Market Segmentation | How Gymshark use Market Segmentation Explained.
Summary
TLDRThis video script delves into market segmentation, a pivotal business strategy exemplified by Gymshark. It elucidates how businesses categorize customers into segments based on demographics, behavior, and lifestyle to tailor products and marketing. The script underscores Gymshark's strategic focus on the 18-25 age group, emphasizing fitness and fashion, leveraging influencer marketing to resonate with its audience. The narrative also addresses the benefits of market segmentation, such as enhanced customer satisfaction and brand loyalty, against potential drawbacks like increased costs and product diversification challenges.
Takeaways
- š Market segmentation allows businesses to identify and understand their target audience's specific needs and wants.
- š Geographical segmentation involves tailoring products and marketing strategies based on the location of the target market.
- š„ Demographic segmentation focuses on characteristics like age, gender, and income to target products effectively.
- šļøāāļø Gymshark targets a young demographic, primarily 18-25-year-olds, with a focus on fitness, fashion, and music.
- š Behavioural segmentation is crucial for planning product production and marketing campaigns to align with consumer buying patterns.
- š± Lifestyle segmentation is about aligning products with the hobbies, interests, and life choices of the target audience.
- š° Income segmentation considers the earning potential and disposable income of consumers to determine product pricing and marketing strategies.
- š Gymshark's success is attributed to its effective market segmentation, focusing on age and lifestyle, and using social media and influencers for marketing.
- š Market segmentation can lead to increased brand loyalty, repeat customers, and higher prices due to better alignment with customer needs.
- āļø While market segmentation offers benefits, it can also increase costs and complexity, potentially leading to a loss of brand identity if not managed carefully.
Q & A
What is market segmentation and why is it important for businesses?
-Market segmentation is a business tool that divides potential customers into groups, known as segments, based on several key factors and characteristics such as location, demographics, behavior, lifestyle, and income. It is important because it allows businesses to understand and meet the needs of their customers more effectively, leading to increased brand loyalty, repeat custom, and potentially higher prices due to reduced price sensitivity.
How does Gymshark apply market segmentation in its business strategy?
-Gymshark applies market segmentation by focusing on specific demographic and lifestyle segments. They target 18-25-year-olds who are interested in fitness, fashion, and music, and develop products and marketing strategies that cater to these interests. They use social media and influencers effectively to reach this audience.
What are the different types of market segments mentioned in the script?
-The script mentions several types of market segments including geographical, demographic, behavioral, lifestyle, and income-based segmentation. Each type focuses on different characteristics of the target market to tailor products and marketing strategies.
How does geographical segmentation differ from demographic segmentation?
-Geographical segmentation is based on the location of potential customers, often leading to businesses altering their product offerings according to the location. Demographic segmentation, on the other hand, is based on characteristics of the target market such as age, gender, race, religion, and sexual orientation.
Can you provide an example of how Gymshark uses demographic segmentation?
-Gymshark uses demographic segmentation by targeting 18-25-year-olds of any gender who are interested in fitness. They develop products that meet the wants and needs of this age group and use social media platforms and influencers popular among this demographic to promote their brand.
What is behavioral segmentation and how does it relate to Gymshark's sales strategy?
-Behavioral segmentation relates to consumer buying behavior and how it varies between different market segments. Gymshark uses this by holding two major sales each year, particularly focusing on Black Friday, to capitalize on the buying behavior of their target market, leading to significant sales during these periods.
How does lifestyle segmentation play a role in Gymshark's marketing approach?
-Lifestyle segmentation focuses on the hobbies and interests of people. Gymshark identifies its target audience's lifestyle revolving around fitness, fashion, and music, and uses this understanding to create marketing strategies that resonate with these interests, such as collaborations with influencers in the fitness and fashion space.
What are the potential benefits of market segmentation for a business like Gymshark?
-The benefits include a better understanding and meeting of customer needs, increased brand loyalty, repeat custom, reduced price sensitivity, and the ability to charge higher prices, leading to increased revenue and profitability.
What could be some drawbacks of conducting market segmentation?
