes the textbook treatment from the strategic discipline that makes segmentation work in practice.
By Kateule Sydney — Researcher and Writer | Last Verified: 2026-10-01 | Published by Kat-Syd Resources Hub
Market segmentation: dividing a heterogeneous market into groups that support different marketing decisions
Table of Contents
1. The STP Framework and Its History
The STP framework — segmentation, targeting, and positioning — is one of the most widely taught approaches to marketing strategy. It is commonly associated with Philip Kotler because successive editions of Marketing Management helped integrate and popularise the three activities as a coherent managerial process. The history is more nuanced than the simple statement that Kotler invented STP. Wendell R. Smith's 1956 article, "Product Differentiation and Market Segmentation as Alternative Marketing Strategies," published in the Journal of Marketing, is a foundational contribution to the theory of market segmentation. Positioning developed separately in advertising and marketing practice, including Jack Trout's 1969 article in Industrial Marketing and the subsequent work by Al Ries and Jack Trout. Their influential three-part "The Positioning Era Cometh" series appeared in Advertising Age in 1972, followed by Positioning: The Battle for Your Mind in 1981.
The useful contribution of STP is not that one scholar created all three concepts from scratch. It is that the concepts can be used together to answer three connected managerial questions:
- Segmentation — what meaningful differences exist among buyers?
- Targeting — which of those groups should the firm prioritise?
- Positioning — what should the chosen customers understand the offering to stand for relative to alternatives?
Markets are rarely completely homogeneous. Buyers can differ in needs, circumstances, resources, geography, usage patterns, desired benefits, and other characteristics. Segmentation attempts to identify differences that are strategically meaningful rather than merely describing customers in increasingly detailed categories. Targeting turns those differences into a resource-allocation decision. A company does not automatically need to serve every segment it can identify. It evaluates which segments are attractive and which it can serve effectively given its objectives, capabilities, and competitive environment. Positioning connects the selected market to a competitive meaning. The objective is not simply to create an attractive message. It is to establish a clear value proposition and a credible place for the offering relative to the alternatives customers consider.
The traditional presentation is sequential — segment, target, position — but actual marketing planning is often iterative. Research can reveal that a proposed segment is not sufficiently differentiated. Competitive analysis can force a firm to redefine its target. A change in positioning can expose the need for a different segmentation scheme. STP is therefore better understood as an integrated strategic logic than as a rigid three-step production line.
The practical STP process runs through seven stages:
- Segmentation analysis — identify meaningful differences in customer needs, characteristics, or behaviour
- Segment profiling — describe the size, characteristics, needs, and behaviour of each segment
- Target evaluation — assess segment attractiveness and the firm's ability to serve each segment
- Target selection — decide which segment or segments to prioritise
- Positioning design — establish the value proposition, competitive frame of reference, and relevant points of parity and difference
- Implementation — align product, price, distribution, communication, and customer experience with the chosen strategy
- Monitoring — test whether the segmentation and positioning remain useful as customers, competitors, and technology change
One of the most important practical lessons is that segmentation is not valuable merely because it produces attractive charts or customer personas. A segmentation becomes strategically useful when the identified groups are sufficiently different in ways that affect decisions. If two supposed segments respond almost identically to the same product, price, message, and channel, the distinction may be descriptive rather than strategically useful. Differentiability therefore deserves more attention than it often receives in classroom exercises.
2. Bases of Segmentation
Segmentation bases are the variables used to divide a market into groups. In consumer marketing, the conventional categories are geographic, demographic, psychographic, and behavioural. These categories should not be treated as mutually exclusive alternatives. A firm can combine them when the combination produces a more useful explanation of customer differences. Michael Wedel and Wagner Kamakura, in Market Segmentation: Conceptual and Methodological Foundations (1998), argue that the choice of segmentation base determines what the firm can and cannot do strategically.
