Market segmentation is a process many businesses use to identify their target market and fully
understand their wants and needs. This video explores the concept of
Market Segmentation with supporting examples by applying the process involved to Gymshark.
Market segmentation is a business tool which aids businesses such as Gymshark
to divide up the market or potential customers into groups which are known as segments based
on several key factors and characteristics. These commonly include location, demographics,
behaviour, lifestyle, and income. The key reason for market segmentation
is based on the vast differences between the needs and wants of people.
For example, if we set up a business selling t-shirts today and just aimed to sell one
generic design to the whole market, the chances are we may not attract many customers at all,
as we fail to meet anyone’s specific needs and wants.
Therefore, businesses segment the market into groups of people
according to their differing wants and needs. This allows them to effectively focus
and tailor their products and associated marketing campaigns at them specifically.
Once potential customers have been split up into segments, the business is then able to
analyse each one in turn to assess the potential profitability or long-term growth of each one,
with the aim of targeting a specific segment or collection of segments to market their products
too and maximise sales and profitability. Once the business has decided on the specific
segments of the market it will be aiming its products or services at,
it will then develop and apply an appropriate marketing mix to attract and convert this
specific target market into paying customers. Let’s take a look at the different types
of market segments in more detail and some examples of market segmentation at Gymshark.
Splitting up the market by the location of potential customers
is also known as geographical segmentation and is essentially based on where the target market live.
Businesses have a wide range of options when it comes to the products it offers according
to the target markets location and often choose to alternate their product offering
according to the location of the customers. This is more apparent in global businesses like
McDonalds whose menu varies across the world according to the location of their customers,
for example in France they have the Mc Baguette and in the Philippines
a speciality is the Mc rice burger. Gym Shark have grown from a start-up in
2012 where founder Ben Francis and a group of his high-school friends got taught how
to sow by his grandma and produced the early products in his parent’s garage into a global
business which now operates within 131 countries. However, unlike McDonald’s, the core products at
Gym Shark remain the same regardless of the customers location, the business was founded
on a belief that young gym-goers wanted to look and feel good going to the gym,
so Ben Francis had a vision of providing them with functional gym gear which performed well
and looked very good, which remains true regardless of where the customer is located.
Demographic segmentation is based on the characteristics of the target market and include:
age, gender, race, religion, and sexual orientation amongst many others.
Considering the demographics of the target market and the products suitability for them
is vital for any business. For example, McDonalds targets
the age demographic of young children with their happy meal option, providing a smaller quantity of
food with healthier options such as carrot sticks alongside a novelty item including a toy or a book
which allows the business to attract and engage the younger audience with the potential of turning
them into a lifelong loyal customer. Whereas a business such as Asos which
sells dresses and trainers amongst other items are targeting the gender demographic
of women looking to buy what they call the “freshest fashion” at an affordable price.
Gymshark has a very clear target demographic which it aims it products at, there main target market
in relation to demographics is based on age, with a clear audience of 18–25-year-olds of any gender.
Gymshark know and understand the wants and needs of their audience and have succeeded
in reaching them through not only developing products to meet their wants and needs
but by using extremely effective promotional methods via their
social media platforms which have over 5 million followers,
combined with the use of influencers which this demographic follow and take inspiration from.
Gymshark are famous for being one of the early adopters of the influencer marketing model
within the health and fitness industry, within which they effectively targeted this demographic
through YouTubers including Lex Griffin and Nikki Blackketter amongst many others.
Behavioural segmentation predominately relates to consumer buying behaviour
and how it varies between industries and specific segments of the market.
For example, some businesses will see an upturn in sales at Christmas, whilst other businesses such
as those which specialise in gardening equipment for example will thrive during the summer.
It’s very important for businesses to be aware of the behaviours of their target market
to ensure they plan production of their products accurately and execute
effective marketing campaigns at the right time. Gymshark’ s products tend to sell all year round
and experience seasonal peaks alongside the usual peaks in the health and fitness industry.
However, a very effective way in which Gymshark use the behaviour of their target market to
their advantage is through the use of sales. They typically hold two major sales each year
and the black Friday one is arguably their most effective and attractive to their customer base.
