Transcript E-Marketing, 3rd edition Judy Strauss, Raymond Frost, and Adel I. El

E-Marketing, 3rd edition
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 8: Targeting Market
Segments and Communities
© Prentice Hall 2003
Segmentation and Targeting Overview

Companies need to clearly understand the needs and
behavior of its target market. It must have in-depth:




Market knowledge,
A savvy segmentation,
Targeting strategy.
E-marketing strategic planning occurs in two highly
interrelated tiers:


The first tier = segmentation, targeting,
differentiation, and positioning,
Second tier = the 4Ps and CRM.
Segmentation and Targeting Overview


Marketing segmentation = the process of aggregating
individuals or businesses along similar characteristics that
pertain to the use, consumption, or benefits of a product
or service.
Targeting = the process of selecting the market
segments that are most attractive to the firm and
selecting an appropriate segment coverage strategy.
Sources, Databases, and Strategy: Tier 1 Strategies
Market Segmentation Bases and Variables

Marketers can base their segmentation of consumer
markets on:





Demographics,
Geographic location,
Psychographics,
Behavior with regard to the product.
Within each base, there are many sub categories.
Market Segmentation Bases and Variables


Companies create segments:
 Combining bases + focus on categories =
geodemographics.
 Using any combination of variables that makes sense
for their industry.
 That can be used to identify and reach the right
people at the right time.
 Using any of these four bases alone or in combination
+ many other variables.
To know which variables broadly identify the target
segment + which simply further describe it because
marketers use identification variables to enumerate and
access the target.
Bases
Geographics
Demographics Psychographics Behavior
Identifying /
Profiling
Variable
Examples
City
County
State
Region
Country
Age
Income
Gender
Education
Ethnicity
Segmentation Bases and Examples of Related Variables
Activities
Interests
Opinions
Personality
Values
Benefits
sought
Usage level
Brand
loyalty
User status
Geographic Segments



Geographic location of computers is not important to users accessing
Web sites, but it is very important to organizations with an Internet
presence.
Most firms target specific cities, regions, states, or countries with
their product offerings
= develop multisegment strategies based on geographics.
Product distribution strategy is a driving force behind geographic
segmentation:



Companies want to reach only customers in countries where it
distributes products.
Firms offering services online will only sell to geographic areas where
they can provide customer service.
Companies must examine the proportion of Net users in its selected
geographic targets before deciding to serve the Web community.
Posadas:
• The leading hotel chain in Mexico,
• Targets tourists in Mexican and United States markets.
• Focuses heavily on the U. S. market and built its first site for the United
States because it recognized that Internet penetration was much higher.
Fiesta Americana Site in Spanish and English Source: www.posadas.com
Important Geographic Segments
for E-Marketing

The United States = the largest Internet usage in the world.
10 other country markets have more than 40% Internet penetration.
= 11 countries represent good markets for new technology.

E-marketers use geographic variables for segmentation also evaluate
online markets by region, city, urban area, and so forth.



The quality of a country’s market is evaluated using additional
criteria: infrastructure variables designed to predict their ability to
access and absorb information technology: computer adoption,
information, Internet, social.
In 2001, Sweden and Norway held the top two positions as the
world’s dominant information economies because of a high mobile
Internet access.
Rank Country
Percent of
Population
Internet
Users
Rank Country
Percent of
Population
Internet
Users
1
United States 64.0
6
United Kingdom
48.7
2
Iceland
60.1
7
Switzerland
46.6
3
Hong Kong
54.2
8
Canada
44.9
4
Sweden
49.4
9
The Netherlands
42.5
5
Norway
48.9
10
Finland
41.3
11
Japan
40.5
Country Markets With Over 40% Internet User Penetration
Important Geographic Segments
for E-Marketing

English is no longer the language of most Web pages and online
bulletin boards, a major change from just two years ago.