The four conventional bases are:
- Geographic — country, region, climate, urban or rural location, population density, and other location-related variables
- Demographic — age, gender, income, education, occupation, household characteristics, and life-cycle stage
- Psychographic — lifestyle, personality, values, interests, and related psychological characteristics
- Behavioural — usage rate, purchase occasion, benefits sought, user status, loyalty, readiness to buy, and other observable behaviours
The important question is not which basis is universally best. The question is whether the variables chosen help explain a difference that matters to the firm's marketing decisions. Demographic variables are often comparatively easy to measure and activate through media or distribution systems. However, demographic similarity does not necessarily mean that customers have the same needs or will respond in the same way to an offer. Psychographic variables can provide insight into motivations, lifestyles, and values, while behavioural variables can connect segmentation more directly to what customers actually do. Behavioural data can therefore be particularly useful when the objective is to design different offers, recommendations, communications, or retention interventions.
In practice, firms frequently combine bases. A company might identify a geographic market, then distinguish customers within it by usage behaviour and benefits sought. Another company might begin with an age group but discover through research that attitudes, purchase occasions, or usage intensity provide a much stronger basis for action.
A conventional test of an effective segmentation uses five criteria:
- Measurable — the segment's size, purchasing power, and relevant characteristics can be estimated
- Substantial — the segment is sufficiently large or valuable to justify serving it
- Accessible — the firm can reach and serve the segment effectively
- Differentiable — the segment responds differently in meaningful ways from other segments
- Actionable — the firm can develop effective programmes for attracting and serving the segment
Differentiability deserves particular attention. A segment should not exist simply because an analyst can draw a boundary around a group of customers. If the boundary does not correspond to differences in needs, behaviour, or response to marketing activity, it may not provide much strategic value. At the same time, it would be too strong to claim that most firms segment on the wrong variable. That is a broad empirical claim requiring evidence across firms and industries. A more defensible conclusion is that one recurring failure in segmentation is choosing variables that describe customers without adequately predicting differences that matter to marketing decisions.
3. Targeting Strategy
Targeting is the process of evaluating market segments and deciding which ones the organisation will prioritise. It is therefore a resource-allocation decision rather than simply a demographic description of the customer. Four broad targeting approaches commonly appear in marketing textbooks, and Michael Porter's work in Competitive Strategy (1980) on cost leadership, differentiation, and focus provides the strategic logic that underlies the choice.
The four broad targeting approaches are:
- Undifferentiated or mass marketing — treating the broad market as the target and using a largely standardised offer
- Differentiated marketing — serving multiple segments with different offerings or marketing programmes
- Concentrated or niche marketing — focusing resources on one segment or a small number of narrowly defined segments
- Micromarketing — adapting marketing to local groups or individual customers, where the economics and technology make that feasible
These are broad strategic approaches, not rules that determine what every company of a particular size must do. A large company can concentrate on a niche, and a smaller company can serve several segments. The appropriate choice depends on market structure, to resources, capabilities, competitive conditions, and the economics of serving customers. Segment evaluation should be distinguished from the five criteria used to test whether a segmentation itself is useful. Once viable segments have been identified, managers can consider questions such as segment size and growth, structural attractiveness, fit with company objectives and resources, profitability, and the firm's ability to serve the segment.
These considerations overlap in practice. A rapidly growing segment is not automatically attractive if competition is intense, customer acquisition is expensive, regulatory conditions are difficult, or the company lacks the capabilities required compete. Targeting is therefore not simply a question of finding the largest group. A smaller segment can sometimes be strategically important if the firm has a strong capability or differentiated proposition for that group. Conversely, a very large segment may be unattractive if the firm has no meaningful advantage in serving it.
The number of segments a firm should target also has no universal answer. Serving more segments can increase market coverage but can also increase complexity, cost, and the risk of inconsistent execution. The appropriate scope depends on the economics and the organisation's ability to deliver distinct value propositions. What matters is that the firm chooses a targeting strategy deliberately rather than defaulting to whichever strategy is easiest to execute.
4. Positioning in the Consumer's Mind
Positioning concerns the place an offering occupies in the minds of target customers relative to relevant alternatives. The modern marketing literature on positioning combines insights from advertising, competitive strategy, and brand management. Jack Trout's 1969 article, "Positioning Is a Game People Play in Today's Me-Too Marketplace," is an important early published use of the modern positioning concept. Al Ries and Jack Trout subsequently popularised the idea through their 1972 Advertising Age series and their 1981 book, Positioning: The Battle for Your Mind. In contemporary brand-management treatments, positioning is more than a slogan. It requires defining the competitive frame of reference and determining the points of parity and points of difference that make the offering both credible within the category and distinctive against alternatives.
