I dont really like the naughty step method and have never used it in its pure form.
Its not "supposed" to be used on under 3's for a start - can't remember the "experts" rationale but its to do with congnitive development and the argument is apparently to do with its effectiveness but many parents will argue anecdotally that it is effective under this age. I have seen it used on 18 month olds, even a crude form of time out on a one year old being put in his cot though because you can't make them sit on a step easily at that age. But hearing about the "not for under 3's" thing was what initially stopped me trying it, as it made sense and had a bit of science to back it up, and in any event I couldn't fathom my child staying on there at that point either. Almost like setting them up for failure and taking even more focus away from the original "bad behaviour" by adding something else they've done wrong and then dealing with that on top of the original thing.
I have used on occasions a form of exclusion, where I've warned that if a certain behaviour against a sibling continues, said child will be excluded from the room so as not to do the behaviour as its not nice - child wants to be in room where the action is so stops behaviour. Have occasionally had to enforce the exclusion until said child is willing to co-operate which is very quickly as doesn't like being excluded - but not really naughty step and does not involve sitting on a step on in a certain place, but is technically "time out". Doesn't get used often as it simply doesn't need to be.
I find under 2, a telling off is generally enough - it does kind of fall on deaf ears (or selective deafness) a bit, but it is enough to communicate that the behaviour is not acceptable. I found a consequence at that age, whatever it was you threaten them with and then carry through, was relatively ineffectual in stopping them do the behaviour again - because I found personally at that age it was just their age that was making them do that and they sort of had to grow out of it as well as having it drummed into them not to do it simply by being told off. So I'd tell them off, but a punishment as such wouldn't deter.
Once they hit 2 or thereabouts I found they were ready for a consequence, and as they get older that consequence can be a bit more severe. When I say severe, leaving someone's house or a fun place because after warnings, behaviour is inappropriate was VERY effective for me recently - I have not had to endure the behaviour since. So I do "punish" as such but I try and make it very topical to the behaviour. This afternoon my son took something from my baby daughter. I told him to give it back, he ran off with it, I warned him that if he didn't give it back on the count of 3 I'd take his balloon until he changed his mind and gave it back. Count of 3 didn't work, I took the balloon, put it out of reach, he went mental, gave thing back to baby daughter, so he got the balloon back. So his punishment for taking something was to have something taken. Whereas to put him on a naughty step makes less sense for me - its not topical enough, whereas I'd like to think the consequence I chose today was more likely to drum in why its not nice to have something taken from you - if I'd put him on the naughty step, I suspect he might have forgotten why he was even there, and the focus would be more on keeping him on it (I know you do the talking to thing as well but that puts all the attention on him and none on the wronged party) - whereas the consequence I chose was very much themed upon having something taken off you and treating others as you'd like to be treated and was very effective in getting him to give the thing back, but hopefully, also, reminded him that having something you like taken off you isn't very nice.
Its a bit personal preference and a bit what your child is like. My children are "naturally" pretty well behaved thus far so I am fortunate in that regard and consequently no expert.
I have read Alfie Kohn and he does make a lot of sense but I think he goes a bit far with the idea that naughty step teaches them conditional love etc - I suppose it might send that message but any kind of behaviour correction might, you could argue. That's not really why I dont like it.
It just doesn't sing to me as an effective method, even though I've never tried it - I just dont believe in it, therefore there is no point doing it, because I just dont buy into it.
I dont have a problem or judge other people using it though, I dont fall into that camp - one friend who used it from very early on and still uses it, though she has rebranded it from "naughty step" to "thinking chair" has one of the worst behaved children I know - probably co-incidence and fair play to her for trying - but I do feel he's now of an age where actually she could probably find a consequence that's more relevant and "painful" for him, as he doesn't seem to give a toss if he has to sit on a chair for 3 minutes, its all a great big joke and he just bides his time before getting off the chair and repeating the behaviour. For her, its clearly not working, so I judge it on that basis but not the method itself, so much, as for some it really does seem to work.