Nike's Market Segmentation Strategies: Demographics, Psychographics, and Behavior

Market segmentation is the identification of groups of individuals who are most likely to have a strong interest in a product. The main methods used for market segmentation include:

Demographic variables include age, sex, race, income, occupation, education, and household status.

Psychographic variables encompass lifestyle, activities, personality, and social class.

Behavioural variables include aspects like the advantages of a product and how it is used.

Geographic factors, including climate, country or region, and population size, have a significant impact on the features of a particular area.

Various methods are often combined in many segmentation techniques.

Nike, previously recognized for its emphasis on efficient production and innovative product design, has shifted towards prioritizing the needs of its customers. Instead of solely concentrating on manufacturing capabilities, Nike now aims to create products that truly matter to its customers. To accomplish this, thorough research has been conducted on different target segments in order to comprehend their distinct product preferences. Considering its worldwide reach, Nike places considerable importance on demographic, psychographic, and behavioral segmentation.

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Nike caters primarily to professional athletes, particularly young and affluent individuals who are either single or in the early stages of marriage. These athletes specialize in various sports such as running, tennis, or basketball and require high-quality footwear specifically tailored for their respective disciplines. They depend on these shoes daily and demonstrate unwavering brand loyalty towards Nike. Many athletes receive sponsorship from Nike and receive complimentary shoe offerings. The most notable athletes, like Michael Jordan and Tiger Woods, even have the opportunity to personalize their own shoe models by customizing every aspect including the sole, color schemes, and patterns.

Nike is targeting a specific group known as "weekend warriors," who are highly active and in good physical condition but not professional athletes. These individuals have diverse backgrounds, ages, and occupations, and prioritize top-quality products that deliver exceptional performance. They are willing to invest more in their footwear and make careful purchasing decisions after thorough research. Some of them prefer shoes endorsed by renowned athletes as they perceive these models to embody superior quality and draw inspiration from these athletes.

In the realm of Nike, there exist various niches among their customer base. These niches can be described as sub-segments that possess unique characteristics and have a specific combination of desired benefits (Kotler & Armstrong 2001).

Examples of such niches could be:

The target market for these athletic shoes is composed of lower to middle class individuals who participate in sports. They are searching for an affordable yet high-performing shoe that also has an appealing appearance. These individuals typically reside in suburban areas, often have families, and possess incomes that range from low to moderate. They can be characterized as individuals who face financial challenges.

Bargain hunters, who are often lower class individuals seeking status, purchase Nike products primarily for appearance and to be noticed wearing their shoes. They may or may not participate in sports, have limited education and income. Additionally, they frequently shop at sales or purchase defective shoes.

Typically, fashion enthusiasts are young individuals who are well-educated and do not adhere to any specific brand as they solely focus on wearing what is trendy. They prioritize the appearance of the shoe over its performance.

In addition to utilizing a variety of segmentation variables, the aforementioned segments and niches also include Nike's production of shoes that are specifically tailored to individuals with distinct characteristics.

Nike produces footwear for individuals of all genders, addressing gender distinctions while also providing a variety of shoe options for children.

Both baseball and gridiron shoes are predominantly produced and marketed in the United States, as they are widely enjoyed national sports.

In the future, as more people engage in sports, Nike may see the rise of new market segments in the sports shoe industry. It is possible that an overlooked sport could produce a new superstar, resulting in a competition between brands like Nike and Reebok to secure their endorsement. This would lead to a widespread marketing campaign focused on this sport's newfound celebrity, encouraging more people to participate and buy the matching footwear. Furthermore, if Nike introduces an innovative feature and effectively promotes it, a new market segment will be formed, reminiscent of the introduction of the Air cushion in previous years.

Some potential developments include advanced lace systems and innovative materials that "enhance performance." While these groundbreaking products would come with a high price tag, they would appeal to elite athletes and affluent individuals. Alternatively, a scenario could arise where a country's economic growth enables its citizens to increasingly afford Nike shoes. Although highly improbable, this situation would present a new market opportunity for Nike to explore.

Organizations in the footwear market strive to segment consumer groups in order to identify the various types of consumer groups they engage with. Kotler and Armstrong (2001) identify the main segment variables as geography, demography, psychography, and behavior of the customer. By establishing these variables and their specific details, organizations like Nike can produce goods tailored to the preferences of consumers.

Initially, the geographical factors play a role in determining customers' needs. These factors include the customer's country, region, urban or rural residence, city/town size, and climate. By categorizing customers based on these geographic variables, a company can promptly identify their requirements. For instance, individuals residing in arid or temperate regions would not find snow skiing sportswear useful.