The key elements of positioning are:
- Competitive frame of reference — the category or set of alternatives against which customers understand and evaluate the offering
- Points of parity — attributes or benefits that the offering shares with competitors or must credibly provide to be considered a legitimate choice within the category
- Points of difference — attributes or benefits that customers associate strongly with the brand and perceive as meaningfully superior or distinctive relative to competitors
- Value proposition — the central combination of benefits and costs that explains why the target customer should prefer the offering
Effective positioning therefore requires both similarity and difference. A brand that claims an unusual benefit but cannot credibly deliver it has a positioning problem. A brand that satisfies every category expectation but offers no meaningful reason for preference risks being difficult to distinguish. Positioning is also competitive. A firm's desired position is not determined entirely by what it says about itself. Customers interpret the offering through existing category knowledge, competitor associations, previous experiences, and the firm's actual performance.
For this reason, positioning should be treated as an ongoing strategic process rather than a one-time communication exercise. Competitors can copy features, categories can change, and attributes that once differentiated a brand can eventually become basic expectations. Positioning happens whether the firm manages it or not. Consumers form mental placements of brands based on every interaction they have. The firm's job is to make sure the placement is the one it wants, and to defend that placement as the market changes around it.
5. Nike and Safaricom
Nike and Safaricom provide useful illustrations of how segmentation can operate in very different markets. The evidence does not establish that either company follows a textbook STP template mechanically. Instead, their public disclosures show combinations of geographic, product, customer, behavioural, and business-market distinctions that can be analysed through the STP framework.
NIKE, Inc. operates a portfolio that includes the NIKE Brand, Jordan Brand, and Converse. Its 2026 annual report states that the NIKE Brand focuses on performance athletic footwear, apparel, equipment, accessories, and services, together with sport-inspired lifestyle products. Jordan focuses on athletic and casual footwear, apparel, and accessories, while Converse focuses on casual sneakers, apparel, and accessories. There is therefore clear evidence of differentiated brand propositions, but it is more accurate to describe this as a portfolio and market-coverage strategy than to claim that Nike publicly identifies each brand as a formally defined demographic or psychographic segment. NIKE's reporting structure also divides the NIKE Brand geographically into North America, EMEA, Greater China, and Asia Pacific and Latin America. In fiscal 2026, NIKE, Inc. reported total revenue of US$46.398 billion, with NIKE Brand revenue of US$45.222 billion and Converse revenue of US$1.174 billion. Those figures should not be interpreted as proof that segmentation itself caused Nike's financial performance.
Nike's digital services provide a more direct behavioural example. The Nike Run Club app records running activity and provides features such as pace, distance, heart rate, cadence, training plans, and personalised coaching. Nike states that its coaching can adapt to a runner's goals and fitness level, while different programmes address beginners, distance runners, speed training, and longer-distance running. This is better described as behavioural personalisation than as proof of a formal demographic segmentation model.
Safaricom provides a different illustration because its business spans consumer telecommunications, mobile financial services, and enterprise solutions. In July 2025, Safaricom surpassed 50 million customers on its Kenyan mobile network. That is a customer-count milestone and should not be confused with active-user measures for individual services. Safaricom's FY2025 results reported 35.82 million one-month-active M-PESA customers and 30.12 million one-month-active voice customers. Its annual reporting describes customer segmentation initiatives and Customer Value Management programmes designed to improve engagement, affordability, and usage. Its enterprise business identifies large enterprises, SMEs and SOHO customers, and wholesale customers as important enterprise segments, with different categories of solutions covering connectivity, M-PESA payments, communications, cloud, and ICT services.
