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Case study on market segmentation


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Case study on market segmentation

  2. 2. 1 CASE STUDY ON MARKET DEMOGRAPHIC INTRODUCTION Market Segmentation Market segmentation Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs. The market consists of many types of customers, products, and needs. The marketer must determine which segments offer the best opportunities. Consumers can be grouped and served in various ways based on geographic, demographic, psychographic, and behavioral factors. The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs is called market segmentation. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. In the car market, for example, consumers who want the biggest, most comfortable car regardless of price make up one market segment. Consumers who care mainly about price and operating economy make up another segment. It would be difficult to make one car model that was the first choice of consumers in both segments. Companies are wise to focus their efforts on meeting the distinct needs of individual market segments. Buyers in any market differ in their wants, resources, locations, buying attitudes, and buying practices. Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view market structure. outlines the major variables that might be used in segmenting consumer markets. Here we look at the 1. GEOGRAPHIC 2. DEMOGRAPHIC 3. PSYCHOGRAPHIC 4. BEHAVIORAL VARIABLES. I. Geographic segmentation Dividing a market into different geographical units, such as nations, states, regions, counties, cities, or even neighborhoods Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods. II. Demographic segmentation Dividing the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. III. Psychographic segmentation Dividing a market into different segments based on social class, lifestyle, or personality characteristics.
  3. 3. 2 IV. Behavioral Segmentation Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments. MajorSegmentationVariablesforConsumerMarkets Geographic World region or country North America, Canada, Western Europe, Middle East, Pacific Rim, China, India, Brazil, Africa Country region Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England Density Urban, suburban, exurban, rural Climate Northern, southern Demographic Age Under 6, 6–11, 12–19, 20–34, 35–49, 50–64, 65 and over Gender Male, female Family size 1–2, 3–4, 5 or more Family life cycle Young, single; married, no children; married with children; single parents; unmarried couples; older, married, no children under 18; older, single; other Income Under $20,000; $20,000–$30,000; $30,000–$50,000; $50,000– $100,000; $100,000–$250,000; over $250,000 Occupation Professional and technical; managers, officials, and proprietors; clerical; sales; craftspeople; supervisors; farmers; students; homemakers; unemployed; retired Education Primary school or less; some high school; high school graduate; some college; college graduate, advanced degree Religion Catholic, Protestant, Jewish, Muslim, Hindu, other Race Asian, Hispanic, Black, White Psychographic Social class Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers Lifestyle Achievers, strivers, survivor Personality Compulsive, outgoing, authoritarian, ambitious Behavioral Occasions Regular occasion; special occasion; holiday; seasonal Benefits Quality, service, economy, convenience, speed User rates Light user, medium user, heavy user Loyalty status None, medium, strong, absolute Readiness stage Unaware, aware, informed, interested, desirous, intending to buy Attitude toward product Enthusiastic, positive, indifferent, negative, hostile
  4. 4. 3 Literature review Demographic segmentation  The demographic segmentation divides customers into segments based on demographic values such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, social class and nationality (Armstrong and Kotler, 2005: 187).  The demographic segmentation is often used in market segmentation for the reason that the variables are easy to identify and measure. Furthermore, the demographic variables are associated with sale of many products and services and finally they provide a description of the target customers so media buyers and others can target a desired target market.  Each of the variable are useful knowledge when segmenting markets and some of the above-mentioned variables will be elaborated in the following (Gunter and Furnham, 1992: 9). 1. Age and life-cycle segmentation  The consumer’s needs and wants change with age. Therefore, some companies use age and life-cycle segmentation, where age and the life-cycle determine the marketing approach. Thus, marketers using the age and life-cycle segmentation must be careful to guard against stereotypes. (Armstrong and Kotler, 2005: 188)  Age and Life-Cycle Stage. Consumer needs and wants change with age. Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups. For example, for children, adult, youth etc.  