Additional details about the customer can be obtained through demographic analysis, which considers the customer's age and gender as the most significant segmentation aspect. The customer's occupation and income further determine the appropriate product quality and price for them. While factors like education, race, and religion are acknowledged, in the sports shoe industry, these factors provide little valuable insight.

The social class and lifestyle of an individual is determined through psychography, which is dependent on their occupation and income. This once again emphasizes that the economic standing of the customer greatly influences what a company offers.

Ultimately, the customer's behavior, which can be unpredictable, divides them into two segments: heavy users and moderate/light users of the product. In the sports industry, heavy users are typically professional athletes who also indicate their loyalty to the company through sponsorship.

The four segmentation approaches offer companies an easy method to divide a large and diverse customer base into smaller groups with distinct desires and requirements. This enables companies to deliver the desired products or services to customers at the appropriate life stage, ultimately influencing their loyalty towards renowned brands.

4. By utilizing the identified segments based on Geographic, Demographic, Psychographic, and Behavioral variables, we can analyze the characteristics and anticipated needs of each customer group. This allows us to dissect customer groups based on behavioral variables like their usage level, whether they are first-time users, amateur users, or professional users. Through this analysis, Nike can determine the footwear offerings it should provide, taking into consideration other relevant variables during the decision-making process.

Athletics:

Regardless of their geographic situation, individuals who use Nike athletics equipment can enjoy athletics. The sport can be played anywhere as climate or location does not impact it, although dry conditions are preferable. Athletes of all ages, genders, occupations, income levels, nationalities, education levels, races, and religions can participate in and enjoy athletics.

Psychographically, individuals in all social classes have a competitive nature, energy, and high motivation. They are the specific target audience of Nike and other companies who believe that these individuals would not only use running shoes for athletic purposes but also for casual use. Moreover, they are not brand loyal and seek affordable yet dependable products.

Although amateur athletes in the 15-35 age range may participate more frequently in athletics and seek improved equipment, they are still a comparable customer group to first-time participants.

Professional athletes, usually aged 20-35, participate in global competitions. Their earnings are tied to their athletic achievements, so they prioritize their sponsors and aim to utilize the best equipment for their specific sports. Psychologically, they are internally motivated and fully devoted to their sport, disregarding social status.

Basketball:

Despite originating in North America, basketball is now a worldwide sport played in different regions. It is commonly favored in areas with dry and warm climates, but can also be enjoyed indoors during the winter season. The availability of indoor basketball facilities ensures that it remains accessible to both beginners and casual players.

Individuals can begin their basketball journey at different ages, ranging from 10 years old and beyond. Despite commonly being linked to younger individuals, both males and females thrive in this sport. It is crucial to acknowledge that while there are stereotypes about basketball players, the sport is not solely controlled by black athletes.

Regardless of social classes, the game's popularity remains unchanged from a psychographic standpoint. Like other sports, newcomers and amateurs are not loyal to specific brands but instead make their choices based on aesthetics, personal preference, or current trends.

However, professionals in the lucrative industry worth billions of dollars have an advantage in endorsing sponsored products. Like athletes, these skilled individuals are usually in their twenties or thirties and heavily depend on specialized footwear while showing immense passion for their sport.

Cricket:

Cricket, although a smaller sport compared to Basketball, Soccer, and Athletics, is primarily played in the "Test Playing Nations" such as Australia, New Zealand, England, The Caribbean, South Africa, Sri Lanka, India, Pakistan, and Bangladesh. In other locations, the facilities and playing standards tend to be of a lower quality. Moreover, Cricket stands out among other sports as bad weather can quickly disrupt it.

Cricket encompasses a wide age range, making it accessible to first-time players and beginners. However, the cost of purchasing specialized cricket equipment can hinder individuals with lower incomes from participating in the game. In terms of the psychological aspects, cricket is generally seen as a sport for the middle class or higher, largely due to the expensive nature of the required equipment. Consequently, a person's occupation plays a role in their ability to engage in cricket.

Amateurs who play cricket regularly must possess a positive personality to sustain their interest, as spending a full day fielding on an oval can be mentally exhausting for cricketers. However, Nike faces a drawback in this sport as some cricketers may have a slightly negative perception of its products when compared to renowned cricket brands like Grey Nicholls and Kookaburra.

Professionals in this sport, aged 20-35 years, are more likely to switch sponsors compared to other professional athletes. Examples of this include Test Bowler Shane Warne ending his contract with Nike last year, Wicketkeeper Adam Gilchrist changing from Kookaburra to Puma two years ago, and Test Batsman Damien Martyn ending his 12-year association with Slazenger this year to use the new 'Kahuna' batting range from Kookaburra.

