What’s the first brand that comes to mind when you think of footwear? There’s a good chance you immediately thought of Nike (or Adidas, but let’s save that story for another day). And who can blame you? Nike is not only the largest shoe brand in the world, but they’re also one of the most well-known brands as a whole. At least in the footwear industry, their brand awareness is truly unparalleled.
The secret to Nike’s success? Segmentation.
Stairway to Success
Every successful company first began by identifying a customer group with a particular need, and Nike was no different. Most certainly, the best way to understand your customer segment is to be a part of your own customer segment. Founders Phil Knight and Bill Bowerman were both marathon runners who were in desperate need of shoes that would be 1) durable enough to last years of constant exercise and 2) designed to effectively prevent sports injury. What better way to tackle these needs than to tackle it themselves?
As a brand new company in a fragmented market, understanding their customer segment exceptionally well became their competitive advantage. More specifically, they specialized in being able to respond quickly to new and pressing needs in the segment and to reach their target audience effectively. Consequently, Nike became the most popular footwear brand for competitive runners in no time. However, the problem arose when Nike decided they wanted to expand their product offering.
Trial and Error
What makes a brand especially strong is their ability to engrave a clear, consistent image and value proposition into the minds of their customers — something Nike was great at since the very beginning. Many brands make the mistake of trying to expand their offerings so much so that their core customer base no longer feels they are a first priority. It’s a case of quality vs quantity — where offering too many new products and deviating too far from your original customers’ needs fog up your overall brand image.
Nike made this exact mistake by attempting to create a more casual shoe. The original purpose of doing so was to increase sales by reaching a broader group of customers. Instead, their original customers got confused and it unfortunately showed through a decline in sales. Luckily, they realized this early on and took it as a sign to shift their focus back towards sports and fitness gear.
After their discovery that expanding into broader shoes wouldn’t work out, they opted to experiment with segmentation instead. Nike is now known for avoiding a “one-size fits all” marketing technique (and product offering!). Their greatest period of growth was led by the decision to split Nike into multiple new segments based on demographic, psychographic, and geographic properties. However, getting to this point took a lot of trial and error for Nike’s team.
Early on, Nike struggled to figure out how to leverage segmentation effectively. They had already established themselves as a running shoe brand, but when Nike tried to extend their products into other sporting shoes, they ran into quite a bit of trouble.
Not only were they unable to understand the new segment they were targeting as deeply, but the way they went about it was all wrong. A large part of the way Nike decided on what products to offer was by talking to the top dogs — those whose lives revolved around being athletes. You might think that by addressing the needs of the top players, they would automatically address the needs and wants of casual athletes as well, right?
Well, not exactly.
What Nike soon realized was that they couldn’t rely on top athletes to explain to them what casual athletes wanted and needed. For example, just because Michael Jordan wanted his shoes to be bright yellow, didn’t mean that every casual basketball player also wanted their shoes to be bright yellow. By getting input directly from their target customers, they were able to much more effectively grasp how to design and brand these new shoes by this new segment. And by talking to more and more casual athletes of all types, they realized they couldn’t just keep rolling out products under the same category and marketing it to a general audience. It was time for Nike to explore new categories that would make sense for their brand.
Utilizing Segmentation…Finally!
Basketball shoes, for example, fit perfectly under the Nike brand. Simply from short conversations with professional basketball players, they realized there was a clear space in the market for improved basketball shoes. And, from further analyzing the market, they even realized basketball itself could be further split into segments. And thus, Force shoes, meant for more aggressive playing, were released, along with Light shoes, meant for athletes who are more light on their feet.
Nike took the idea of segmentation and ran with it (no pun intended). They replicated what they did with basketball with other activities like tennis, hiking, and bicycling, along with segmenting by different characteristics (e.g. gender, geography). By creating so many new, relevant product categories, they managed to both grow exponentially as a company and stay true to their brand at the same time.
Not only did Nike apply rules of segmentation to their product line, but they also incorporated it into their marketing strategies. Their slogan “Just Do It” was a powerful tactic to appeal to athletes, but for women, it wasn’t as impactful. For this very reason, Nike began curating marketing campaigns targeted directly at women, such as a magazine release that revealed the stories of inspirational women athletes. Not surprisingly, this targeted campaign was received with open arms by women across the world.
We’ve talked about the importance of segmentation in marketing throughout past blog posts, but Nike makes it clear that it can be applied in countless other ways, from implementing new product categories to providing a competitive edge. No matter what your ultimate goals are, Cotera’s job is to make the segmentation aspect much easier for you. What you do with the insights we help you uncover is up to you. And whether you use them to pilot a new product line, cater your marketing campaigns to different segments, or to simply better understand your most loyal customers, we promise to make it all so much easier for you.