-Drawbacks include potential increased costs for market analysis, research and development, and marketing to various segments. It may also lead to a larger product range, potentially causing confusion for customers and loss of brand identity.
How does Gymshark ensure its product offerings remain consistent despite operating in 131 countries?
-Gymshark maintains consistent core products across all locations, focusing on the belief that young gym-goers want functional and stylish gym gear. Their vision remains true regardless of the customer's location.
What is the role of influencer marketing in Gymshark's success?
-Influencer marketing has been crucial for Gymshark's success, as they were early adopters of this model in the health and fitness industry. They effectively targeted their demographic through influencers like Lex Griffin and Nikki Blackketter, who are followed and admired by their target audience.
Outlines
šŖ Market Segmentation Overview
This paragraph introduces the concept of market segmentation, a business strategy used to identify and understand target markets' specific needs and wants. It uses Gymshark as a case study to demonstrate how businesses divide potential customers into segments based on factors like location, demographics, behavior, lifestyle, and income. The goal is to tailor products and marketing campaigns to these segments, aiming to maximize sales and profitability. The example of a generic t-shirt business is used to contrast the ineffectiveness of a non-segmented approach. The paragraph also discusses how businesses assess the potential of each segment and develop a marketing mix to attract and convert these specific target markets.
š Geographical and Demographic Segmentation
This section delves into geographical segmentation, explaining how businesses like McDonald's adapt their offerings based on the location of their customers. It contrasts this with Gymshark, which maintains consistent products across 131 countries, focusing on functional and aesthetically pleasing gym gear for young gym-goers. The paragraph then discusses demographic segmentation, highlighting how businesses like McDonald's and Asos target specific age and gender demographics. Gymshark's clear demographic focus on 18-25-year-olds of any gender is emphasized, along with their use of social media and influencers to effectively reach and understand this audience.
š Behavioural, Lifestyle, and Income Segmentation
The third paragraph explores behavioural segmentation, focusing on consumer buying patterns and how businesses like Gymshark use these insights to plan production and marketing strategies, such as seasonal sales. It details Gymshark's 'Blackout' campaign as an example of leveraging consumer behavior to increase sales. The paragraph then moves on to lifestyle segmentation, discussing how businesses adapt to lifestyle changes, like the rise of veganism, to target specific market segments. Gymshark's success in targeting the fitness, fashion, and music-oriented lifestyle of its 18-25-year-old audience is highlighted. Lastly, it addresses income segmentation, explaining how Gymshark targets customers with higher disposable income, offering high-quality, fashionable gym wear at a premium price.
š Benefits and Drawbacks of Market Segmentation
The final paragraph discusses the benefits and potential drawbacks of market segmentation. It outlines how Gymshark's use of market segmentation has led to increased brand loyalty, repeat business, and higher prices due to reduced price sensitivity. The paragraph also acknowledges the increased costs associated with market segmentation, including research, development, and marketing expenses. It warns of the risk of expanding the product range to meet diverse segment needs, which could lead to a loss of brand identity and reduced economies of scale. The paragraph concludes by commending Gymshark's effective execution of market segmentation strategies to support brand growth.
Mindmap
Keywords
š”Market Segmentation
š”Target Market
š”Geographical Segmentation
š”Demographic Segmentation
š”Behavioural Segmentation
š”Lifestyle Segmentation
š”Income Segmentation
š”Influencer Marketing
š”Product Differentiation
š”Market Analysis
š”Marketing Mix
Highlights
Market segmentation is essential for businesses to understand and meet customer needs effectively.
Gymshark uses market segmentation to focus on specific customer groups, enhancing product and marketing strategies.
Geographical segmentation involves tailoring products to the location of the target market, as seen with McDonald's varied menus.
Gymshark maintains consistent core products globally, focusing on the functional and aesthetic needs of young gym-goers.
Demographic segmentation is crucial for businesses to ensure product suitability for different age, gender, and other characteristics.
Gymshark targets the 18-25 age demographic with a clear understanding of their fitness and fashion needs.
Influencer marketing is a key strategy for Gymshark to reach their demographic through social media platforms.
