Defining Target Audience

Why Develop a Target Audience?

As OOFOS irons out the details of its objectives, it also needs to think about the next element of its marketing plan: the target audience.

OOFOS knows that its unique foam technology has the potential to provide benefits to many different customers. But which customers specifically does it want to influence? Should it target a specific type of customer or appeal to everyone?

You’ll consider why and how companies put customers into different groups, or segment them, and how they decide which segment(s) should take priority.

Lou Panaccione shared how OOFOS initially began focusing on runners as its target audience because of its success at the Boston Marathon Expo. However, OOFOS appeals to many groups beyond runners, as Darren Brown shares next.

Darren Brown: I think where we established the brand and where we continue to plant our flagpole is an active-minded consumer. Whether they are or were a highly active, motivated person, who it's part of their lifestyle to walk, run, go lift, exercise, play a team sport, they understand that in life they want to get a little bit more out of their body. They understand that as they age, as they get older, their body might give them back less. And so there are tools out there that can help them continue to elongate that lifestyle that they've come to love and engaged in for so long.

The great thing about this brand is that it's become so much more ubiquitous than that. And the benefits really exist outside of that sphere. It's not just recovery for after a run, a walk, a workout. It's also relief for people who work in a very different way, on their feet all day long on hard surfaces—teachers, nurses, chefs—because they deserve the recovery just as much as the active person, the athlete. They just have never really thought about it as "recovery" before.

So we established the concept where it's known already, but we have to be sure that we're inclusive, and we're welcoming to people who will also benefit from it in the peripheral, which honestly is a much larger group. And we hope that we can service them just as we are that smaller finite group in the middle.

Darren Brown shares that the audience for OOFOS is potentially very broad. Given OOFOS’s aggressive sales goal, should the company try to reach as broad an audience as possible or focus on one or two specific groups?

It might be tempting, given the potential for a wide-ranging appeal, for OOFOS to try to target the broadest possible audience. But remember that OOFOS, as a small company, is dealing with limited resources.

Segmentation

While you can try and market a product to everyone, consumers have different needs and preferences. What appeals to one group of consumers may not appeal to another group. In fact, to appeal to everyone, you may end up appealing to no one. This is where segmentation can help. Segmentation is the process of grouping consumers with similar needs and preferences. These groups are referred to as segments.

Let's consider an example. Imagine you're a company, and you want to set a price for a new product. You survey the market. Based on the survey responses, you estimate the average price that consumers might be willing to pay. Should you set the price at this level? Some consumers are more price-sensitive than others. By setting an average price, you may be leaving too much money on the table for non-price-sensitive consumers. And you might be overpricing for price-sensitive consumers. Recognizing these segments can help your company to either launch different products at different price points or offer promotional discounts to attract price-sensitive consumers. Alternatively, your company could decide to focus only on those consumers who are not price-sensitive because they provide a higher margin.

Segmentation benefits consumers because companies can tailor their products to a group of consumers with similar needs. This provides consumers greater convenience and time savings, as well as more relevant offers and personalized customer experience. As technology advances, companies can determine more and more specific segments. We can even create a segment of one person where products are personalized to each individual consumer's taste. For example, Nike offers a service called Nike By You where consumers can customize their Nike shoes by choosing their own colors and designs.

Firms benefit from segmentation because it helps them identify underserved consumers and their unfulfilled needs. For example, banks may offer new products specifically designed to serve a segment of consumers who do not qualify for mainstream financial products. Segmentation also benefits firms because it can result in better product design, more targeted promotions, and increased customer satisfaction. By creating products and services that align specifically with the needs of a particular segment, you will have a more compelling value proposition that will help you acquire new customers and keep them satisfied. And gaining a growing number of satisfied customers is a good way to achieve sustainable profit growth.

Steve Gallo shares some of the ways OOFOS is thinking about segmenting its customers.

Steve Gallo: In the beginning, we were primarily focused on the female consumer, that younger 25 to 35-year-old who may have graduated from college, thinking about having a family but was very fitness-oriented. The idea was that if you can appeal to that individual, the influence that she had on the household was the goal to say, hey, you should have OOFOS for other genders, other demographics.

