Market Segmentation | How Gymshark use Market Segmentation Explained.

0:00 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

0:47 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

1:35 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

2:23 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

3:10 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

4:00 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.

4:46 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

5:35 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.

6:21 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

7:11 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.

8:01 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,

8:48 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

9:37 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

10:23 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

11:08 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.