The two companies demonstrate an important point about applying STP carefully: public evidence rarely maps neatly onto textbook segment labels. Nike combines brands, geography, sports, product categories, channels, and digital engagement. Safaricom combines consumer and enterprise customer groups, product use cases, service categories, customer-value management, and behavioural data. In both cases, the practical segmentation is multidimensional. A customer is not necessarily classified by one variable alone. Location, product category, usage behaviour, customer type, needs, and engagement can all influence the proposition delivered to that customer. However, the cases do not prove that every segmentation decision made by either company is optimal, nor do they prove that segmentation caused the companies' financial results. What the cases do show is that real-world segmentation is more complicated than simply placing customers into demographic boxes.
Judgement
The strongest practical lesson from STP is not that every company should create more segments. It is that a segmentation should exist for a reason. A useful segmentation identifies differences that matter. If customers classified into different segments do not have materially different needs, behaviours, or responses to marketing decisions, the classification may add little strategic value. If the segments do differ but the organisation cannot reach or serve them differently, the segmentation may still fail to produce commercial value.
My detailed conclusion is this. The conventional STP framework remains a useful starting point, but it should not be treated as a mechanical recipe. Its three components developed through different strands of marketing thought and were subsequently integrated into a widely used managerial framework. The textbook treatment can undersell three practical disciplines. First, it can undersell segment validity. A segmentation that describes customers without predicting differences that matter produces activity without strategic value. Second, it can undersell the cost of maintaining segmentation over time. Nike and Safaricom both operate in markets where customer behaviour, product categories, and competitive conditions change, and their public disclosures show segmentation activity that is ongoing rather than a one-time exercise. Third, it can undersell the coordination problem. A segmentation that does not change the behaviour of the sales, product, pricing, and communications functions has produced research output, not strategic value.
The strongest counterargument to my position is that the STP framework is descriptive, and that any claim about the value of segmentation is subjective. I take that objection seriously. Segmentation value is not measurable in the same way as revenue or market share. But the objection misses the point. The framework is useful precisely because it forces managers to examine whether their customer divisions are predictive and actionable. Firms that skip that examination are more likely to produce decorative segmentations than firms that perform it. The discipline is in the examination, not in the certainty of the answer.
My recommendations for practitioners are these:
- Segment on the variable that predicts behaviour, not the variable that is easiest to collect — demographic data is easy to reach through media but weak at explaining purchase; behavioural data is harder to reach but more predictive
- Test segment differentiability before committing to the segmentation — if the segments do not respond differently to different offers, the segmentation is decorative
- Revisit the segmentation on a rolling basis — customer behaviour changes, competitors reposition, and previously distinctive benefits can become category expectations
- Coordinate the segmentation output across functions — a segmentation that does not change the behaviour of the sales, product, pricing, and communications functions has produced no value
- Protect the positioning that the segmentation produces — segments are easy to redefine and positioning is easy to dilute, and the firm that holds both over time builds durability
Segmentation is not valuable because it divides a market. It is valuable when the divisions reveal differences that the organisation can act on. STP provides the strategic logic. Research establishes whether the segments are meaningful. Targeting determines where resources go. Positioning determines what the chosen customers should understand the offering to mean. Execution determines whether any of those decisions produce practical value.
References
- Smith, W. R. (1956). Product Differentiation and Market Segmentation as Alternative Marketing Strategies — Journal of Marketing
- Ries, A., & Trout, J. (1972). The Positioning Era Cometh — Advertising Age
- Ries, A., & Trout, J. (1981). Positioning: The Battle for Your Mind — McGraw-Hill
- Kotler, P., Keller, K. L., & Chernev, A. (2022). Marketing Management, 16th ed. — Pearson
- Wedel, M., & Kamakura, W. A. (1998). Market Segmentation: Conceptual and Methodological Foundations — Kluwer Academic Publishers
- NIKE, Inc. (2026). Annual Report on Form 10-K, fiscal year ended May 31, 2026 — NIKE Investor Relations
- Safaricom PLC (2025). Annual Report and Financial Statements — Safaricom
- Safaricom PLC (2025). Condensed Audited Results for the Year Ended March 31, 2025 — Safaricom
- Brand Finance (2025). Kenya 25 2025 — Brand Finance
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Written by Kateule Sydney — Researcher and Writer
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