Behavioural segmentation helps businesses plan production and marketing campaigns around customer buying patterns.
Gymshark capitalizes on seasonal sales, such as Black Friday, to drive impulse purchases and increase sales.
Lifestyle segmentation is pivotal for Gymshark, targeting young adults interested in fitness, fashion, and music.
Income segmentation allows businesses like Gymshark to price their products appropriately for their target market's disposable income.
Market segmentation benefits include increased brand loyalty, reduced price sensitivity, and higher profitability for Gymshark.
Drawbacks of market segmentation include increased costs for research, development, and marketing tailored to various segments.
Gymshark's success showcases effective market segmentation, focusing on specific demographic and lifestyle segments.
Market segmentation enables businesses to offer products that meet the quality and style expectations of their target market at a premium price.
Transcripts
Market segmentation is a process many businessesĀ use to identify their target market and fullyĀ Ā
understand their wants and needs. This video explores the concept ofĀ Ā
Market Segmentation with supporting examplesĀ by applying the process involved to Gymshark.
Market segmentation is a business toolĀ which aids businesses such as GymsharkĀ Ā
to divide up the market or potential customersĀ into groups which are known as segments basedĀ Ā
on several key factors and characteristics. These commonly include location, demographics,Ā Ā
behaviour, lifestyle, and income. The key reason for market segmentationĀ Ā
is based on the vast differencesĀ between the needs and wants of people.Ā
For example, if we set up a business sellingĀ t-shirts today and just aimed to sell oneĀ Ā
generic design to the whole market, the chancesĀ are we may not attract many customers at all,Ā Ā
as we fail to meet anyoneāsĀ specific needs and wants.Ā
Therefore, businesses segmentĀ the market into groups of peopleĀ Ā
according to their differing wants and needs. This allows them to effectively focusĀ Ā
and tailor their products and associatedĀ marketing campaigns at them specifically.Ā
Once potential customers have been split upĀ into segments, the business is then able toĀ Ā
analyse each one in turn to assess the potentialĀ profitability or long-term growth of each one,Ā Ā
with the aim of targeting a specific segment orĀ collection of segments to market their productsĀ Ā
too and maximise sales and profitability. Once the business has decided on the specificĀ Ā
segments of the market it will beĀ aiming its products or services at,Ā Ā
it will then develop and apply an appropriateĀ marketing mix to attract and convert thisĀ Ā
specific target market into paying customers. Letās take a look at the different typesĀ Ā
of market segments in more detail and someĀ examples of market segmentation at Gymshark.
Splitting up the market by theĀ location of potential customersĀ Ā
is also known as geographical segmentation and isĀ essentially based on where the target market live.Ā
Businesses have a wide range of options whenĀ it comes to the products it offers accordingĀ Ā
to the target markets location and oftenĀ choose to alternate their product offeringĀ Ā
according to the location of the customers. This is more apparent in global businesses likeĀ Ā
McDonalds whose menu varies across the worldĀ according to the location of their customers,Ā Ā
for example in France they have theĀ Mc Baguette and in the PhilippinesĀ Ā
a speciality is the Mc rice burger. Gym Shark have grown from a start-up inĀ Ā
2012 where founder Ben Francis and a groupĀ of his high-school friends got taught howĀ Ā
to sow by his grandma and produced the earlyĀ products in his parentās garage into a globalĀ Ā
business which now operates within 131 countries. However, unlike McDonaldās, the core products atĀ Ā
Gym Shark remain the same regardless of theĀ customers location, the business was foundedĀ Ā
on a belief that young gym-goers wantedĀ to look and feel good going to the gym,Ā Ā
so Ben Francis had a vision of providing themĀ with functional gym gear which performed wellĀ Ā
and looked very good, which remains trueĀ regardless of where the customer is located.