Football, also known as Soccer, Rugby, Gridiron, and AFL:

Out of the four main codes of football, only soccer and rugby are recognized as international sports. These two sports have a global presence, with soccer being particularly popular. Both soccer and rugby host world cup events where numerous nations compete. This means that individuals from different parts of the world, whether they are first timers, amateurs, or professionals, can participate in these sports without any concerns about their geographical location. On the other hand, gridiron and AFL are limited to their respective home countries. Consequently, the market for soccer and rugby is significantly larger than that for the domestic codes.

Football (excluding Soccer) is a physically demanding sport that is typically not played frequently by individuals over the age of 50 in order to avoid injuries. Professional football players, on the other hand, are usually between the ages of 18 and 35 due to obvious physical reasons.

In the sport of Australian Football League (AFL), midfielders who are either amateurs or professionals often have to run distances ranging from 10 to 20 kilometers during a single match, depending on the level of competition. This level of performance must be sustained for an additional 21 consecutive games after the regular season, excluding any playoff matches.

Football is a sport that can be enjoyed by people from all social classes. It is typical for players' shoes to deteriorate rapidly due to regular competition.

Tennis:

First time tennis players will discover that geographically, tennis is ideal for playing in countries like Australia, North America, and Europe. Despite being a worldwide sport, facilities and playing standards outside of these regions are subpar, making it prudent for Nike to prioritize customers in these areas. Similar to cricket, tennis is impacted by rainy weather, which frequently leads to issues in countries like England where grass courts may become wet and slippery. Whether for beginners or experts, Nike needs to guarantee that its footwear can accommodate these conditions.

Regardless of age, tennis is a sport that people from all demographics can enjoy. While it can be physically demanding, playing socially turns it into a source of fun for everyone, including those under 10 years old and older players.

Tennis, similar to cricket, is considered a sport popular among the working and middle classes. The cost of accessing tennis courts, as well as purchasing necessary equipment, can be high. Professionals in this sport typically fall within the 20-35 age bracket and often exhibit loyalty towards their sponsors.

5. Nike caters to multiple customer groups with a diverse range of products, resulting in various benefits for each group. These identified customer groups receive distinct advantages from Nike's product offerings.

Nike offers specialized shoes for athletics that are designed for specific events. These shoes are light in weight, allowing athletes to achieve faster times and better performance in their chosen discipline. They are equipped with spikes on the bottom to provide better grip and enhance confidence. Different spikes are available to suit various surfaces and weather conditions, although these are primarily intended for professionals rather than amateur athletes. Additionally, the shoes have cushioning to provide better protection for the feet, ankles, and knees of athletes. This is crucial because athletics subjects the legs and feet to high impact.

Basketball shoes are crucial for providing ankle support in the sport. Given the extensive running and jumping involved, superior ankle support minimizes the risk of ankle twists. Additionally, cushioning and air pockets are vital to facilitate support for the player's feet, ankles, and knees, minimizing potential injuries during landings after jumping. Furthermore, basketball shoes possess a lightweight design and springiness to aid with running and jumping. These features collectively enhance a basketball player's performance and overall comfort during and after games. Notably, basketball shoes are available in larger sizes compared to other shoe categories, reflecting the taller stature commonly found among basketball players.

Tennis players prefer comfortable, lightweight shoes with excellent grip. Nike provides a variety of tennis shoes suitable for different court surfaces such as clay, grass, and hard court. Each type of court demands specific grip characteristics to enhance speed and confidence. Additionally, these shoes feature sufficient cushioning to minimize impact from harder surfaces.

Both soccer and Australian Rules football players use similar boots because they play on the same surfaces and both sports involve a significant amount of running and jumping. Nike provides lightweight boots with ample cushioning to support the player's feet and ankles, reducing pressure from continuous running and jumping. The high quality of these boots also enhances kicking performance.

Cross training shoes are versatile footwear designed for various sports and surfaces. These shoes must be lightweight, durable, and provide cushioning to meet a wide range of needs. Due to their ability to accommodate various requirements, cross training shoes are highly popular and not limited to specific uses.

Nike goes above and beyond to satisfy specific individuals within different customer groups, particularly the world-class, renowned athletes who are sponsored by the company. These athletes receive unlimited free products and are compensated with significant amounts of money to wear Nike products. Furthermore, the products are custom-made according to the athletes' preferences in order to maximize the benefits they derive from using Nike's offerings.