Top Internet languages:







English (42%),
Japanese (9%),
Chinese (9%),
Spanish (7%),
German (7%).
Huge implications for e-marketers desiring to reach global markets
via the Internet
Until more online text appears in local languages, users in those
countries will not able to participate in e-commerce or other online
activities.
Korean
5%
Chinese
9%
Portuguese
3%
Other
9%
Italian
4%
Dutch
2%
English
42%
French
3%
Spanish
7%
German
7%
Less Than Half of Web Users Access in English
Source: Adapted from Cutitta (2002)
Japanese
9%
Demographic Segments

In the Internet’s early years, the typical user was:



In developed nations,




A young male, college educated, with a high income = an
innovator.
Now, this is true in countries with low levels of Internet adoption.
76% of U.S. users are 18-49 years old,
The annual average household income: about $50,000,
The population is almost equally divided by gender.
Knowing that U. S. Internet users mirror the population,
marketers need to identify attractive demographic niches.
Occupation

Few years ago, the Internet = a place for the
technologically- and financially-savvy.

Today = a place where U.S. residents from all professions
find something of use.

Huge implications for e-commerce and advertising, and
big changes are still taking place.
Occupation



Blue-collar workers:
 Are currently the fastest growing online occupational group in the
U.S.
 This group is busy surfing and exploring,
 Represent a major marketing opportunity because segment
members have not yet developed site loyalty and have some
different product and entertainment needs from users in other
professions.
Other fast growing occupational groups include homemakers (49%),
service workers (37%), and salespeople (34%).
E-marketers can use such facts about occupational segments online
as information and then knowledge to drive e-marketing strategy.
Teens and Children

In the US, 75% of 14-17 year olds + 65% of 10-13 year
olds use the Internet:





= “The Net Generation” or Generation Y,
= One of the fastest-growing online niches.
12-17 year old: send e-mail (81%), instant messages
(70%), play games, and purchase music, tickets, and
videos.
58% use the Internet for homework,
Teens’ repeated requests for online access is what
leads families into computer and ISP purchases.
Teens and Children




Driving future growth in this market is the fact that 95%
of all U.S. schools now have Internet access.
This market:
 Is not impressed with brand names online;
 wants utility + particular activities.
Teens spread the news through online word of mouth
(viral marketing).
38% of teens share their online findings with friends = a
great marketing opportunity.
Teens and Children

One big problem = payment:






They do not have credit cards for online purchases (only 12% have
purchased online).
Some are allowed to use their parents’ credit cards.
Those over 16 years of age can obtain a debit card.
Innovative approaches such as “Splash Plastic” prepaid cards or “cyber
allowance” accounts deposited at designated online retailers have
emerged.
Important characteristics of this market = the need to be honest
about marketing tactics: revealing the motives behind asking for
personal information.
Teens are eager to play online games, download music and movies,
and sign up for sales promotion premiums and free samples.
Ethnic Groups

African Americans:





One of the largest and most quickly growing ethnic groups online in the
United States.
Tend to be younger, more highly educated, and affluent.
Are heavy purchasers of music online and buy less clothing and travel.
Go online from academic and public locations and are less likely to
register at Web sites.
Hispanics:




A huge segment with 14.5 million users + 19-26% growth rate.
55% use the Spanish language when online = a market with unique
needs in the US.
Miami-Fort Lauderdale, Florida is the 15th largest market overall, but 3rd
largest for Hispanic Web users.
Hispanics who use the Internet outspend those non-users by a margin of
7%, a statistic that has caught the eye of marketers.
Ethnic Groups

Chinese-Americans:



More than 50% have Internet access,
65% of those are online everyday,
Purchase books, computer products and electronics
online and enjoy a large purchasing power—the
average income is $69,000.
Differently Abled
= “The Internet’s next niche” :




Spend 20 more hours a week online than other
Internet users.
Fifty-four million U.S. consumers have disabilities,
health problems, or handicaps that prevent full
participation in work, school, or housework.
Web accessibility guidelines exist to accommodate
disabled people.
BUT this segment is a demographically diverse group,
and tend to have low incomes, making them difficult
and undesirable targets for some firms.
Differently Abled

Why do marketers target this segment, despite its low
income and accessibility challenges?