Demographic segmentation is based on theĀ characteristics of the target market and include:Ā
age, gender, race, religion, andĀ sexual orientation amongst many others.Ā
Considering the demographics of the targetĀ market and the products suitability for themĀ Ā
is vital for any business. For example, McDonalds targetsĀ Ā
the age demographic of young children with theirĀ happy meal option, providing a smaller quantity ofĀ Ā
food with healthier options such as carrot sticksĀ alongside a novelty item including a toy or a bookĀ Ā
which allows the business to attract and engageĀ the younger audience with the potential of turningĀ Ā
them into a lifelong loyal customer. Whereas a business such as Asos whichĀ Ā
sells dresses and trainers amongst otherĀ items are targeting the gender demographicĀ Ā
of women looking to buy what they call theĀ āfreshest fashionā at an affordable price.Ā
Gymshark has a very clear target demographic whichĀ it aims it products at, there main target marketĀ Ā
in relation to demographics is based on age, withĀ a clear audience of 18ā25-year-olds of any gender.Ā
Gymshark know and understand the wants andĀ needs of their audience and have succeededĀ Ā
in reaching them through not only developingĀ products to meet their wants and needsĀ Ā
but by using extremely effectiveĀ promotional methods via theirĀ Ā
social media platforms whichĀ have over 5 million followers,Ā Ā
combined with the use of influencers which thisĀ demographic follow and take inspiration from.Ā
Gymshark are famous for being one of the earlyĀ adopters of the influencer marketing modelĀ Ā
within the health and fitness industry, withinĀ which they effectively targeted this demographicĀ Ā
through YouTubers including Lex GriffinĀ and Nikki Blackketter amongst many others.
Behavioural segmentation predominatelyĀ relates to consumer buying behaviourĀ Ā
and how it varies between industriesĀ and specific segments of the market.Ā
For example, some businesses will see an upturn inĀ sales at Christmas, whilst other businesses suchĀ Ā
as those which specialise in gardening equipmentĀ for example will thrive during the summer.Ā
Itās very important for businesses to beĀ aware of the behaviours of their target marketĀ Ā
to ensure they plan production ofĀ their products accurately and executeĀ Ā
effective marketing campaigns at the right time. Gymsharkā s products tend to sell all year roundĀ Ā
and experience seasonal peaks alongside theĀ usual peaks in the health and fitness industry.Ā
However, a very effective way in which GymsharkĀ use the behaviour of their target market toĀ Ā
their advantage is through the use of sales. They typically hold two major sales each yearĀ Ā
and the black Friday one is arguably their mostĀ effective and attractive to their customer base.Ā
A great example was through a marketing campaignĀ named āblackoutā which utilised their targetĀ Ā
markets fear of missing out by running aĀ weeklong sale starting on Monday at 3pmĀ Ā
until the end of a week with a countdownĀ timer showing how long the sale had left,Ā Ā
which influenced their behaviourĀ and increased impulse purchases.Ā
These types of sales have led to Gym Shark sellingĀ 90% of their products in just one day in the past.
Segmenting the market by lifestyle isĀ focused on the hobbies and interestsĀ Ā
of people, alongside their wants and needsĀ according to the type of life they lead.Ā
The rapid rise of veganism and increase ofĀ vegan options available at restaurants andĀ Ā
supermarkets to customers is a clear exampleĀ of businesses identifying a recent changeĀ Ā
in the lifestyle choices of many of theirĀ customers in specific segments of the market.Ā
With many businesses reacting to and targetingĀ this audience, such as Subway releasingĀ Ā
plant-based products which include the āMeatlessĀ Meatball Marinaraā and āTastes Like Chickenā Subs.Ā
The market segment of lifestyle is oneĀ of the most important characteristics ofĀ Ā
a customer at Gymshark and focusing onĀ this segment has arguably been the mainĀ Ā
factor in their growth and success to date. Gymshark have a clear target audience ofĀ Ā
18ā25-year-olds whose lifestyles revolveĀ around fitness, fashion, and music.Ā
Once Gymshark identified the lifestyleĀ choices of its target audience,Ā Ā
the business was able to effectively targetĀ their products at them through a series of wellĀ Ā
executed marketing strategies based around theirĀ lifestyle choices, hobbies, and areas of interest.