The concept behind this is that when these athletes wear the products, they receive global recognition and people from all over the world witness it. The viewers assume that by purchasing the same products as the athletes, they can achieve the same level of success. Unfortunately, this is often not the reality. Nevertheless, Nike generates millions of dollars annually from this type of advertising.

6. Nike faces competition from various brands in the market, including companies of similar size like Adidas, as well as smaller brands such as FILA and New Balance. Despite the differences in size, all these brands offer similar products in the athletic shoe industry. This section highlights four major competitors and their three core shoe products.

Reebok is an athletics company based in the United Kingdom. It was established in the 1890s with the purpose of helping athletes increase their speed. The name Reebok was officially adopted in 1958, and the brand entered the US market in 1979, offering shoes priced at $60, which were the most expensive at the time. Reebok has maintained a strong presence in numerous countries worldwide and continues to be successful. Below are some highlighted products from this year's collection.

The Reebok Toast men's cross training shoe has an aggressive, multi-grip outsole that provides lightweight traction on various surfaces. It also features forefoot and rear foot outriggers that enhance lateral stability and support. Additionally, the shoe's full-grenade construction offers a low-profile appearance and a low-to-the-ground feel. (source: reebok.com)

The Reebok Powerwalk DMX walking shoes for women have technology that provides moving cushioning and a bevelled heel design for an enhanced walking stride. The mesh and synthetic upper offer cushioning and breathability, ensuring comfort with every step taken.

[source: reebok.com]

The X Beam men's basketball shoes from Reebok have X Beam technology, which offers a low-to-the-ground look and feel for both working out and stepping out. They also feature a V-shape collar height that provides additional ankle support. (Source: reebok.com)

Reebok Toast, Reebok Powerwalk DMX, and Reebok X Beam Basketball Shoe.

Adidas was founded in 1925 in Germany by Adolf "Adi" Dassler. Adi established the company after recognizing the demand for high-performance athletic footwear in Germany. Initially, Adidas specialized in producing soccer and running shoes. Over time, Adidas has become a globally renowned brand, known for its iconic three stripes featured on all of its products. Among Adidas' primary offerings are:

The Adidas ClimaCool Basketball Shoes for men provide 360-degree ventilation with open mesh and open-cell foam padding in the upper. This innovative design offers excellent breathability while maintaining protection. The shoe features a mid foot rib chassis and vented sock liner to channel airflow. With a low to the ground and sleek design, these shoes are perfect for quick slashing and cutting on the basketball court. You can find these shoes at thestore.adidas.com.

The Women's Supernova Cushion has undergone five years of careful refinement and improvement. It features full-length adiPRENE and adiPRENE+ cushioning, an extended midfoot Torsion System, the Engineered Forefoot Ride forefoot concept, and a supportive medial second density. These features make it the ultimate, all-around training shoe. (thestore.adidas.com)

The Men's Barricade II is now more durable than ever with a lightweight, breathable metal mesh upper and venting midfoot that keeps you cool. It also offers ultra-cushioned shock-absorbing comfort and has an adiWEAR outsole for grinding hard. The Barricade II is so durable that it even comes with a six-month guarantee. (thestore.adidas.com)

Men's Climacool Basketball, Women's Supernova Cushion, and Men's Barricade II.

In 1934, an English immigrant named William J. Riley dedicated himself to assisting individuals with feet issues. He achieved this by crafting arch supports and custom-made footwear to enhance shoe comfort. Eventually, Riley formed a partnership and expanded his business to manufacture a variety of athletic shoes. Today, New Balance is a renowned leader in the athletics shoe industry. Information source: newbalance.com.

Both the New Balance MX1004W and WX662WB shoes offer midfoot support and torsional stability while also minimizing weight. They both provide excellent shock absorption in the heel and forefoot, along with lightweight comfort and support. The only distinction between these two is the color and gender-specific design, with one intended for women and the other for men. (newbalance.com)

According to newbalance.com, the Men's BB1000BW basketball shoe offers lightweight cushioning, flexibility, and durability. It also provides excellent shock proofing in the forefoot to help with the impact of heavy landings.

New Balance MX1004W Women's WX662WB Men's BB1000BW

Founded in 1948 by Rupert Dassler, Puma emerged as a direct competitor to Adidas, which was founded by his brother, Adolf. Over the past fifty years, Puma has been associated with remarkable sporting accomplishments, such as partnering with Pelé in World Cup finals, supporting Boris Becker on the grass courts of Wimbledon, and helping Linford Christie secure an Olympic gold medal. Despite these achievements, Puma continues to strive for even greater success.

