Under Armour's beginnings
It is hard to consider Under Armour is only now celebrating its 25th anniversary; it feels like the company has been around forever. This is both a testament to the effective way the company has grown and the largess of major competitors like Nike and Adidas. It’s always fun to read about a successful company that started in a basement (Barrabi, 2020), and Under Armour gives us that.
Under Armour began in what is clearly a niche segment market by producing a rather revolutionary piece of American football equipment, shirts to be worn under pads. Sometimes great ideas are simple, and this fits the bill. I was playing highschool football in the early 1990’s, a few years before Under Armour was founded, and can recall the sweat-soaked cotton t-shirts quite well. I’m not sure they ever got completely clean.
The company also was smart enough to recognize the limitations of being so specialized, and soon after their first contract with Georgia Tech the company had agreements with several NFL teams (fundable.com, n.d.). What followed was a broadening market which, still segmented geographically in the U.S. and demographically by people serious about sports and fitness, began entering retail space (Barrabi, 2020). Today Under Armour is a global company with billions in sales, and its product line has increased to include shoes, hats and the like (Cao, 2015).
Part of this success can be attributed to the company’s entry into the women’s athletic apparel market, a risky move considering Adidas had, at the time, just failed in a similar attempt. Under Armour's campaign, “I will what I want” featured known females like ballerina Misty Copeland and model Gisele Bündchen, and the significant talent and influencer investment paid off with viral ads and success that exceed expectations (Darden Business Publishing, 2016).
Key points in market segmentation strategy
Both external and internal factors should be considered when implementing market segmentation strategies. Under Armour’s case study provides useful guidance here with the following guidelines, adapted from Consumer Behavior 2nd Edition (2015).
- Understand your competition
The athletic apparel industry is competitive with bedrock companies like Nike and Adidas as well as relative newcomers like lululemon. Thus it is important to differentiate, understanding the competition will be doing the same. - Find your niche
Under Armour’s brilliance at launch was meeting a need that few knew existed … until they were told about it. This niche market was small and thus had a ceiling. But the company was able to leverage that start into successful market expansion. - Understand the sales cost tradeoff
Particularly on the heels of Adidas’ failure to enter the women’s demographic segment, Under Armour took a significant risk in trying the same. The company then added to that risk by investing heavily in high-priced talent to tell their story. The were willing to risk spending more to sell more, and it worked. - Use psychographics to identify potential segments
Even as the company branched out from professional and college athletes, it remained highly focused on a demographic that cared deeply about fitness. The company further presented its products in a way that positioned it well with achievers, willing and able to pay for a premium product believed to be superior. - You can target; the market will position
In Under Armour’s case their brand was positioned well, a result of investment in talent and other segmentation techniques.
What comes next
I wonder how Under Armour might do in a more mature market. To my knowledge the company has targeted segments of people in early to mid-adulthood with great success, but it seems to me people in their fifties and up are more active and health-conscious than ever. Furthermore, this segment, generally speaking, has money.
If the company’s past actions are an indicator of future behavior, I would not expect Under Armour to soften its approach to appeal to a mature market. In fact, I imagine them being aggressive in segmentation and advertising, aiming at and featuring highly active people in their campaign; I do not see them promoting their shoes as something to wear on a leisurely Sunday evening stroll through the neighborhood. The company's foray into this segment would be based on demographics of active, financially comfortable people who are passionate about being fit and healthy.
I suspect this market would rise to the perceived challenge because it is filled with active people and mirrors Under Armour’s traditional targets in many ways including a desire to exercise, eat well, and remain active. Such an entry could, perhaps, be as successful as the company's approach to female consumers.
References
Barrabi, T. (2020, June 22). How Under Armour was founded. Retrieved from https://www.foxbusiness.com/retail/how-under-armour-was-founded
Cao, S. (2015, October 13). Can Under Armour Win The World? Retrieved from https://cnsmaryland.org/interactives/fall-2015-2/Under-Armour/index.html
Darden Business Publishing. 2016, July 27). Under Armour’s Willful Digital Moves. University of Virginia. https://services.hbsp.harvard.edu/lti/links/content-launch
Fundable.com. (n.d.). Under Armour Startup Story. Retrieved from https://www.fundable.com/learn/startup-stories/under-armour
Kardes, F; Cronley, M; Cline, T. (2015). Consumer Behavior 2nd Edition. Boston: MA