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E-M ARKETING /6E
C HAPTER 8
C HAPTER 8 O BJECTIVES
8-2

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.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-3
C HAPTER 8 O BJECTIVES , CONT.

Outline the five types of Internet usage
segments and their characteristics.

Describe two important coverage
strategies e-marketers can use to target
online customers.

Define differentiation and positioning
and give examples of companies using
them.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-4
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-5
THE 1-800-FLOWERS STORY,
CONT.

In Q4 2009, the firm’s Web site
had 767,360 daily visitors, $238.5
million in sales and drew 656,000
new customers.

Why do you think better
segmentation and targeting lead
to reduced phone time and lower
costs?
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-6
T HE 1-800-F LOWERS S TORY

Jim McCann started 1-800-Flowers as a
traditional retailer in New York City in
1976.

In 1995, he extended the brand to the
Internet.

He used SAS data mining software to
identify customer segments for better
targeting.

The software analyzed the clickstreams
and purchasing patterns of the firm’s
21 million customers.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-7
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-8
S EGMENTATION & TARGETING
O VERVIEW

Marketing segmentation is the
process of grouping individuals or
businesses, according to use,
consumption, or benefits of a
product or service.

Market targeting is the process of
selecting market segments that
are most attractive to the firm.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
T HREE M ARKETS
8-9
Outline the
characteristics
of the three
major markets
for ebusiness.

Three important markets sell to and buy
from each other:
 Business Market: Marketing of
products for use in the business
operation, as components, or for
resale.
 Government Market: Federal, state,
county, city, and foreign governments.
 Consumer Market: The consumer
market involves marketing goods and
services to end consumers.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-10
T HREE B ASIC M ARKETS
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
M ARKET S EGMENTATION
B ASES AND VARIABLES
8-11
List the most
commonly
used market
segmentation
bases and

variables.


Marketers create segments to identify and
reach the right people at the right time.
 Geographic location
 Demographics
 Psychographics
 Behavior with regard to the product
Companies can also combines bases, such as
geodemographics (geography and
demographics)
Marketers create segments based on variables
that can be used to identify and reach the
right people at the right time.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
G EOGRAPHIC S EGMENTS
8-12
Product distribution strategy is a driving force
behind geographic segmentation.
 Countries may be segmented based on
Internet usage.
 China has 384 million users.
 U.S. has 234 million users .
 Japan has 96 million users.
 Geographic markets may also be evaluated by
infrastructure variables and language spoken.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-13
TOP I NTERNET L ANGUAGES
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-14
D EMOGRAPHIC S EGMENTS



In developed nations, users are much like the
mainstream population demographically.
The heaviest Internet penetration in 2010: 18-29,
white, suburban, earn $75,000+, and highly
educated.
Four market segments are of great interest to emarketers.




Millennials
Kids
Ethnic Groups
Online opinion leaders (Influentials)
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
M ILLENNIALS
8-15
Of those born between 1979 and 1994,
over 90% use the Internet.
 “Confident, connected, and open to
change.”
 75% have a social networking
profile, 83% sleep with their cell
phones, and 80% sent a text
message in the past 24 hours.
 This group is a marketing proving
ground for the future.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
K IDS
8-16


The number of kids under 16 online is
increasing.
Kids 8-12 do a number of activities online:
 Play online games (78.1%)
 Homework (34.2%)
 Music (28.6%)
 Videos (26.2%)
 Surf Web (22.7%)
 E-mail (20.4%)
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
E THNIC G ROUPS
8-17
Hispanics, African Americans, and Asians are
important online markets.
 English-speaking Hispanics have a 64% Internet
adoption rate.



They access the Internet with a handheld device
more than non-Hispanic Caucasians.
African Americans are one of the largest and
most quickly growing ethnic groups online.

They have a 70% rate of adoption and tend to
be younger, more highly educated, and more
affluent than African Americans not using the
Internet.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
I NFLUENTIALS
8-18

Influentials are individuals who
influence others, driving change in
America.

Represent 10% of the population,
15% of Internet users.

82% of influentials have Internet
access, compared with 76% of the
general U.S. population.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-19
P SYCHOGRAPHIC S EGMENTS

User psychographics include:

Personality (e. g other-oriented vs selforiented)

Values deeply held principles (e.g. religious,
beliefs)

Lifestyles & Activities refer to non-product
related behavior (e.g. playing sports or eating
out)

Interests & Opinions are attitudes and beliefs
people hold (e.g. internet is waste of time,
others they could not exist without e-mail)
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
I NTEREST C OMMUNITIES
8-20

Exhibit 8.8 lists 10 important types of
online communities, including social
networking,




Six degrees of separation
Social bonding.
Ways to target online communities.
 Provide online chats, bulletin boards,
and events.
 Advertise on another firm’s community
site.
 The firm can join the community and
post as a member.
Advantages & disadvantages
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-21
ATTITUDES
AND
B EHAVIORS
Attitudes – internal evaluations about people,
products, and other objects
 Behaviors – what a person physically does.
 Psychographic information helps e-marketers
define and describe market segments.
 Some marketers believe that a segment’s attitudes
toward technology can help determine buying
behavior.
 Forrester Research measures attitudes toward
technology with a system called
Technographics.
 Forrester identified 10 consumer
Technographics segments in the U.S.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
T ECHNOGRAPHICS
8-22


Technographics – measures consumer and
business attitudes toward technology

Are you optimistic or pessimistic toward
technology?
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Income level

Primary motivation for going online
Results revealed that

Technology optimism declines with age

Men are more optimistic

40% of high income citizens are optimistic
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-23
T ECHNOGRAPHICS , C ONT.