What we found is that the business with our male customer has really grown exponentially. So we went from 90% female to the next year being 85% to now being about 60, 60-40 female to male. And it continues to balance out as time goes on. The average age of a purchaser of OOFOS is around 55 years old. And it's folks that really have searched for relief from daily pains that they might have throughout their daily regimen or specifically a plantar fasciitis or an orthopedic issue, elements like that in the medical field.

We do have marketing approaches, primarily grassroots efforts, that work with the medical field and folks who are on their feet all day who need relief from pain or just daily aches. And we do sell into retailers like that. We also have medical affiliate programs, where someone goes to work with these doctors who recommend OOFOS for a lot of their patients that have foot issues, knee issues, back issues, et cetera.

Darren mentioned he thinks about OOFOS’s consumers in terms of the degree to which athletics play a role in their lives. OOFOS could conceivably segment the market into a few different groups based on this criterion.

How to Segment the Market

As you may have noticed from the OOFOS case, segmenting the market is not always a straightforward task, and there are many factors to consider.

Companies use many different ways to divide the market into different segments, but we can boil those down to three main approaches.

The first approach is based on who the consumers are by looking at demographic data such as their age, income, gender, occupation, or where they live, or their lifestyle and interest. This is the most common way to segment consumers. The implicit assumption in this approach is that consumers with the same demographics, for example, millennials, have similar preferences.

The second approach focuses on what the consumers have done. In other words, you segment the market based on consumer behavior related to your product. For example, you may segment the market as heavy versus light users, price sensitive versus non-price sensitive buyers, loyal versus non-loyal consumers, and so on.

The third approach focuses on the motivation of consumers to understand why they buy a certain product. Are they looking for convenience and value, or are they status conscious? For example, if you have a small puppy, you may buy expensive dog food because that puppy is like your baby. It isn't necessarily the size or breed of the dog that determines your price sensitivity, it has more to do with what that dog means to you.

Most companies use multiple ways to segment markets that combine these three approaches.

We mentioned the following methods for segmentation:

• Demographics (age, income, gender, occupation, region, lifestyle, or interests)
• Behavior (usage, price sensitivity, or loyalty)
• Motivation (relief from foot pain)

Now let’s apply these methods to OOFOS. Name three potential segments that OOFOS could target: one based on demographics, one on behavior, and one on motivation.

There are a number of possible answers to the previous question - there are multiple potential groups that could benefit from OOFOS's product. Ultimately, OOFOS decided to segment their market into the following segments:

• Workout Warriors: fitness and sports enthusiasts who have an active lifestyle. This segment consists of about 20 million people with a median age of 34 and an average household income of about $120,000.
• Regular Exercisers: people who pursue fitness activities three to five times per week to have a healthy lifestyle. This segment has 79 million people with a median age of 39 and an average household income of about $90,000.
• Active Occupation: professionals who constantly work standing up, such as chefs, healthcare workers, teachers, and sales representatives. This segment has 86 million people with a median age of 42 and an average household income of $86,000.
• Pain Sufferers: those who suffer from constant foot and joint pain. This is the largest segment with 99 million people with a median age of 51 and an average household income of about $75,000.

These segments are not completely independent of each other, as shown in the figure below. If you examine the column of workout warriors, it shows that 37% of workout warriors are also pain sufferers. In contrast, looking at the pain sufferer column reveals that only 8% of pain sufferers are workout warriors.

Considering the segments, and the information you have about each (audience size, age, and household income), which of these segments should OOFOS choose as its primary target audience?

• Workout warriors
• Regular exercisers
• Active occupation
• Pain sufferers

Companies often have limited resources. And it may not be wise for them to try and target all segments at once. Your product may resonate with one group more than others. Focusing on that segment rather than all segments may be a more effective strategy. Sometimes you may want to appeal to a specific segment, for example, a younger audience, to establish the image of your brand. You also need to consider the size and profitability of the segment.

So how do you decide which segment or segments to target? In general, three broad criteria can help you guide your decision.

The first factor to consider is the characteristics of the segment and its consumers. This may include the needs of consumers and how well your product fulfills those needs, as well as the size, growth rate, and profitability of the segment.

