Theoretical Overview
From a theoretical perspective, market segmentation is the process of dividing a single consumer market into multiple segments based on one or more factors or attributes. Market segmentation is a key element of a firm’s market strategy. Its goal is to fully satisfy the needs of customers, and as a result, the successful functioning and prosperity of the company. Marketers have noted that a marketing specialist who can offer a new approach to market segmentation for a product can enable the company to avoid intense competition (Peng et al., 2022).
Consequently, the success of the On Running company in the competitive market largely depends on how well the target market segment is chosen. The primary market segmentation is the company’s position in a competitive environment when it is unable to meet all the needs for a specific product. Therefore, it should focus only on those segments that are most preferable from the company’s production and commercial capabilities. The objects of market segmentation are groups of consumers, goods and services, as well as competing enterprises.
Four features are used in the segmentation process: geographical, demographic, psychographic, and behavioral (Kim et al., 2019). Geographical location refers to the fact that a firm chooses one or several regions for its activities, where the most favorable conditions are created for it. The demographic principle of segmentation involves selecting specific age, gender, and social groups within the population that the firm intends to focus on. The psychographic principle, according to which consumers are grouped according to the following characteristics: belonging to a certain social group, personality type, lifestyle, and moral principles. The fourth principle of segmentation involves grouping consumers according to their behavioral characteristics.
Key Market Segmentation Criteria
Psychographic
The company selected for the analysis – On Running – is a Swiss company that manufactures shoes. The first relevant way to segment the market related to this product is by psychographic feature, which includes the motive for purchasing a new pair of shoes (Peng et al., 2022). Among the leading motives of consumption among On Running customers, one can single out a pragmatic one: shoes are updated by the buyer as they wear out.
Additionally, the motive is often driven by the desire to follow current fashion trends. Shoes are updated in response to fashion trends, and a new pair of On Running shoes is purchased to add fashionable shoes to the wardrobe, regardless of the degree of wear on the old ones; a change in fashion stimulates purchases. Another psychographic factor is the desire for novelty and diversity (Sari & Nurhadi, 2019). New shoes are purchased not only when the old ones wear out, but also when customers strive for changes and a variety of wardrobes, not from a purely functional, pragmatic approach. Thus, the psychographic sign of market segmentation for On Running consists of motives that encourage customers to buy shoes.
Socio-Demographic
The second relevant way to segment the shoe market is by socio-demographic characteristics: age, gender, and per capita income level of On Running customers. There are many fewer women under the age of 29 among buyers than those younger than this age threshold (Peng et al., 2022). Young people tend to have more flexible attitudes and are potentially ready to expand their wardrobes, and consumption will grow in line with income growth. At this stage, consumption is limited by the availability of material resources. The majority of buyers (almost 54%) have an average income level (Peng et al., 2022).
In this group, a sufficient number of women have such an income that they can afford to buy shoes not as they wear out, but more often. The income of men who entered this segment varies: 46% have a low income per family member per month, and 55% have an average income (Kim et al., 2019). Thus, On Running’s customers are mainly male consumers with low to middle incomes and female consumers with middle incomes.
Behavioral
The third relevant way to segment the market related to On Running is based on behavioral characteristics. Customers aged 25-35 are more interested in shoes made of natural materials, while respondents aged 16-24 are more interested in shoes with a suitable design and style, as well as youth style, and also pay a little more attention to prices (Kim et al., 2019). 18% of buyers have a low income, and 20% have a high income (Lam et al., 2021). There is a difference in behavioral approaches: half of the customers are more interested in price, design, and style, while the other half prefers comfortable shoes with a comfortable shoe block and youth-style shoes when making a choice.
The other half, on the contrary, are more interested in shoes made of natural materials, weight, country of origin, and shoes of well-known brands. The vast majority of On Running customers do not deny purchasing models made of materials that require special care, such as suede or textiles (Nargiza & Lee, 2021). The percentage of women who have had experience buying such shoes is higher than that of men. Thus, buyers are not deterred from buying by seasonal climate features. At the same time, a third of customers’ interest in buying goods can be increased by gift care products that will protect against rolling, moisture, and dirt.
