e-marketing - targeting market segments and communities

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

Chapter 8: Targeting Market Segments and Communities

© Prentice Hall 2003

Overview Segmentation and Targeting Overview Market Segmentation Bases and Variables

Geographic Segments Important Geographic Segments for

E-Marketing Demographic Segments Psychographic Segments Behavior Segments

Targeting Online Customers Targeting Communities on the Internet

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.

S

D

S

Internal Data Secondary Data Primary Data Information: consumer behavior, competitive intelligence

Product Database

Customer/ Prospect Base

Other Data/ Information

*Marketing Knowledge*

Tier 1 Segmentation Targeting Differentiation Positioning

Tier 2 Marketing Mix CRM

Performance Metrics

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 /ProfilingVariableExamples

CityCountyStateRegionCountry

AgeIncomeGenderEducationEthnicity

ActivitiesInterestsOpinionsPersonalityValues

Benefits soughtUsage levelBrand loyaltyUser status

Segmentation Bases and Examples of Related Variables

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.

Fiesta Americana Site in Spanish and English Source: www.posadas.com

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.

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 InternetUsers Rank Country

Percent of Population InternetUsers

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.

English42%

Japanese9%

German7%

Portuguese3% Other

9%Italian4%Korean

5%

Dutch2%Chinese

9%French

3%

Spanish7%

Less Than Half of Web Users Access in EnglishSource: Adapted from Cutitta (2002)

Demographic Segments In the Internet’s early years, the typical user was:

A young male, college educated, with a high income = an innovator.

Now, this is true in countries with low levels of Internet adoption.

In developed nations,

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: Traits (other-oriented / self-oriented)

and habits, Values: Deeply held convictions (religious

beliefs),

Lifestyle: Non-product-related behavior Activities: (playing sports or eating out),

Interests: Attitudes and beliefs people hold. Opinions:

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 1-800 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.


Forrester Research measures consumer and business attitudes toward technology.

The system, Technographics, works by combining three specific variables:

1. Determine if a person is optimistic or pessimistic toward technology,

2. Measure a user’s income level ( important determinant of online shopping behavior),

3. Query users about their primary motivation for going online.


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

Career Family Entertainment

TechnologyOptimists52%

High Income(>$40,000)

Fast Forwards12%

New Age Nurturers8%

Mouse Potatoes9%

Low Income(<$40,000)

Techno-Strivers7%

Digital Hopefuls7%

Gadget Grabbers9%

TechnologyPessimists48%

High Income

Handshakers7%

Traditionalists8%

Media Junkies5%

Low Income

Sidelined Citizens 28%

Consumer Technographic Segments and Proportion in the United StatesSource: Adapted from Modahl (2000)


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 TechnologyHow 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 SegmentsTwo 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%), Hunter-Gatherers (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 AccessSegmentation 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.

ActivityData

Service % ActivityData 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

Simplifiers

50% of total online purchases.49% have been online for over 5 years. Longest online tenure.

7 hours per month.

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.

Connectors

36% active user population.40% have been online under two years.42% have made online purchases.

Less than the average of 9.8 per month.

Bargainers8% of active user population52% are eBay users

Less than the average of 9.8 per month.

Routiners6% 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 e-commerce.

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. Quickies: users concentrate on visits to two or fewer familiar sites extracting specific bits of information or sending e-mail (duration = 1 minute).

2. 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).

3. 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. Do It Again: users spend 95% of the session at familiar sites for auctions, games, investments (duration = 14 minutes).

5. Loitering: leisure visits to familiar sticky sites, such as news, gaming, and entertainment sites. (duration = 33 minutes).

6. 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).

7. 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 E-marketers select among 4 targeting strategy:

1. Mass marketing = undifferentiated targeting = when the firm offers one marketing mix for the entire market.

2. 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.

3. Niche marketing = when a firm selects one segment and develops one or more marketing mixes to meet the needs of that segment.

4. 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.


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.


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.

Key Terms

•Benefit segmentation•Demographics•Geodemographics•Geographics•Individualized targeting•Marketing segmentation•Mass marketing•Micromarketing

•Multi-segment marketing•Niche marketing•Occasionalization•Psychographics•Targeting•Technographics•Undifferentiated targeting

Review Questions1. Define the four main segmentation bases and

list at least two segmentation variables for each.2. Why do e-marketers need to measure attitude

toward technology? What measures are available?

3. What benefits do consumers seek online? 4. How do benefit segments differ from usage

segments?5. What is occasionalization and why is it

important for effective e-marketing?6. How does micromarketing differ from multi-

segment marketing, niche marketing, and mass marketing?

7. Why would an e-marketer want to create or nurture a Web site for building a community?

Discussion Questions

1. Underdeveloped countries tend to have sharper class divisions than exist in the United States. It is not uncommon for 2% of the population to control 80% of the wealth. As a marketer, how would you use this knowledge to develop a segmentation strategy for targeting consumers in these countries?

2. Booz-Allen and Nielsen/NetRatings suggest that successful e-tailers will change their approach from one size fits all to a series of parallel sites targeted to appeal to multiple usage occasions. The challenge for e-tailers, they say, is to use technology to detect which occasion a user entering the site may be in and to use that information to trigger an interface geared to that occasion. Do you agree? Defend your position.

Discussion Questions

1. Many parents are upset that some Web sites specifically target children and young teens. Outline the arguments for and against a company such as MyKindaPlace.com (featured in the opening vignette) using this segmentation and targeting strategy. Which side do you support—and why?

2. Some company managers forbid employees from using the Internet for non-work-related activities. What are the implications for e-marketers that segment their markets using the variable of home and work access?