Second, you should consider your own company's capabilities and resources. If you're a small company with limited resources, it might be hard for you to target multiple segments. Your company objectives might also drive your choice. If you want to establish an image of a trendy and youthful brand, you will probably want to target Gen Z consumers.

The third factor to consider is competition. If a segment is large, it is likely to attract a lot of competition that might limit your chances of success with that particular segment. In this case, targeting a smaller and more niche segment might be better than focusing on a large crowded market.

Ultimately, the choice of target segment is a strategic decision that is based on the characteristics of the segments, competitive intensity in those segments, and a company's own objectives, capabilities, and resources. The choice of your target segment also affects the media you choose to reach them. For example, the media channel that OOFOS uses to target young Workout Warriors will be very different from the choice of media channel to target older pain sufferers.

Now let’s return to the OOFOS team to learn which segment the company wants to target.

Steve Gallo: Our target audience has been the runner, outdoor enthusiast, and fitness enthusiast. We really tied into this cultural tension of the importance of recovery from training and fitness activities. And we've really anchored the brand there.

We chose that younger group because of the influence that they have on their relationships with different aspects of their parents, their grandparents. And what we found with people with foot pain or medical issues with their feet, such as plantar fasciitis, is that OOFOS actually served them extremely well, even though the intention of the product originally was to focus on the athletes that I mentioned who understand recovery from fitness activities.

Even though our aim or reach is a lot younger, and we gear our marketing efforts towards that younger group, the average age of a purchaser of OOFOS is around 55 years old.

Steve Gallo wants OOFOS to focus on young Workout Warriors—consumers who actively engage in exercise and athletic activities, even though most of OOFOS’s current sales come from 55-year-old+ consumers who suffer from foot pain. Do you agree with his choice?

Darren Brown and Bianca Reed explain why OOFOS chose to focus on a younger audience, even though its current buyers are much older.

Note that Bianca uses the term “lifetime value”. We will go into this concept in greater depth later, but for now just know that this refers to the value that a customer delivers to the firm over a long period of time.

Darren Brown: As somebody who's no longer in the 25 to 35-year-old age range, I can tell you I still want to be in the 25 to 35-year-old age range and look at what they're using to optimize performance to elongate the longevity of my athleticism and activity. So I think there's something very aspirational still within that age group. If you're basing it on the true benefits of the technology of OOfoam and what we've provided, you can have something that will apply in that age range, but that will also be sought after by your core consumer, which is what we've seen.

Bianca Reed: One of their goals for us was to drive a much younger audience for them. They saw their average age kind of creeping past that 55-plus, and so the challenge for us was to make sure we reached a younger audience. There are different levels of Workout Warrior. There's someone who works out five days a week, runs marathons. But what we found is that's a very niche audience. The general population is not running marathons regularly, which really shrunk our audience potential.

We had to really expand that definition of what a Workout Warrior is to include those who work out two or three days a week or are learning how to get back into a sport. The other portion of that Workout Warrior is the future Workout Warriors, which are the youth—young adults, college-age students, that kind of range—whose parents are probably still funding their lifestyle. But they are a target audience that allows us to really increase our lifetime value for OOFOS.

Instead of getting a customer who's 55-plus who may have a different lifetime value, we now have a household of four or five individuals that are going to have a lifetime value that will be longer but also have a higher average order value for the total household. So they're buying more products, essentially.

Within that Workout Warrior segment, we really identified active families. And all the work that we've been doing currently with our media efforts and both our creative efforts is to drive the active family. Now you can't force a younger audience, we can't somehow magically make a younger audience resonate with the brand.

But what we have found is for a younger audience, the purchasers are the parents. So getting that 30-plus, 40-plus mom involved, father involved, means that suddenly we have shoes on the feet of a much younger audience, and we're introducing a younger audience.

Although OOFOS identified that the Workout Warrior was a smaller segment by numbers, the purchase potential for this audience and the potential to gain additional future customers drove the company to focus on this category.

But why would this young audience buy OOFOS shoes? OOFOS needs to clearly articulate its value proposition that provides a compelling reason for the Workout Warriors to buy OOFOS shoes.

Articulating the value proposition for your brand is the third critical component of a marketing plan. This step will guide the message you create for your target audience.