How to use these information






high income optimists shop online
Low-income pessimistic not a good market
Early adopters: high-income technology optimists first consumers to shop online
Leggards: low- income technology pessimists - last
consumers to shop online
Companies can use Technographics segments to profile
consumers who shop online & where to allocate
resources
Assist businesses with product development and
launches, lead generations, cross-selling opportunities,
customer service, and brand building.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
B EHAVIOR S EGMENTS
8-24

Two common segmentation variables are
benefits sought and product usage.
 Marketers using benefit segmentation
form groups of consumers based on
the benefits they desire from product.
 Product usage: marketers often
segment by light, medium, and heavy
product usage.
 Marketers can segment users as brand
loyal, loyal to a competitive product,
switchers, and nonusers.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
B ENEFIT S EGMENTS
8-25

The Internet offers something for everyone:
information, entertainment, news, social meeting
places, etc. Thus, design products and services to
meet those needs.


To determine benefits sought, marketers can look
at what people actually do online.



More practical approach than demographic one
Online activities: connect, create, learn, enjoy, trade.
Popular Web sites
Most popular, according to comScore.com:





Google
Yahoo!
Microsoft
AOL
Facebook
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
U SAGE S EGMENTS
8-26
Outline the
five types of
Internet
usage
segments
and their


characteristics
Marketers can segment according to how
consumers use the Internet.
Home and work access
 Important because of different needs of
how to use the internet
 Households have more than one computer
connected wirelessly to the internet.



60% of all U.S. users have broadband
connectivity at home.
Nielsen/NetRatings estimated 69.7 million
accessed the Internet from work; 217.3 million
from home.
Mobile access
 Using smartphones to access Internet apps
 Biggest use in 2010 was for text and Web
browsing.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-27
S OCIAL M EDIA
E NGAGEMENT S EGMENTS
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-28
O NLINE E NGAGEMENT L EVEL

Users are actively participating by adding content for
others to view. Social media engagement segments:







Creators
Critics
Collectors
Joiners
Spectators
Inactives
Industry-Specific Usage Segments



Explorers – the smallest group, but half buy their new
vehicle within two months of visiting a site
Off-roaders – tend to do a lot of research online, are likely
to purchase offline
Cruisers – visit car sites frequently but only 15% buy a car in
the short term
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-29
Describe two
important
coverage
strategies emarketers can
use to target
online
customers.
TARGETING O NLINE C USTOMERS

E-marketers select a targeting strategy.
 Which targets to serve online
 Which in the brick-and-mortar
location
 Other factors (catalog)
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-30
TARGETING O NLINE C USTOMERS ,
C ONT.

Two targeting strategies are well-suited for the
Internet.
 Niche marketing



Micromarketing (individualized targeting)


Selecting one segment and develops one or
more marketing mixes to meet the needs of
that segment (e.g. Amazon)
Can be risky because competitors may be
drawn into profitable markets
When a firm tailors all of the marketing mix to
a very small number of people.
The Internet’s big promise is individualized
targeting.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-31
Define
differentiation
and
positioning
and give
examples of
companies
using them.
D IFFERENTIATION O NLINE

Kotler & Keller define differentiation as
the process of adding meaningful and
valued differences to distinguish the
company’s offering from the
competition.

There are a number of differentiation
dimensions and strategies for their
accomplishment.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-32
DIFFERENTIATION DIMENSIONS

A firm can differentiate along five
dimensions:

Product

Service

Personnel

Channel

Image
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-33
INTERNET-SPECIFIC
DIFFERENTIATION STRATEGIES

There are six differentiation strategies
unique to online businesses.
 Site Environment/Atmospherics
Atmospherics – in-store environment
created by retailers.
 Websites with easy downloads, accurate
and clear information, easy navigation.


Build Trust




Paying online requires trust
Strong brand recognition.
Privacy policy.
Safe and encrypted payment process for
transactions
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-34
INTERNET-SPECIFIC DIFFERENTIATION
STRATEGIES, CONT.




Efficient and Timely Order Processing
 Ease of ordering very important
 Automated email updates important
Pricing
 Easy to imitate
 Majority of firms today differentiate themselves in
other ways besides pricing.
 Pricing is transparent
Customer Relationship Management (CRM)
 Managing long-term relationships with customers.
 Tracking customer habits
 Creates a more efficient shopping environment
Invite User-generated Content
 The key is to trust customers, listen, respond, and
learn (e.g. YouTube, Flickr…)
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
P OSITIONING
8-35

Positioning is the process of creating a
desired image for a company and its
products in the minds of a chosen user
segment.

The e-marketer’s goal is to build a position
on one or more bases that are relevant
and important to the consumer.

Firms can position brands, the company,
the CEO, or individual products.
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
BASES AND STRATEGIES
FOR POSITIONING
8-36

Product or service attributes

Technology position

Benefits position
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User category position

Competitor position

Integrator position
©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL
8-37
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Copyright © 2012 Pearson Education, Inc.
Publishing as Prentice Hall