Social values of full accessibility and potential legal action.
To draw a larger consumer audience.
The huge baby boomer group is headed for some of these
problems as they reach age 65 and older.
This market can be a productive target: The 2000 Paralympic
Games from Australia last fall experienced good traffic.
Most importantly, a market consisting of 54 million Americans has
a great deal of purchasing power.
Psychographic Segments

User psychographics include:

Personality:

Values:
Traits (other-oriented / self-oriented)
and habits,
Deeply held convictions (religious beliefs),
Lifestyle:
Activities:
Non-product-related behavior
(playing sports or eating out),
Interests:
Opinions:
Attitudes and beliefs people hold.




Attitudes And Behaviors
How do attitudes and behavior differ?

Attitudes:

Internal evaluations about people, products, and other
objects,

Either positive or negative,

The evaluation process occurs inside a person’s head.
Attitudes And Behaviors


Behavior:
 Refers to what a person physically does (calling a 1800 number to order, shopping, or purchasing a
product),
 Product behaviors are such a vital segment descriptor
that they form an entirely separate category.
Psychographics:
 The general ways that consumers spend time,
 Help e-marketers define and describe market
segments so they can better meet consumer needs,
 Important for Web page design.
Attitudes Toward Technology

Marketers believe that demographics are not helpful in
predicting who will purchase online.

BUT it is important to know which demographic target is
online.

The segment’s attitudes toward technology determine
whether or not these users will buy when they surf the
Web.
Attitudes Toward Technology

Forrester Research measures consumer and business
attitudes toward technology.

The system, Technographics, works by combining
three specific variables:
1.
2.
3.
Determine if a person is optimistic or pessimistic
toward technology,
Measure a user’s income level ( important determinant
of online shopping behavior),
Query users about their primary motivation for going
online.
Attitudes Toward Technology
Examples of the 10 consumer technographics segments in
the United States:
Fast Forwards
the biggest users of business software
New Age Nurturers
the most ignored group of technology consumers
Gadget Grabbers
buy low cost, high-tech toys such as Nintendo
Traditionalists
use VCRs but not much more
Media Junkies
love TV and are early adopters of satellite television
Motivation for Using Internet
Technology
Optimists
52%
Technology
Pessimists
48%
Career
Family
Entertainment
High
Income
(>$40,000)
Fast Forwards
12%
New Age
Nurturers
8%
Mouse Potatoes
9%
Low
Income
(<$40,000)
Techno-Strivers
7%
Digital Hopefuls
7%
Gadget Grabbers
9%
High
Income
Handshakers
7%
Traditionalists
8%
Media Junkies
5%
Low
Income
Sidelined Citizens 28%
Consumer Technographic Segments and Proportion in the United States
Source: Adapted from Modahl (2000)
Attitudes Toward Technology
Forrester’s research revealed some interesting findings:

Technology optimism declines with age:





Older users tend to have a more negative attitude toward
technology,
Their attitudes may be less negative if they use a PC at work or
live in one of the largest 50 U.S. cities,
Men tend to be more optimistic,
Peer pressure can increase optimism in all demographic
groups,
Income:


40% of high-income citizens are optimistic,
Certain low-income groups such as college students and young
families are also optimistic about technology.
Attitudes Toward Technology
How do these findings translate to online purchasing?



Twice as many high-income optimists shop online (19%) compared
with other groups.
Only 2% of low-income pessimists shop online and, therefore, are
not a good target for e-commerce firms.
Combining Technographics with adopter categories,



Early adopters = high-income technology optimists = the first
consumers to shop online.
Laggards = low-income pessimists = last to shop online.
Technographic segments can be used to profile customers who shop
online and to determine where to allocate resources to attract more
of the same.
Behavior Segments
Two behavioral segmentation variables are:

Benefit segmentation: form groups of consumers based on the
benefits they desire from the product.
“70% of online shoppers can be segmented into two groups:



Bargain hunters: includes Hooked, Online & Single (16%), HunterGatherers (20%)
Convenience shoppers: includes Time-Sensitive Materialists (17%),
brand loyalists (19%), E-Bivalent Newbies (5%), and Clicks & Mortars
(23%).”
Product usage:


Light, medium and heavy product usage.
Brand loyal, loyal to the competitive product, switchers (who don’t care
which brand they use), and nonusers of the product.
Benefit Segments



On the Internet, there is something for everyone:
information, entertainment, news, social meeting places,
and more.
Marketers form segments based on the benefits sought
by users to design products to meet those needs.
What better way to determine benefits sought than to
look at what people actually do online?



