Market Segmentation and Target Marketing
Blue Ribbon Sports Targets Distance Runners
In1964. Phil Knight, who was a former University of Oregon champion runner (with a 4:10 personal best in the mile), and the track trainee of the legendary Bill Bowerman, at the University of Oregon, was passionate about distance running. They both believed that the German made shoes which most competitive runners used to wear at the time were very expensive and not designed as per distance runners' requirement. An upcoming opportunity was seen coming their way to have a better design running shoe in the US. The idea was to get them made in Asia and then get them sold in US at lower prices as compared to German shoes.
Distance Runner’s Unique Needs
Footwear needs for distance runners such as Knight and Bowerman was different than other athletes. At an intercollegiate track meet to become conditioned enough to run 26-mile long marathon, the distance runners used to run lots of miles every day. Often, rough trails were the places where miles were spent, or it was spent across country roads where obstacles like rocks and other natural substances led to twisted ankles and other injuries, or even stress fractures of the bones in their legs and ankles. Bill Bowerman, who was a lifelong innovator used his garage to manufacture the shoes good enough for his runners. He believed that lighter and more flexible shoes are the ones that the distance runners needed rather than heavy leather with stiff soles. Shoes needed more cushioning, to help getting better lateral stability, and protection against ankle sprains.
The Waffle Revolution
With some of the latex and his wife's waffle iron, Bowerman’s waffle sole was invented that would ultimately revolutionize the running shoe. The stable, yet durable and lightweight sole became responsible for setting a new standard of shoe performance for runners. Phil Knight, the visionary, drove out a plan for development of a business to sell American-designed, Asian-made shoes to distance runners. Both of them invested $500 to develop a sports firm Blue Ribbon Sports in collaboration with a Japanese firm Onitsuka Tiger, to market the shoes they designed. For many years, wherever there was running event going on, Knight could be seen selling his shoe brand outside the stadium. By 1969, Knight quitted his day job and devoted all of his time to grow the business. This effort actually grew out and resulted in large retail outlets of the brand.
Launching and Expanding the Nike Brand
In 1972, “Nike” the brand name was launched by the Blue Ribbon sports after the agreement broke between them and the tigers. Nike was launched at the US Olympic trials. In the Olympic marathon of 1972, the top 4 finishers wore Nike shoes which led to a
sensation in the running world. By 1974, after ten years of efforts to build the company, the Nike shoe was USA’s best-selling training shoe, and was on its way to stardom. In 1978, Nike Inc. was the new name given to the company who signed John McEnroe who was responsible for the change in name. From then on tennis shoes became a prominent part of the product line. In 1985, Michael Jordan, a Chicago Bulls basketball rookie was signed for a line of Air Jordan shoes and apparels. By 1986, the Nike's worldwide sales passed billion-dollar mark and Nike was known to be the leader in footwear industry in the field of technology.
World Cup 2002
Now football was amongst the Nike's target markets, which was the world's most-played sport. Scheduled in Korea and Japan with World Cup 2002, Nike's product developers knew that the conditions would be hot and humid and would create a need for uniforms that would help players to keep themselves dry and don’t exert themselves to heat. Working for 2 years Nike developed the new Cool Motion technology, with a material of two-layer structure designed to maximize thermal comfort and ventilation, said Craig Buglass, Nike's Creative Product Designer for Football. The uniform's inner layer kept perspiration away from the skin and helped drying the uniform quickly by quick evaporation. The uniform was water repellent outer and helped greatly in order to keep the uniform dry from outside during intense aerobic activity. As a result Korea surprised many by winning 3rd place. The relentless pressure and unending team speed of Korea impressed many observers.
Learning Objectives
The example of Nike, Inc.'s, origins and early development vividly points out how a few relatively simple decisions to clearly. identify a market segment with unmet or poorly met needs – distance runners – and then develop innovative goods or services that meet the needs of the targeted segment can provide entrée into a market niche and serve as a foundation for subsequent expansion that can revolutionise a market or industry. What Phil Knight, Bill Bowerman, and the management team they assembled understood so well is that different groups of consumers – different market segments – have different wants and needs, both tangible and intangible, in athletic footwear and in athletic apparel. In virtually any market, if different segments can be clearly identified, specific products with specific marketing programmes can be developed to meet both the physical needs of the consumer (e.g., the lateral stability and the extra cushioning that distance runners need in their shoes) as well as the emotional needs that consumers attach to their athletic pursuits (e.g., to feel that they might someday soar through the air and dunk a basketball with the panache of Michael Jordan). We draw on the foundation of market knowledge and customers understanding to introduce what are probably the most important and fundamental tools in the marketer's toolkit: market segmentation and target marketing. Together with product positioning, these tools provide the platform on which most effective marketing programmes are built. Learning to apply these tools effectively, however, requires addressing several important questions about the need to do market segmentation and the meaning of target marketing. Why not sell same athletic shoes – or airline tickets, beverages, or whatever – to everyone? How can potentially attractive market segments be idenified and defined? Finally, how can these segments be prioritised so that the most attractive ones are pursued? Answering these questions should enable an entrepreneur, a venture capital investor in Silicon Valley, or a marketing manager in an multinational firm to decide which market segments should be targeted and which investments should be made.
Why to do Segmentation of Market and Target Marketing ? –
Segmentation of Market refers to the activity of dividing the market into distinct subsets of customers with same wants and attributes leading them to give response in the same way at particular offering.
Target marketing requires the evaluation of various parts of market in terms of potential, rate of growth, inten¬sity of competition, and other factors related to markets.. The mission of the firm and its capability to fulfil the needs of each and every segment. Product positioning takes into the view the product offering in the market getting the company a collective profit from all over the targeted market and also to create a unique image, or position, in the customer's mind.
Knight and Bowerman could actually found Blue Ribbon Sports because they saw a market seg-ment – distance runners – who deserved something which was not fulfilled. They chose to target this segment because the popularity of running was growing and they had particular resources like knowledge of the product, equipments to be used and expertise to produce the product which helped them create such a good brand. The positioning of their innovative product portrayed a product to the market that boosts the level of performance for the best runners in world.
These three decision processes – market segmentation, target marketing, and positioning – are closely linked and have strong interdependence. In order to manage a given product-market relationship these all must be linked together and implemented after consideration.
No matter how large the firm, however, its resources are usually limited com¬pared with the number of alternative market segments available for investment. Thus, a firm must make choices. Even in the unusual case where a firm can afford to serve all market segments, it must determine the most appropriate allocation of its marketing effort across segments. But are all these analyses and conscious choices about which segments to serve really necessary?
Most Markets Are Heterogeneous
Heterogeneous products are products with attributes that are significantly different from each other, which makes it difficult to substitute one product for another. By focusing their initial efforts on high-performance distance runners, a clearly defined and very narrow market segment, Knight and Bowerman put themselves in position to design shoes especially well suited to these runners'
An example of a heterogeneous product is a computer. You really can't substitute a PC for a Mac, because each computer platform is too different.
On the other hand, the products that have similar characteristics can be reffered to as a perfect substitute. Commodities are generally a good example of homogeneous products. For example, a 1-kg 24-karat gold bar can be perfectly substituted for a different 1-kilogram bar of 24-karat gold.
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