According to expert estimates, the shoe market is divided into three main price segments. These include the lower price or economy segment, the mid-price segment, and the upper price segment (Lam et al., 2021). The market characteristics of the On Running shoe market segment are mid-price. Moreover, behavioral criteria for segmentation of the footwear market were highlighted. The leading segmentation criteria are a mixed motive to buy.
In this case, the factors that encourage the purchase of shoes are two or even three motives: shoes are updated as they wear out, due to the desire for novelty and diversity, or changes in fashion. Clients are both men and women, but the predominant age segment is up to 39 years (Kim et al., 2019). Behavioral criteria for segmenting the shoe market include a thrifty attitude towards things, attention to fashion trends, and a focus on quality.
Factors Influencing Demand
Fresh insights were gathered from the analysis of demand factors, which are expected to increase demand for On Running shoes. The demand for shoes, as a basic necessity, is robust and rarely wanes. However, the increase in demand for certain models may be seasonal, i.e., it depends on the time of year: then buyers will actively purchase winter, demi-season, or summer shoes (Kim et al., 2019). The demand for shoes can be influenced by social and psychological factors, such as the division of society into classes, the level of cultural sophistication, the desire to follow fashion, and the attitude towards prestige.
The more people follow fashion and the more often it changes, the greater the demand for shoes will be. Economic factors, including income and unemployment, play a significant role. The more customers earn, the greater their purchasing power, which can cause an increase in demand for shoes. Climatic features can also have an impact: for example, during the period of global warming, the demand for summer shoes increases, while during the rainy season, the demand for water-resistant shoe models rises (Kim et al., 2019). However, as the analysis of market segmentation has shown, all market factors affecting this product’s demand have a complex impact.
Summary
Therefore, the target audience of the On Running shoe store is retail customers, most of whom are female and male population aged 18 to 39 years. According to the age composition, the main part of buyers are people who are of working age. Only a small percentage of young people under 20 and people over 39 are buyers of On Running. Moreover, to identify the target market, it is necessary to segment buyers by income level.
The bulk of buyers are individuals with average and above-average incomes, indicating sufficient potential for the development of the middle price segment of the assortment. A typical consumer has an average income and prefers high-quality, comfortable, and functional shoes. The target audience can buy shoes for several reasons. First of all, these are purchases of casual shoes due to seasonality and the onset of the new season. It is necessary to have at least winter, summer, and mid—season shoes, which is the basic set of any customer.
References
Kim, Y. K., Ha, S., & Park, S. H. (2019). Competitive analyses for men’s clothing retailers: Segmentation and positioning. International Journal of Retail & Distribution Management, 47(12), 1266–1282. doi: 10.1108/IJRDM-08-2018-0172
Lam, M. M., Hung, E. P., & Liu, W. S. (2021). Dissociative fashion practices and identity conflicts: Local resistance as a response to clothing acculturation in the context of rural–urban migration. Journal of Fashion Marketing and Management, 25(4), 723–747. doi: 10.1108/JFMM-07-2019-0150
Nargiza, P., & Lee, O. (2021). Market segmentation based on the clothing benefits of female college students in Uzbekistan: Clothing involvement and clothing purchasing behavior. The Research Journal of the Costume Culture, 29(6), 795–809. doi: 10.29049/rjcc.2021.29.6.795
Peng, H., Dong, L., Sun, Y., & Jiang, Y. (2022). Analysis of marketing prediction model based on genetic neural network: Taking clothing marketing as an example. Journal of Mathematics, 18(5), 471–497. doi: 10.1155/2022/8743568
Sari, H., & Nurhadi, D. A. (2019). Designing marketing strategy based on value from clothing producing companies using the AHP and Delphi methods. Jurnal Teknik Industri, 20(2), 191–203. doi: 10.22219/JTIUMM