A great example was through a marketing campaign named ‘blackout’ which utilised their target
markets fear of missing out by running a weeklong sale starting on Monday at 3pm
until the end of a week with a countdown timer showing how long the sale had left,
which influenced their behaviour and increased impulse purchases.
These types of sales have led to Gym Shark selling 90% of their products in just one day in the past.
Segmenting the market by lifestyle is focused on the hobbies and interests
of people, alongside their wants and needs according to the type of life they lead.
The rapid rise of veganism and increase of vegan options available at restaurants and
supermarkets to customers is a clear example of businesses identifying a recent change
in the lifestyle choices of many of their customers in specific segments of the market.
With many businesses reacting to and targeting this audience, such as Subway releasing
plant-based products which include the ‘Meatless Meatball Marinara’ and ‘Tastes Like Chicken’ Subs.
The market segment of lifestyle is one of the most important characteristics of
a customer at Gymshark and focusing on this segment has arguably been the main
factor in their growth and success to date. Gymshark have a clear target audience of
18–25-year-olds whose lifestyles revolve around fitness, fashion, and music.
Once Gymshark identified the lifestyle choices of its target audience,
the business was able to effectively target their products at them through a series of well
executed marketing strategies based around their lifestyle choices, hobbies, and areas of interest.
The final market segment which is commonly assessed by businesses is income.
This segment is focused on how much the typical person earns
and how much disposable income they have. Which is a crucial factor for any business
to consider before launching their product or targeting a specific segment of the market.
For example, businesses such as Tesla and Rolex clearly target a segment of the
market which have high earning potential and a high amount of disposable income.
Whereas businesses such as Aldi targets a segment of the market which mainly have a lower earning
potential and not as much disposable income as customers of competitors such as Waitrose.
Gymshark targets a market of customers who have higher levels of disposable income,
but not necessarily higher earning potential due to the age of their target market being younger.
Although their gym wear is pitched as affordable it is still at the
higher end of the market in line with competitors such as Nike,
in comparison to businesses which target their gym wear products to customers with lower levels
of disposable income such as Boohoo or Primark. Gymshark have been very successful when targeting
this segment of the market as they are willing to pay the premium price due to the high-end quality,
fashionable gym wear, which is designed to shape to fit, slimming,
and be tight in all the right places, effectively meeting the needs and wants of the target market.
Now that we have looked at various examples of market segmentation in action, it’s important
to understand the potential benefits and drawbacks of conducting market segmentation.
Let’s start with the benefits. The key benefit of using market
segmentation for a business such as Gymshark is the process enables them to understand and meet
the needs of their customers more effectively. This is very clear at Gymshark as the business
clearly meets the needs and wants of its target market and act upon these.
By doing so, it has led to Gymshark achieving increased brand loyalty and repeat custom.
Whilst at same time reducing price sensitivity around the brand, allowing Gymshark to charge
a higher price for their products and the target market being happy to pay it.
Which has ultimately increased the revenue and profitability of the business which has
grown from a start-up in 2012 to a reported $1.3 billion brand in 2020.
However, it’s important to understand some of the potential drawbacks of
conducting market segmentation. A key drawback is the potential
for increased costs, not just whilst conducting the analysis of the market initially, but the
increased research and development costs involved when developing and producing products to meet the
wants and needs of various segments of the market. Alongside this, marketing to a wider audience and
more segments over time will also cost more money as the message communicated is likely to alter
according to the varying wants and needs of the target market as the business aims
at different segments, which will increase the amount of marketing activities required.
Market segmentation can also lead to a bigger product range as the business tries to meet the
wants and needs of more people within various segments of the market, which can cause a
business to lose sight of its core purpose or values and cause confusion for customers,
potentially leading the brand to lose its identity and be less able to exploit economies of scale.
Gymshark are a fantastic example of market segmentation being conducted
and executed effectively by a business to support the growth of their brand.
They have focused purely on just a few specific segments of the market with age and lifestyle
being the most notable characteristics of its target market, once these were identified,
they targeted them with well executed marketing mainly through social media and influencers,
offering products which met their wants and needs in terms of both quality and style
at a price they are willing to pay due to their pay and disposable income levels.
So that’s it, market segmentation, I hope you’ve found the video useful,
and if you have don’t forget to give it a like and subscribe to Two Teachers YouTube channel
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