Market segmentation is practiced by all companies, in one way or another. It is a way for a company to take its broadest audience down to specific groups, allowing the brand to offer these groups benefits of its product or services where they are most needed or desired. When implementing these strategies, it is important that companies remember that market segments should be:
- Measurable, either by value or volume. A good marketer should be able to identify the size of a market segment within a “reasonable degree of accuracy,” so that the cost of marketing to that segment can be evaluated in terms of return on investment (Lannuzzi, 2014).
- Substantial. If the market segment a brand defines isn’t large enough, or doesn’t command enough buying power, there is little point in expending the time, effort, and money required to market to it.
- Accessible. Different segments will respond to different strategies, but the brand has to be able to reach the segment in the first place to have any effect.
- Differentiable. Obviously, there is at least one similarity among the various segments a company identifies and targets, but there must be differences appreciable enough that the segment is clearly defined.
- Actionable. The size, volume, and characteristics of the target segment must support a marketing or sales approach, and they must have quantifiable results that can be measured and adjusted.
In Under Armour’s Willful Digital Moves, authors Mina Saghian and Meghan Murray offer insight into the athletic wear brand’s evolution from a one-man basement company to the competitive powerhouse that it is today. In 2013, the company recognized a unique opportunity in women’s apparel, as it represented only about 22% of its revenue.
The men’s athletic-wear market is what drove Under Armour to the heights it attained in just 20 years of business; what founder Kevin Plank realized was that there was an entirely separate market that was just ripe for marketing. After observing an expensive, and failed, effort from competitor Adidas to market to the athletic female demographic, Plank launched his own campaign, called “I Will What I Want.” Using famous athletic women like ballerina Misty Copeland and model Giselle Bündchen, Under Armour’s iconic campaign ultimately resulted in a 28% increase in women’s apparel sales and a 42% increase in traffic to Under Armour’s website, UA.com.
Market segmentation can be done based on any number of factors, including age, socioeconomic status, income, gender, geographic location, lifestyle, life stage, education, race, generation, and even personality characteristics. Really, there is no limit to the level of specificity to which a marketer can drill down when defining a segment market.
I was recently shopping online with my niece, Lizzy, who is 13 years old. She is a very unique kid who loves music, playing guitar, and art. She’s a bit of a loner, preferring the company of one or two close friends to being just one in a crowd. She’s fairly introverted, but shines when discussing things she is passionate about, like the band twenty one pilots (NEVER capitalize their name, Aunt Angie!), Japanese anime, and her slightly off-kilter personal brand of fashion. She spends a lot of time online, either on her phone, iPod, laptop, or gaming console, and, like most young people her age, can’t imagine a time without the instant connectivity of the internet. She is not afraid to speak her mind, and she does not hesitate to stand up for others who are persecuted, belittled, or bullied. She has a very well-defined sense of right and wrong, like most young people, but it’s not all black and white with her; she understands that there are shades and degrees and that justice should be applied on a case-by-case basis, rather than as a blanket policy. In addition to her book smarts (she is consistently on the A/B Honor Roll in school and will start high school in all Honors classes), she also has a great deal of common sense and often operates at a level far beyond her years.
A brand could target Lizzy and other kids like her by incorporating all the things they are passionate about – art, music, and fashion – into a well-executed social media and online campaign. While shopping with her online, it is easy to see how many brands are already tuned into our everyday habits – ads for t-shirts with the bands she loves on them, combat boots that lace nearly to the knee, and art supplies popped up on nearly every page we visited. Later, playing some of the “free” video games on her PS4 with her, I saw similar advertisements targeting kids like Lizzy. This is a powerful segment because, even though these kids may not have a lot of their own money to spend, their parents are quick to provide them with the things they desire…at least, that’s the case with Lizzy and her mom!
Market segmentation is a powerful tool that, used correctly, can catapult a company to the heights of its potential; however, it requires a great deal of focus and structure, with an eye toward actionable, measurable results.
“Identifying Market Segments and Selecting Target Markets.” (n.d.) Retrieved 17 March 2017 from http://www.managementstudyguide.com/identifying-market-segments.htm
Murray, M. and Saghian, M. (2016, July 27). Under Armour’s Willful Digital Moves. Retrieved 16 March 2017, from https://cb.hbsp.harvard.edu/cbmp/content/62362880
Lannuzzi, A. (2014, July 30). Market segmentation criteria – Five essential criteria. Retrieved 17 March 2017, from https://www.linkedin.com/pulse/20140730082827-41390803-market-segmentation-criteria-five-essential-criteria