Check which Web sites are the most popular.
Sites report monthly on the top online properties displays the top
Web site parent companies.
AOL, MSN, and Yahoo! are consistently among the top sites in
most countries.
Benefit Segments

Commonly used segmentation variables:





E-mail: 8 billion e-mails flying over the Internet
worldwide.
Shop.
Information search.
Online stock trading and online banking. Online
banking has a high usage but online stock trading is
quite active.
Streamies: People who listen to online audio.
•Rank
•Parent Company
•Millions of
Visitors
•Percent Reach of
all Users
•1
Microsoft
39.4
50.7
•2
AOL Time Warner
37.2
47.9
•3
Yahoo!
33.8
43.5
•4
Google
10.9
14.0
•5
eBay
9.0
11.5
•6
Terra Lycos
8.0
10.3
•7
About-Primedia
7.3
9.4
•8
Amazon
7.1
9.2
•9
The Gator Corporation
6.0
7.6
•10
USA Network
5.3
6.8
Top Web Properties in June 30, 2002 Source: Data from www.nielsen-netratings.com
Usage Segments

E-marketers:


Identify segments according to how users behave and
use the Internet.
Profile the segments by user characteristics,
geographical location, and so on.
Difference between usage-based segmentation
and user-based segmentation
= when users shop online:



sometimes they browse aimlessly,
but sometimes they have a specific goal.
Home and Work Access
Segmentation by access point is important because the needs are
different:

Home:



80% of home users have slow connection speeds, making large graphics
and other files undesirable on sites frequented from home.
A small but growing number of households have more than one PC and
are networking them within the home.
Work:



42 million U.S. users access the Internet from work.
People spend nearly twice as much overall time online than those who
access only from home.
The audiences in all countries are much more heavily male.
Home and Work Access

The most popular sites for U.S. at-work access follow:







Telecom or Internet services (29.7 million visitors)
Finance, insurance, or investment (21.2 million visitors)
Travel (18.4 million visitors)
Corporate information (14.6 million visitors)
Special occasions such as greeting cards, gifts or flowers (14.1
million visitors)
E-marketing strategists can use such information to
target their Web site offerings.
Strategies might include special products, the language in
sites, and the amount of interactivity and multimedia
possible for work users.
Access Speed

The type of Internet connection + the information
receiving appliance both affect usage behavior. Faster
connections at work allow users to receive larger data
files filled with multimedia content.



20% of the U.S. population has broadband Internet access from
home (21.9 million).
25.5 million office broadband users (60%).
Home users:



Are connected through ISPs offering cable modems and DSL
(satellite).
Cost is still a barrier for many home users.
Broadband penetration is nearly high enough to reach the critical
mass needed for true video and audio program delivery on
demand. This will certainly change the face of the Web.
Access Speed

Broadband users operate differently from narrowband
users online. They:






Play audio CD’s (75%),
Play online games (60%),
Download music (48%),
Watch streaming video or DVD’s (67%).
Mobile wireless users have very small screens and slow access
speed.
About 200 million wireless devices were in use during
2001 = hard for marketers to resist!


