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E-Marketing 4/EJudy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 8: Segmentation & Targeting Strategies

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Chapter 8 Objectives

After reading Chapter 8 you will be able to: Outline the characteristics of the three major

markets for e-business. Explain why and how e-marketers use market

segmentation to reach online customers. List the most commonly used market

segmentation bases and variables. Outline five types of usage segments and their

characteristics. Describe the four coverage strategies e-marketers

can use to target online customers.

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Utilized data mining software to identify customer segments for better targeting.

As a result of segmentation and targeting strategies, customer retention increased by 15% and sales by 13.8% in 2003.

Web site attracted 13.1 million new customers and the repeat order rate increased to 43%.

Why do you think better segmentation and targeting lead to reduced phone time and lower costs?

1-800-Flowers

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Segmentation & Targeting Overview

Marketing segmentation is the process of grouping individuals or businesses, according to use, consumption or benefits of a product or service.

Targeting is the process of selecting market segments that are most attractive to the firm.

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Three Basic Markets

Business MarketGovernment MarketConsumer Market

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Geographic location.Demographics.Psychographics.Behavior with regard to the product.Companies can combines bases, such as

geodemographics (geography and demographics).

Segmentation Bases

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Geographic Segments

Product distribution strategy is a driving force behind geographic segmentation.

Countries may be segmented based on Internet usage. U.S. has 186 million users. China has 95.6 million users. Japan has 77.9 million users.

Geographic markets may also be evaluated by infrastructure variables.

Language spoken may also be a variable.

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Top Internet Languages

English, 35.8%

Chinese, 14.1%Japanese, 9.6%

Spanish, 9.0%

German, 7.3%

Korean, 4.1%

French, 3.8%

Portuguese, 3.5%

Italian, 3.3%

Russian, 2.5%

Dutch, 1.8%

Other, 5.2%

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In developed nations, users are much like the mainstream population demographically.

Three market segments are of great interest to e-marketers. Millenials Ethnic groups Influentials

Demographic Segments

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Millenials

Of those born between 1979 and 1994, over 75% use the Internet.

They grew up with the Internet.80% have cell phones and 36% use text

messaging.Most have broadband for downloading

music and watching videos online.This group is a proving ground for the

future.

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Ethnic Groups

59% of Hispanics use the Internet; 55% use the Spanish language online.

African Americans have 43% rate of adoption and tend to be younger, more highly educated and more affluent than African Americans not using the Internet.

More than half of Chinese Americans have Internet access and high purchasing power.

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Influentials

Influentials are individuals who influence others.

Represent 10% of the population and 15% of Internet users.

They serve as opinion leaders for the rest of the population.

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Psychographic Segments

User psychographics include: Personality Values Lifestyles Activities Interests Opinions

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Interest Communities

Interest communities attract like-minded individuals who post comments on Web sites or send e-mails to other members.

Exhibit 8.7 lists ten important types of online communities.

There are 3 ways to target online communities. Provide online chats and events. Advertise on another firm’s community site. Join the community and post as a member (stealth or

guerilla marketing).

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Some marketers believe that a segment’s attitudes toward technology determine buying behavior.

Forrester Research measures attitudes toward technology with a system called Technographics™.

Their findings provide a number of clues about online purchasing behavior.

Attitudes and Behaviors

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Two common segmentation variables are benefits sought and product usage. Online shopper can be bargain hunters or

convenience shoppers. Marketers often segment by light, medium and

heavy product usage.

Behavior Segments

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Usage Segments

Marketers can segment according to how consumers use the Internet. Home vs. work access Access speed Preferred receiving device Time spent online Industry specific usage

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Usage Segments, cont.

Approximately 56 million U.S. users access the Internet from work and 202.4 million from home.

Broadband users operate differently from narrowband users online. 75% play audio CDs. 60% play online games. 48% download music and watch streaming

video or DVDs.

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User Segments Based on Online Viewing Behavior

Segment Important Facts Online Time

Simplifiers50% of total online purchases.49% have been online for over five years. Longest online tenure.

7 hours per month.

Surfers8% of active user population.32% of online time usage—far more than any other segment.

More than the average of 9.8 hours per month.

Connectors36% 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 population.52% 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.

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Targeting Online Customers

E-marketers may select from among 4 different approaches for a targeting strategy. Mass marketing or undifferentiated targeting Multisegment marketing Niche marketing Micromarketing

The Internet’s big promise is individualized targeting.