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
- 🔍 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
🏪 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.
🌍 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.
🛍 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.
Mindmap
Keywords
💡Market Segmentation
💡Target Market
💡Geographical Segmentation
💡Demographic Segmentation
💡Behavioural Segmentation
💡Lifestyle Segmentation
💡Income Segmentation
💡Influencer Marketing
💡Product Differentiation
💡Market Analysis
💡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 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.
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