13.1 million PDAs (personal digital assistants)
The majority of the other 187 million devices are cell phones.
Access Speed

Wireless users do a lot more than talk on their cell phones. They send and
receive data—anyplace, anytime:









E-mail and voice mail,
Online banking,
Access Internet,
Track information on package shipment, stock quotes, airline schedules and
changes, and news.
Wireless devices cannot access typical Web pages on their tiny screens
Site developers have a mobile viewing mode and a regular viewing mode.
The mobile mode = 100% text and serves precise information on demand.
The mobile wireless segment = huge opportunities for firms wanting to
produce wireless portals: a customized point of entry to the Net where
subscribers can access Web sites and information in text format.
Big technical problems BUT the market is unstoppable and will grow
considerably.
Activity
Data
Service %
Activity
Data Service
%
E-mail, Fax, Voice mail
30
Mobile office
7
Online banking
15
Telemetry
5
Location dependent
information services
15
Games
3
Internet access/surf
13
Payments
1
simple info services
10
Telematics (in car)
1
2002 Predicted Revenue Proportion for Data Type on Mobile Devices Worldwide Source: Fichter (2001)
Time Online

Although the Internet has been growing, not all the people with
access are as active logging on as others.

Six user segments based on the active user’s time online, pages,
domains accessed, and the amount of time spent per Web page:







Simplifiers want end-to-end convenience.
Surfers want what’s new.
Connectors are novelty seekers.
Bargainers look for deals..
Routiners want something special..
Sportsters desire highly interactive content.
These segments are likely to overlap because people use the
Internet for different purposes at different times—such as research,
e-mail, chat, work, and so forth.
Segment
Important Facts
Online Time
7 hours per month.
Simplifiers
50% of total online purchases.
49% have been online for over 5 years.
Longest online tenure.
Surfers
8% of active user population.
32% of online time usage—far more than
any other segment.
More than the average 9.8 hours
per month.
Less than the average of 9.8 per
month.
Connectors
36% active user population.
40% have been online under two years.
42% have made online purchases.
Bargainers
8% of active user population
52% are eBay users
Less than the average of 9.8 per
month.
Routiners
6% have purchased online.
They visit fewer domains.
9.8 hours per month.
Sportsters
4% of active user population.
7.1 hours per month.
User Segments Based on Online Viewing Behavior
Source: Adapted from McKinsey and MediaMetrix study
Industry Specific Usage Segments




Segmenting by usage vary from one business type to the other.
Visitors to car sites behave differently than visitors to other ecommerce.
Even serious car buyers tend to visit car sites only a few times—64%
of all buyers complete their online research in five sessions or fewer.
Three visitor segments for car Web sites:



Explorers are the smallest group, but almost half buy their new vehicle
within two months of visiting a car site. They want a convenient, explicit
buying process.
Off-roaders tend to do a lot of research online and subsequently are
very likely to purchase in an offline showroom.
Cruisers visit car sites frequently but only 15% buy a car in the short
term Still, they have a strong interest in cars and heavily influence the
car purchases of others, making them important visitors.
Targeting by Usage Occasions

Marketers identify segments based on how consumers are using the
Web at particular moments
= occasionalization. Behavior patterns
= “usage occasions.”

4 key variables for defining discrete clusters of online behavior:




Session length—the time a user stays online.
Time per page—the average time a user spends on each page during a
session.
Category concentration—the percentage of time a user spends at
sites belonging to the most frequented category.
Site Familiarity—the percentage of total session time a user spends at
familiar sites, defined as those previously visited four or more times.
Targeting by Usage Occasions

7 Occasionalization Segments:
1.
2.
3.
Quickies: users concentrate on visits to two or fewer familiar
sites extracting specific bits of information or sending e-mail
(duration = 1 minute).
Just the Facts: users look for specific information from related
sites = transaction-oriented or time-consuming sites such as
shopping, travel, and sports sites (duration = 9 minutes).
Single Mission: users want to complete a certain task or gather
specific information (involve more reading), duration = 10
minutes.
Targeting by Usage Occasions
7 Occasionalization Segments:

4.
5.
6.
7.
Do It Again: users spend 95% of the session at familiar sites for
auctions, games, investments (duration = 14 minutes).
Loitering: leisure visits to familiar sticky sites, such as news, gaming,
and entertainment sites. (duration = 33 minutes).
Information Please: used to build in-depth knowledge of a topic by
gathering broad information from a range of sites, typical for travel
and automotive Web sites (duration = 37 minutes).
Surfing: 70 minutes, with few stops at familiar sites with wide, but
not deep, exploration. Users gravitate to sites that grab their attention
immediately, such as shopping, online communities, and news.
Why Use Occasionalization in Targeting?

