Market Segmentation | How Gymshark use Market Segmentation Explained.

Summary

This 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

• 🔍 Market segmentation allows businesses to identify and understand their target audience's specific needs and wants.
• 🌐 Geographical segmentation involves tailoring products and marketing strategies based on the location of the target market.
• 👥 Demographic segmentation focuses on characteristics like age, gender, and income to target products effectively.
• 🏋️‍♂️ Gymshark targets a young demographic, primarily 18-25-year-olds, with a focus on fitness, fashion, and music.
• 📈 Behavioural segmentation is crucial for planning product production and marketing campaigns to align with consumer buying patterns.
• 🌱 Lifestyle segmentation is about aligning products with the hobbies, interests, and life choices of the target audience.
• 💰 Income segmentation considers the earning potential and disposable income of consumers to determine product pricing and marketing strategies.
• 🚀 Gymshark's success is attributed to its effective market segmentation, focusing on age and lifestyle, and using social media and influencers for marketing.
• 📊 Market segmentation can lead to increased brand loyalty, repeat customers, and higher prices due to better alignment with customer needs.
• ⚖️ 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

00:00

🏪 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.

05:01

🌍 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.

10:06

🛍 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.

📈 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.

Keywords

💡Market Segmentation

Market segmentation is a strategic business process that involves dividing a broad market into distinct groups of consumers who share similar needs, characteristics, or behaviors. In the video, this concept is central as it discusses how businesses like Gymshark use segmentation to understand and cater to their target audience more effectively. The video explains that by segmenting the market, businesses can tailor their products and marketing strategies to meet the specific needs of different consumer groups, thereby increasing sales and profitability.

💡Target Market

The target market refers to the specific group of potential customers a business aims to attract with its products or services. In the context of the video, Gymshark has clearly defined its target market as young gym-goers aged 18-25, who are interested in fitness, fashion, and music. Understanding the target market is crucial for developing products and marketing campaigns that resonate with their preferences and lifestyle.

💡Geographical Segmentation

Geographical segmentation is a type of market segmentation that groups potential customers based on their location. The video uses McDonald's as an example, highlighting how the menu varies across different countries to cater to local tastes. In contrast, Gymshark maintains consistent core products across all 131 countries it operates in, emphasizing the global appeal of its functional and stylish gym gear.

💡Demographic Segmentation

Demographic segmentation involves dividing the market based on characteristics such as age, gender, race, and income. The video points out that Gymshark focuses on the demographic of 18-25-year-olds, understanding their specific needs for gym wear that is both functional and fashionable. This demographic focus helps Gymshark to develop products and marketing strategies that appeal to this age group.

💡Behavioural Segmentation

Behavioural segmentation is based on consumer actions, including their purchasing behaviors, brand loyalty, and usage rates. The video describes how Gymshark leverages this by conducting sales events, such as the 'Blackout' sale, to capitalize on the target market's impulse buying behavior, particularly around Black Friday. This strategic approach increases sales by creating a sense of urgency and exclusivity.

💡Lifestyle Segmentation

Lifestyle segmentation groups consumers based on their interests, opinions, and lifestyle choices. The video emphasizes Gymshark's focus on the lifestyle segment of young adults who are passionate about fitness, fashion, and music. By aligning their products and marketing with this lifestyle, Gymshark successfully targets a market segment that is likely to appreciate and engage with their brand.

💡Income Segmentation

Income segmentation involves targeting consumers based on their earning potential and disposable income. The video explains that Gymshark targets customers with higher levels of disposable income, even if they may not have high earning potential, due to the age of their target demographic. This understanding allows Gymshark to price its products appropriately to meet the willingness to pay of this segment.

💡Influencer Marketing

Influencer marketing is a strategy that involves partnering with influential individuals who have a strong following to promote products. The video highlights Gymshark's early adoption of this model in the health and fitness industry, using YouTubers like Lex Griffin and Nikki Blackketter to reach and influence their target demographic effectively.

💡Product Differentiation

Product differentiation is the process of distinguishing a company's products from competitors' products to make them more attractive to customers. The video discusses how Gymshark differentiates its products by offering high-quality, fashionable gym wear that fits well and appeals to the aesthetic and functional preferences of its target market.

💡Market Analysis

Market analysis is the process of evaluating a market to understand its size, growth potential, and consumer behavior. The video implies that businesses like Gymshark conduct market analysis to identify and assess the profitability and growth potential of different market segments before deciding which ones to target.

💡Marketing Mix

The marketing mix, often referred to as the '4 Ps' (Product, Price, Place, Promotion), is a set of variables that a company can control to influence the demand for its products. The video suggests that once Gymshark identifies its target segments, it develops an appropriate marketing mix to attract and convert these segments into paying customers.

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 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  

for lots more Business Studies content. All the best.