Men's Complete Abound: The Complete Abound is a premium running shoe designed with a breathable single layer mesh featuring two-sided flow molding TPU support, microfiber, and suede leatherette materials. (puma.com)

The latest basketball shoe from Puma, the Men's Sky ST 002, features a soft full grain upper with a Velcro power strap ankle closure. It also includes a full length CM EVA frame and a forefoot with ArchTech support system (puma.com).

Women's Appeal: The women's cross training shoe on puma.com is constructed using full grain leather and features a robust rubber outsole. It is available in various colors and sizes to cater to different preferences.

Men's Complete Abound Men's Sky ST 002 Women's Appeal

7. and 8. To effectively reach its target audience, an organization must adopt a targeted marketing approach. This approach involves identifying potential buyers within specific market segments and tailoring the marketing mix to appeal to their needs and preferences. Target marketing has replaced the outdated practice of mass marketing in today's complex and educated marketplace. The marketing mix consists of controllable tactical tools, including product, price, place, and promotion, that the organization combines to elicit the desired response from the target market (Kotler & Armstrong 1999).

Market segmentation is the initial phase of target marketing. It refers to the classification of potential buyers into segments (groups) that share similar needs and are likely to show similar responses to marketing efforts.

A simplified example is when a shoe company has defined market segments for basketball players and long distance runners. The advertisements that basketball players respond to will be very different from those that long distance runners respond to.

There are multiple ways to segment a consumer market. Some commonly used methods include geographic, demographic, psychographic, and behavioral variables.

An organization will employ various methods to target specific audience(s), while remaining consistent with their current market position. Nike is widely recognized as the leader in athletic footwear, but Reebok and Adidas also hold significant market share in this industry. Despite these differences, all these companies use similar strategies to segment the market.

The retail markets for athletic shoes are highly segmented based on consumer age groups. Teenagers are seen as the most significant consumers of athletic shoes. According to a study conducted by the Athletic Footwear Association in the U.S., the average American aged twelve or older owns at least two pairs of athletic shoes that are used for both athletic activities and casual wear (Fairchild Fact File, 1989). During the 1980s and continuing to the present, athletic footwear has been designed and often marketed among teenagers as a significant symbol of fashion, status, and personal identity. Teenagers are also the most susceptible to sponsorship advertising, driven by their desire to achieve their sporting dreams and emulate their sports idols by purchasing the endorsed footwear of professional athletes.

Reebok Shoes featuring signature models by Shaquille O'Neal, Venus Williams, Pat Rafter, and Emmit Smith.

One example of successful product segmentation can be seen in Reebok shoes. On their website http://store.reebok.com/home/index.jsp, they have divided their market into three main demographic groups - male, female, and children. Each category offers a range of shoes designed for customers with different sports preferences. Through market research, Reebok has identified specific needs for each group. For instance, they offer both men's and women's golf shoes due to the sport's growing popularity among transgender individuals. However, they do not offer children's golf shoes as younger ages are generally less interested in golf.

By clicking on the link for your preferred sport, you will find a diverse range of sub-categories. For instance, if you choose men's football (grid iron), you will come across a variety of shoe options in different colors, sizes, and styles. The prices of these shoes vary from US$159.99 to US$44.99 to accommodate consumers from different income levels. The same can be observed in the market segment for women's fitness/aerobic shoes, in which Reebok has a significant market share. This segment played a key role in Reebok's expansion from a niche company that focused solely on running shoes to becoming industry giants.

The internet site cannot provide any examples of geographic segmentation because the internet has no borders. However, a demonstration of geographic segmentation can be seen in Reebok's extensive promotion of Michael Chang in Asia. Chang, a Chinese-American Tennis player, embodies qualities typically associated with Asians, such as being clean-cut, humble, and family-oriented. Reebok has utilized this strategy to break into the Asian market, where demographic variables often differ. Similarly, NFL running-back Emmit Smith is highly marketable in Texas due to his legendary status with the Dallas Cowboys, which resonates with the Texan state of mind. Additionally, advertising that involves local hero Allen Iverson resonates with loyal Philadelphia Seventy Sixer fans.

Reebok markets its products as revolutionary, highlighting their innovative concepts (such as Reebok Pump and DMX) and remarkable achievements (such as pioneering running spikes). This enables them to promote these qualities as their competitive edge over other brands. Additionally, Reebok frequently emphasizes its ethical approach to business and production, indirectly challenging Nike, which has faced criticism for its practices lately.