None of the session types was dominated by a single demographic group.

Usage occasion data + demographics, online marketers:





Raise the chances of communicating with their target consumers when they are
paying attention to and influenced by the message.
Can tailor their environments in real-time to meet the interests of the user + the
occasion.
By examining how the four session variables (session length, time per page,
category concentration, and site familiarity) define the different segments,
A marketer can identify behavioral patterns that can help in the creation +
placement of communications.
Occasionalization allows marketers to reach a larger number of users more
effectively by pinpointing when they are most likely to be receptive.
Reaching Users During Sessions

When sessions are long:
Marketers want to post messages to generate click-throughs to their
own sites as a way to build brand awareness.

In Surfing occasions, user behavior is impatient, impulsive clicking.






Site or message need to be interesting to appeal to impulse users
attracted to novelty.
When the sessions are shorter: Users are less inclined to buy,
Click-throughs should be the goal only in very specific situations.
How can marketers identify usage sessions?
Cookies are small bits of text placed on user hard drives that allow
Web sites to identify users and send them the appropriate
advertising.
Targeting Online Customers

Marketers must select the best potential segments for targeting:




Review the market opportunity analysis,
Consider findings from the SWOT analysis,
Look for the best fit between the market environment and the firm’s
expertise and resources.
Sometimes it is easy to discover a new segment and experiment with
offers that might appeal to this group.



Other times it is a lengthy and thorough process.
To be attractive, an online segment must be accessible through the
Internet, sizable, growing, and hold great potential for profit.
Targeting Online Customers

1.
2.
3.
4.

E-marketers select among 4 targeting strategy:
Mass marketing = undifferentiated targeting = when the firm
offers one marketing mix for the entire market.
Multi-segment marketing = when a firm selects two or more
segments and designs marketing mix strategies specifically for each.
Most firms use a multi-segment strategy.
Niche marketing = when a firm selects one segment and develops
one or more marketing mixes to meet the needs of that segment.
Micromarketing, = individualized targeting = when a firm
tailors all or part of the marketing mix to a very small number of
people.
The Internet’s big promise is individualized targeting =giving
individual consumers exactly what they want at the right time and
place.
Targeting Communities on the Internet

The Internet is ideal for gathering people with similar interests and
tasks into communities.

People join communities to feel connected with others who have the
following common interests:







44.8% with folks who share their hobbies;
31.5% with other professionals;
27.2% with family members;
15.7% in support groups…
Targeting can be achieved by building community through online
chat rooms, discussion groups, bulletin boards, and online events.
Motivation: value received in both information and social bonding.
A firm needs to build and maintain the watering hole to present
products and messages customized to the group’s interests.
Targeting Communities on the Internet



Two of the most publicized consumer community sites
include:
 Yahoo! GeoCities: Members build Web pages that Yahoo!
hosts for free and also join in chats and bulletin board
postings geocities.yahoo.com.
 Google groups provides Web access to the Usenet with
over 35,000 special interest bulletin board discussion
groups and 700 million community messages.
Business communities also play a big role in B2B commerce.
Most professionals subscribe to discussion groups containing
information in their field, and many Web sites promote
community.
Targeting Communities on the Internet

In discussion groups, users feel part of the site by posting
their own information and responding to other users.

Amazon allows users to write their own book reviews and
read the reviews of others.

These kinds of Web sites encourage users to return again
and again and see what their cyber friends are discussing
and doing online.
Yahoo! Games: Chess
Source: www.yahoo.com. Reproduced with permission of Yahoo! Inc.
© 2000 by Yahoo! Inc. YAHOO! and the YAHOO! logo are trademarks of Yahoo! Inc.