The final market segment which isĀ commonly assessed by businesses is income.Ā
This segment is focused on howĀ much the typical person earnsĀ Ā
and how much disposable income they have. Which is a crucial factor for any businessĀ Ā
to consider before launching their product orĀ targeting a specific segment of the market.Ā
For example, businesses such as TeslaĀ and Rolex clearly target a segment of theĀ Ā
market which have high earning potentialĀ and a high amount of disposable income.Ā
Whereas businesses such as Aldi targets a segmentĀ of the market which mainly have a lower earningĀ Ā
potential and not as much disposable incomeĀ as customers of competitors such as Waitrose.Ā
Gymshark targets a market of customers whoĀ have higher levels of disposable income,Ā Ā
but not necessarily higher earning potential dueĀ to the age of their target market being younger.Ā
Although their gym wear is pitchedĀ as affordable it is still at theĀ Ā
higher end of the market in lineĀ with competitors such as Nike,Ā Ā
in comparison to businesses which target theirĀ gym wear products to customers with lower levelsĀ Ā
of disposable income such as Boohoo or Primark. Gymshark have been very successful when targetingĀ Ā
this segment of the market as they are willing toĀ pay the premium price due to the high-end quality,Ā Ā
fashionable gym wear, which isĀ designed to shape to fit, slimming,Ā Ā
and be tight in all the right places, effectivelyĀ meeting the needs and wants of the target market.Ā
Now that we have looked at various examples ofĀ market segmentation in action, itās importantĀ Ā
to understand the potential benefits andĀ drawbacks of conducting market segmentation.
Letās start with the benefits. The key benefit of using marketĀ Ā
segmentation for a business such as Gymshark isĀ the process enables them to understand and meetĀ Ā
the needs of their customers more effectively. This is very clear at Gymshark as the businessĀ Ā
clearly meets the needs and wants ofĀ its target market and act upon these.Ā
By doing so, it has led to Gymshark achievingĀ increased brand loyalty and repeat custom.Ā
Whilst at same time reducing price sensitivityĀ around the brand, allowing Gymshark to chargeĀ Ā
a higher price for their products andĀ the target market being happy to pay it.Ā
Which has ultimately increased the revenueĀ and profitability of the business which hasĀ Ā
grown from a start-up in 2012 to aĀ reported $1.3 billion brand in 2020.
However, itās important to understandĀ some of the potential drawbacks ofĀ Ā
conducting market segmentation. A key drawback is the potentialĀ Ā
for increased costs, not just whilst conductingĀ the analysis of the market initially, but theĀ Ā
increased research and development costs involvedĀ when developing and producing products to meet theĀ Ā
wants and needs of various segments of the market. Alongside this, marketing to a wider audience andĀ Ā
more segments over time will also cost more moneyĀ as the message communicated is likely to alterĀ Ā
according to the varying wants and needsĀ of the target market as the business aimsĀ Ā
at different segments, which will increaseĀ the amount of marketing activities required.Ā
Market segmentation can also lead to a biggerĀ product range as the business tries to meet theĀ Ā
wants and needs of more people within variousĀ segments of the market, which can cause aĀ Ā
business to lose sight of its core purposeĀ or values and cause confusion for customers,Ā Ā
potentially leading the brand to lose its identityĀ and be less able to exploit economies of scale.
Gymshark are a fantastic example ofĀ market segmentation being conductedĀ Ā
and executed effectively by a businessĀ to support the growth of their brand.Ā
They have focused purely on just a few specificĀ segments of the market with age and lifestyleĀ Ā
being the most notable characteristics of itsĀ target market, once these were identified,Ā Ā
they targeted them with well executed marketingĀ mainly through social media and influencers,Ā Ā
offering products which met their wants andĀ needs in terms of both quality and styleĀ Ā
at a price they are willing to pay due toĀ their pay and disposable income levels.Ā
So thatās it, market segmentation, IĀ hope youāve found the video useful,Ā Ā
and if you have donāt forget to give it a likeĀ and subscribe to Two Teachers YouTube channelĀ Ā
for lots more Business Studies content. All the best.
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