Digital Marketing and Consumer Behavior MKTG 437 Scott W. Flexo, Ph.D.

Part II: Segmenting the Digital Consumer Market

What is Market Segmentation? Chapter 8 Segmenting and Targeting Markets What is Market Segmentation? Market Segment Segmentation People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. Notes: Within a market, a market segment is a subgroup of people or organizations with one or more characteristics that cause them to have similar product needs. Market segmentation is the division of a market into meaningful, relatively similar, and identifiable segments or groups.

The Importance of Market Segmentation Chapter 8 Segmenting and Targeting Markets The Importance of Market Segmentation Markets have a variety of product needs and preferences Marketers can better define customer needs if divided into segments Marketers can define objectives and allocate resources more accurately Notes: Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments. Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide. Discussion/Team Activity: Discuss how Coca-Cola’s product lines fit the needs of different market segments. Name different fashion retailers and identify their marketing segmentation strategies.

Geographic Segmentation Target people based on physical presence (Idea: Go where the people are and where they go!) Research shows that people more likely to have "friends" within 25 miles of their home location than outside this geographic area. Critical for small businesses in this 25 mile range to become "friends" with people in this area for they will be more likely to connect to other "friends" in the same geographic location. Any Neighborhood USA

Geographic Segmentation: Birds of a Feather Flock Together People tend to live in households with other people and households that hold similar interests, viewpoints and demographic characteristics. Local digital media can therefore very effective in promoting local and small to medium sized businesses. Google Zip Code Targeting

Demographic Segmentation Use of common characteristics such as age, gender, income and ethnic background, life stage, generation, etc. to understand how to group similar consumers together. But more than that; demographic targeting goes beyond these physical and social characteristics and seeks to understand and market to the motives and beliefs that characterize the subgroups themselves.

Demographic Targeting: How Would You Target? Targeting 18-24 Year Olds Digital Consumers

Psychographic Segmentation Market is segmented based on personality, motives, lifestyles and attitudes and opinions Psychographic Segmentation exemple - Claritas Prizm

Psychographic Segmentation

Maslow's Marketing Applications Practical Marketing Applications A prospective consumer driven by the first order needs would be motivated to buy a car because it can provide basic transportation to and from work or school. A prospective customer driven by Maslow's second needs level, safety and security, might be enticed to buy a new car if you convince him that it is safe for his family, reliable and well-rated in consumer studies. A prospective consumer driven by Maslow's "family needs" might be enticed to buy a new car if you can convince him that it is a good family car, families use this kind of car, his/her kids will like this car, family will love him/her if they get this car. Someone driven by the need for self-esteem, in needs level four, is looking for recognition and validation, so you might tailor your marketing to convince her that acquiring and implementing your accounting methods will bring accolades from her peers or make her look good to her boss.

Benefit Segmentation The central aspect governing benefits-based research is that consumers enter the marketplace to address their “needs and wants,” and elect specific behaviors such as what, where and how they shop and buy so as to achieve these desired consequences. People shop not for a drill or drill bits, but to build a deck in order to get love and comfort from family and pride from a job well done. It is the job of marketers to connect the attributes of the drill and drill bits to the benefits consumers seek. The more successful a marketer is in doing this, the more successful will they be in marketing their products and brands.

e-Commerce Benefit Segments Why America Shops Online! Based on an exhausted analysis of consumer benefits, 7 e-Consumer benefit segments were identified

Motto: “I’m looking and having fun!” e-Browser Motto: “I’m looking and having fun!” 12% of e-Shoppers are e-Browsers. You love to shop, and shopping online is a fun and interesting way to do it. While online you are looking at things to buy. But this does not mean that you actually buy stuff online. Rather, it is the activity of online shopping itself that you like. Buying something is secondary to the joy of browsing around the Internet and looking at all the stuff that is for sale.

Motto: “Keep it a secret!” e-Privateer Motto: “Keep it a secret!” 14% of e-Shoppers are e-Privateers. As a Privateer, you enjoy e-Shopping because you can do it in secret, alone and in private. You are most concerned with online privacy issues. You especially enjoy e-Commerce sites that offer products and services unavailable elsewhere. You gravitate to e-Commerce sites that offer things you might feel uncomfortable shopping for in person at a store.

Motto: “I Love the Internet" e-Joiner Motto: “I Love the Internet" 16% of e-Shoppers are e-Joiners. You are an “Internet Dreamer” and are enamored with all aspects of e-Commerce and the Internet. As you shop online you feel part of an economic and social revolution. You feel able to connect to others with similar interests in a way that you could never before. Shopping online gives you a feeling of being a part of social change, whether connected to like-minded users, part of the “Internet Community,” using the Internet to promote social or political causes and groups, or advancing a worldwide (sans national borders) perspective.

Behavioral Segmentation Divides digital consumers based on how they act with regard to a brand or product category. Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand/sales.

Segments: Involvement Chapter 6 Consumer Decision Making Segments: Involvement High-involvement purchases require: Extensive and informative promotion to target market Low-involvement purchases require: In-store promotion, eye-catching package design, and good displays. Coupons, cents-off, 2-for-1 offers Notes: For high involvement products, a good ad gives consumers the information they need for making the purchase decision, as well as specifying the benefits and advantages of owning the product. For low-involvement purchases, customers may not recognize their wants until they are in the store. In-store promotion and package design are important tools for catching the customer’s attention. Good displays can help explain a product’s purpose and create recognition of a want.

Behavioral Segmentation Another way to use behavior segmentation in digital marketing is to use the behaviors consumer exhibit when surfing the web to target behavior. This approach uses software and Web analytics (data mining, etc.) cookies and IP addresses to create a behavioral profile of individual consumers based on their web behavior. Then relevant, interactive advertising and other marketing are tailored and sent over the Internet, etc., to these individual consumers. Yahoo Behavioral Targeting How Yahoo Uses Behavioral Targeting - Video

Digital Segments: Segmenting consumers based on their digital activities

How Americans Go Online: Check Out These Links Pew Internet Research How Americans Go Online Take the Online Dating Survey - Which Segment Are You In?

Digital Segments: Kinds of Digital Activity

Digital Marketing and Consumer Behavior Questions?