Furthermore, the age and life-cycle segmentation are associated with behavioral characteristics and buying patterns. An example of this is single people who have a tendency of purchasing new fashionable items due to the fact that they have no other economic obligations. This is opposed to married people, who have a large economic obligation and thereby they prioritize their economy different (Gunter and Furnham, 1992: 11). 2. Gender segmentation  Gender segmentation is used to differentiate the needs and wants between men and women due to the fact that men and women have different attitudes toward a product. The gender segmentation has long been applied in connection with clothing, hairstyling, cosmetics and magazines. Furthermore, it must be taken into consideration that metro sexuality has become a common gender-factor and thus the marketers must not only define a product as being masculine or feminine (Kotler and Keller, 2009: 257). 3. Income segmentation  Income segmentation divides the market into different income groups. It is used in automobiles, clothing, cosmetics, financial services and travel. Many companies within the mentioned categories seek to target the high-income customers. Others seek to target the customers with a lower income in order to gain consumer loyalty and lessen the
  5. 5. 4 competitive pressures. However, companies must consider the fact that the income does not always predict the most suitable customers for a given product due to the fact that some customers may have other preferences and prioritize their money different (Kotler and Keller, 2009: 258). 4. Generation segmentation  Each generation is influenced by the times in which they grow up i.e. the music, the movies, politics and other significant events characteristic of that period. Marketers therefore market to a generation by using icons and images that is relatable according to the generation (Kotler and Keller, 2009: 259). 5. Social Class segmentation  Social class segmentation divides the customers according to their preferences in cars, clothing, home furnishings, leisure activities, reading habits and retailers. However, although the tastes of social classes changes, many companies design products for specific social classes (Kotler and Keller, 2009: 260). Case study analysis of demographic segmentation in : Under Armour Introduction Back ground of the company Under Armour Was founded in 1996 by Kevin Plank, a Former football player with the University of Maryland. Plank came up with a synthetic textile design Which enabled sweat to be "wicked-- ‐away" during high Levels of physical activity. The company was Originally named KP Sports And changed their name in 2005 when they went public. Is an American sport clotting and accessories company. the company is a supplier of sport wear and casual appeal also footwears in 2006. Under Armour is the pioneer of performance apparel. Their gear is designed to keep athletes cool, dry and light throughout the course of a game, practice or workout. The technology behind Under Armour's diverse product assortment for men, women and youth is complex, but the idea behind it is simple wear when it's hot, ColdGear® when it's cold, and All- season® forall seasons in between. Under Armour's brand mission is to make all athletes better through passion, design and the relentless pursuit of innovation in all over sports.
  6. 6. 5 Objective  To understand how can be divided customers in to smaller group by using marketing demographic segmentation  Understanding the marketing demographic segmentation of under armour company and how they divided Scope of this study  This case study done on under armours, the company is a supplier of sport wear Market Demography of under Armours Of Under Armour's current consumer base, 53% of Under Armour's customers are male and 47% of customers are female. Over 36% of customers have graduated from college, the majority of Under Armour's customers fall within the age range of 25-34, with the smallest customer base consisting of those aged 65+. 49.9% of Under Armour's customers have a household income ranging from $75,000 to $149,000 (Gfk Mediamark Research & Intelligence, 2015). Attribute Consumers / attribute (%) Attribute Consumers / attribute (%) Men 53 Adult 18-49 75.4 Women 47 Adult 25-54 66.74 Educ:graduated College plus 36.5 HHI: $150,000+ 17.1 Educ: attended College 26.3 HHI: $75,000- $149,999 49.9 Educ: graduated 22.4 HS HHI: $60,000- $74,999 8.2 Educ: did not graduate HS 4.8 HHI: $50,000- $59,999 7.1 Age: 18-24 17.1 HHI: $20,000- $29,999 3.2 Age:25-34 30.6 HHI: < $20,000 8.9 Age:35-44 17 Census Region: North East 16.9 Age: 45-54 20.8 Census Region: South 50.4 Age: 55-64 11.2 Census Region: Midwest 19.5 NB: HHI -household income Table rescores  Age segmentation Under Armour’s first major market segmentation group is the age of their customers. Different aged people demand different products and Under Armour has produced certain merchandise to appeal to each category.  The age group of 0-10 only consumes 10% of the company’s goods because of their young age and rare participation in athletics that would require the apparel. Under Armour caters to this niche by producing colorful and fun printed goods at a lower price, sports equipment form beginners, and creating an image through commercials and advertisements that children of this age group aspire to be.
