On my block in Manhattan, there are three coffee shops. I've mentioned this here before, when I wrote about the hype around lines. What I didn't mention is the question that came after: how can three businesses selling practically the same thing, a few steps apart, all survive at the same time?
After paying attention for a few months, the answer became clear. They don't sell the same thing to the same person. One is the quick stop for people heading to the subway who want a cup in hand within two minutes. Another is the place for people who'll sit with a laptop for three hours. The third sells an experience—the pretty drink, the photo, the trendy spot.
Each one chose someone. And to choose someone, each had to give up everyone else. In marketing, this has a name: segmentation and positioning. And, in my experience, it's one of the most important—and hardest—decisions a brand can make.
Segment, choose, position
In marketing textbooks, this process goes by the acronym STP, for Segmentation, Targeting and Positioning. It's three steps, always in this order:
- 1. Segment: divide the market into groups of people with similar needs, habits or behaviors.
- 2. Target: decide which of those groups the brand will focus its energy and money on—and, by extension, which ones it will leave aside.
- 3. Position: define the place the brand wants to hold in that audience's mind, and the reason they should choose it over the competition.
It looks simple on paper. The hard part is the second step. Every company wants to sell to everyone, and saying “this customer isn't for me” feels almost like losing money. But a brand that tries to please everyone usually ends up being no one's first choice.
What New York taught me about choosing
My favorite examples are the ones that have already appeared on this blog. Looking at them again through the STP lens, it's easy to see who each business chose—and who it deliberately left out.
| Business | For whom | How it positions itself | Who's left out |
|---|---|---|---|
| Quick-stop coffee shop | People on their way to work or the subway | Speed and a fair price | People who want to sit and stay |
| Trendy matcha café | A young crowd that chooses based on the experience and the photo | Aesthetics, a photogenic drink, the feeling of being in the know | People who just want a cheap black coffee |
| Trader Joe's | People who like discovering new products and are willing to go to the store | Curation, private label, fair prices | People who want delivery or the same famous brands as always |
The matcha café makes sense when you remember a stat I shared in my post about the hype: 60% of Gen Z choose where to get coffee based on how the photos look, not necessarily on taste. It isn't making a mistake by investing more in the cup than in the beans. It's speaking to the audience it chose.
And Trader Joe's may be the boldest case. Refusing delivery in a city like New York means giving up a huge group of customers. But it's exactly that sacrifice that protects its positioning: the treasure-hunt experience only exists inside the store.
Segmentation on the beach
I learned segmentation in practice long before I knew the acronym. At one of the largest breweries in Brazil, in Natal, I handled VIP clients: restaurants and beach bars. And the Ponta Negra Beach strip was a case of its own. Our beers were more expensive than the region's popular brands, and our market share there was low.
The temptation would have been to treat every point of sale the same way: same discount, same approach. But a beach bar isn't a neighborhood bar. Its value goes beyond the volume it sells: it's a showcase. Every umbrella with the brand on it is seen by thousands of people on a weekend. So we created a proposal specific to that segment: a minimum monthly purchase of about R$3,000 (Brazilian reais), across at least four brands in the portfolio, in exchange for equipment (umbrellas, tables, chairs, buckets) and an extra discount for those who followed the suggested retail price.
I spoke with about 60 beach bar owners. The result was a 43% adoption rate and a 20% increase in beer volume sold in the region. What made the difference wasn't the discount itself. It was understanding that this group of customers had a different need—and offering something designed for them.
Years later, at a delivery super app, the same logic played out in a different way. When we brought the platform to Natal, a market dominated by a single competitor, we couldn't go after everyone at once. The expansion grew as we learned which businesses and which areas responded best—and it ended up reaching areas that weren't even in the original plan.
Everyone agrees, few actually do it
The curious thing is that nobody disputes the importance of segmentation. A Bain & Company survey found that 81% of executives consider customer segmentation essential to growing profits, but fewer than 25% believe their companies use it effectively. In other words: the theory is a consensus, the execution is rare.
And customers notice the difference. A McKinsey study on personalization—segmentation taken down to the individual level—found that 71% of consumers expect personalized interactions and 76% get frustrated when that doesn't happen. The same study notes that getting personalization right typically drives a 10% to 15% revenue lift.
To me, these numbers explain why segmentation isn't just one step in a plan. It's a business decision that shows up on the bottom line—for those who do it right and, above all, for those who don't.
Segmenting isn't labeling
There's one caveat I think is important to make clear. Bad segmentation is almost worse than none at all. The most common mistake is dividing an audience only by age, gender or income and assuming everyone in each box thinks the same way. That isn't segmentation, it's stereotyping.
I'm a good example myself. Based on demographics, I should be a loyal customer of the trendy matcha café. In reality, I've swapped coffee for decaf and make my own at home. Anyone who put me in that segment based only on my age and address would be way off.
That's why segmentation that works looks at behavior first: what people buy, how often, at what moment, and why. In the case of the beach bars, what defined the segment wasn't the size of the business or the owner's profile. It was the role that point of sale played in the brand's visibility. And that's where data and segmentation meet: without measuring behavior, all that's left is guesswork.
To choose is to give something up
In the end, segmentation is a conversation about courage. The theory fits in three steps, but the real decision lies in the middle one: choosing who you exist for and accepting that other people will walk right past your door.
The three coffee shops on my block are still open because each of them accepted that. The fourth, the one that closed, I never quite knew who it was for. Maybe that was exactly the problem.
And you: can you say, in one sentence, who the brand you work for is for—and who it isn't for?