  7. 7. 6  For the second age group of 10-18 years, the company sponsors sports camps in order to promote their products that correlate to this segment such as sports equipment and recreational clothing and also begin pricing their items parallel to the quality at this segment.  In the 18-30 age segment, college athletes and active young adults are included who consume high quality athletic apparel and accessories regularly to support a healthy lifestyle. To appeal to this group, Under Armour sponsors collegiate teams and sell their products at competitive prices at college bookstores and athletic apparel stores that are accessible to this group. Finally, individual  over the age of 30 do not require as specialized segmentation as the other age groups. People of these ages are already active, brand loyal, and willing to pay for Under Armour product, allowing the company to forego heavy advertising expenses towards this category.  Gender segmentation After segmenting consumers, according to age, Of Under Armour's current consumer base, 53% of Under Armour's customers are male and 47% of customers are female.  For females, the company produces apparel in fun colors that are considered fashion forward and pricing these garments in alignment with other fashionable athletic wear. In addition, women tend to wear athletic apparel more casually than men, so Under Armour produces yoga pants and other clothes that can be worn actively and for everyday purposes. In order for these items to appeal towards women, Under Armour has launched a “Power in Pink” campaign to promote their products and support breast cancer survivors (Under Armour, 2015).  For men, the company had established its brand differently to appeal towards this group. Products catered towards men have a more masculine vibe – tight fitting, durable, and resistant to wear-and-tear. They have also produced cleats and specialty footwear to further establish the brand as a well-rounded and reliable athletic company. To promote this 0 10 20 30 40 0-10 10-`18 18-30 OVER 39 10 15 40 35 Age segmentation %
  8. 8. 7 merchandise, Under Armour uses very toned and muscular models, including mannequins that provide a visual for what consumers can aspire to be.  Through use The next step of Under Armour’s market segmentation includes the range of uses that consumers have for the products. One of the ways in which Under Armour has acquired national recognition is through its sponsorship of professional athletes such as Tom Brady and Lindsey Vonn (Wagner, 2015). Although there is no price on these products, Under Armour is able to promote their products towards other segments of the market, including fans of the athletes sponsored. Similarly, Under Armour endorses collegiate teams such as the Auburn University Tigers and University of Notre Dame Fighting Irish (Under Armour, 2015). By putting its name and emblem on uniforms and gear, the company is able to promote its brand and products. The collegiate use is a smaller portion of the market compared to professional use because consumers typically follow professional athletes more than collegiate athletes therefore Under Armour allocates its resources accordingly. The largest use of the company’s products, whether apparel, footwear or accessories, is the recreational segment of the market. Recreational use includes all individuals who participate in mild to rigorous athletic activity on a consistent and regular basis. Almost all of Under Armour’s moisture wicking and specialty products are targeted to this use and the company uses the recognition from the professional and collegiate promotions to appeal to this sector. The remaining uses of Under Armour products are allotted to casual, everyday wear. These products are created to be more comfortable and versatile, and priced slightly lower to reflect the absence of high quality and specialized athletic material in the goods. A majority of these unspecialized products are promoted through Under Armour’s website and in stores, who convince consumers to try these goods. 53%47% gender segementation % men womens
  9. 9. 8  Climate The final segment that Under Armour considers is the climate that the products are utilized in. The company’s product lines are devoted to regulating body temperature in either hot or cold climates. Under Armour originally designed a moisture wicking fabric known “HeatGear” that worked to regulate sweat and body temperature when active in hot climates (CASE). Because of this technology, the price for these products using these materials is higher in comparison to competitors but still popular because of their established reputation. Following the success of the “HeatGear” line of apparel, Under Armour worked to create a line that had a similar function but in colder and more severe climates. These products are promoted similarly to the moisture wicking line to target consumers who are participating in different activities and have consequently made the company appear as a well-rounded brand Observations  Market segmentation is a marketing strategy that involves dividing a wide target market into smaller groups of consumers, who have similar needs and desires. After putting these consumers in smaller groups, the company must then start implementing strategies to target the consumer’s needs and desires using media channels to allow them to reach the consumers.  Under Armour is targeting the population of people who are looking to stay fit and stay in shape. Initially Under Armour was targeting younger athletes, more so at the collegiate level. However, as their company has grown they have expanded their target market to include men, women and children of all ages. Due to the fact that their products happen to be more expensive than some competitors, they target consumers who are more financially stable and have higher incomes.
  10. 10. 9 Conclusion The area of market segmentation has now been discussed in order to realise the purpose of this thesis i.e. to provide a framework for exemplifying how market segmentation can determine the right target audience. In discussing these areas it can be concluded that the market segmentation can determine the right target audience by following the market segmentation process and thus help a company to design an appropriate marketing order to reach the main customer and potential customers of the product and this company also successful by using those marketing demographic segmentation. Reference  Armstrong, Gary & Kotler, Philip (2005) Marketing: An Introduction Upper Saddle River, N.J. Prentice Hall, 7. Edition  Dibb, Sally and Simkin, Lyndon (1996) The market segmentation workbook: Target marketing for marketing managers Routledge, London  BowenDaigleDionValentine_UnderArmour_CaseStudy  Fool, Montly. "Where Under Armour Is Finding Its Growth." October 2011. finding-its-growth/  Kotler, Philip & Keller, Kevin Lane (2009) Marketing Management Pearson Education International, 13. Edition  PHILIP Kotler $GARY Armstrong Principle of marketing Principles_of_Marketing_2814th_edition29  