1. E-Marketing/6E Chapter 8
Segmentation, Targeting, Differentiation, and Positioning Strategies

2. 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.
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3. Chapter 8 Objectives, cont.
8-3
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.
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4. The Flowers Story
Jim McCann started 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.
As a result of segmentation and targeting strategies, customer retention increased by 15% and sales by 13.8% in 2003.
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5. The 1-800-Flowers Story, cont.
The firm’s Web site attracted 13.1 million new customers and the repeat order rate increased to 43%.
In 2006, the site had 2.1 million monthly visitors and $430 million in sales.
Why do you think better segmentation and targeting lead to reduced phone time and lower costs?
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6. Segmentation & Targeting Overview
Marketing segmentation is the process of grouping individuals or businesses, according to use, consumption, or benefits of a product or service.
Easy to tailor marketing mix for smaller groups/individuals with internet.
Is it worth the effort?
Market targeting is the process of selecting market segments that are most attractive to the firm.
Criteria used includes growth, profitability, competitiveness, accessibility
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7. Three Markets
Three important markets that both sell and buy to each other:
Business Market
Online B2B marketing is huge because more firms are connected to the internet than consumers.
Products used in the business operation as components or for resale
Government Market
The government is usually the country’s largest buyer.
e-perolehan
Consumer Market
The consumer market involves marketing goods and services to end consumers.
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8. Three Basic Markets The 3 markets buy and sell to each other.
Give examples from your countries.
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9. The Business Market
Marketing of products to business, governments, and institutions for use in the business operations either for resale or as components of final product.
Very large market because most firms are connected to the Internet
Much activity is transparent to consumers
Information technology creates tremendous efficiencies
Globalization is causing increased competition
The Internet makes supply chains more efficient- sometimes cause conflicts
Firms experience greater interdependence in their value chain.
Internet allows for strange bedfellows
Unlikely industries find partnerships due to the Internet
Strategic partnerships are formed that would not be possible without Web access
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10. The Government Market Usually the country’s largest buyer
Authorizes thousands of work contracts
Unique challenges faced
Rules, paperwork, specific binding processes
Most businesses have an equal chance of selling to governments
The great debate
Should government agencies allow advertising on their Web sites? Fees would subsidize costs and lower taxes
Could be considered unethical to mix government and business in this way
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11. The Consumer Market - Segmentation Bases and Variables
Segmentations bases are a few general organizing categories, and segmentation variables include numerous subcategories.
Marketers create segments based on variables that can be used to identify and reach the right people at the right time.
Geographic location – hemisphere, city, country, region
Demographics – age, gender, income, ethnicity
Psychographics – personality, activities, values
Behavior with regard to the product – benefit sought, usage level, online engagement
Companies can combine bases, such as geodemographics (geography and demographics)
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12. Geographic Segments
Product distribution strategy is a driving force behind geographic segmentation.
May want to only reach customers in countries that it can provide the product/service
Countries may be segmented based on internet usage. Good market for new technology?
Geographic markets may also be evaluated by infrastructure variables.
Language spoken may also be a variable.
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13. Geographic Segments
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.
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14. Overview of Global E-Marketing Issues
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15. Top Internet Languages
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16. Demographic Segments
In developed nations, users are much like the mainstream population demographically.
In less developed countries, the ‘innovator’ would be the typical user.
Three market segments are of great interest to e- marketers.
Millenials
Kids
Online opinion leaders
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17. Millenials
Of those born between 1979 and 1994, over 90% use the internet (from developed countries)
75% have social networking profile; 80% sleep with their cellphones; 80% sent a text message in the last 24 hours
They grew up with the internet, therefore adept at multitasking and handling information overload.
Operates new gadgets with ease.
Most have broadband for downloading music and watching videos online.
This group is a proving ground for the future.
Get their attention and it will be spread via their online word-of-mouth
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18. Kids 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%)
(20.4%)
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19. E-Kids

24. Ethnic Groups
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.
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25. Ethnic Groups
Hispanics, African Americans, and Asians are important online markets.
79% of Hispanics use the internet.
They view 15% more Web pages and spend 9% more online than the average internet user.
African Americans are one of the largest and fast growing ethnic groups online.
They have a 56% 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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26. Influentials
Influentials are individuals who influence others, driving change.
Represent 10% of the population and 15% of internet users.
82% of influentials have internet access, compared with 64% of the general U.S. population.
They serve as opinion leaders for the rest of the population.
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28. What we do with our mobile phones?  
(Source: NYT 1/21/09) Service                              13-24         Sent text message                57%           28% Sent                            11               9 Took photos                         14               5 Used I.M. service                   9                4 Used photo/video network   9                4 Sent photo to a phone           8                3 Sent photo to a pc                 6               2 Sent photo via                5               3 Captured video                      5                2 Uploaded photo to Web         4                2

29. Psychographic Segments
User psychographics include:
Personality – self vs other orientation; procrastinate vs diligence
Values – deeply held beliefs/convictions
Lifestyles – entertainment; dining out
Activities – hiking, 4WD adventure
Interests – wildlife preservation; green energy
Opinions – traditional/natural medicine
Marketers do not include product related behaviors as part of the segment but just the general way consumers spend their time.
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30. Interest Communities
Interest communities attract like-minded individuals who post comments on Web sites or send s to other members.
Social networking is perhaps the most important type.
10 important types of online communities.
Amongst them advocacy, consumer, brand, education, trading communities.
There are several 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.
Corporation owned and maintained community –
can control messages; learn about problems and suggestions
beware of negative postings; offensive language; unpredictable content makes attracting advertisers difficult
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31. Attitudes and Behaviors
Most marketers believe that demographics cannot predict who will purchase online or offline.
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. (Exhibit 8.10).
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32. Consumer Technographics Segments
Attitude towards technology, income level and primary motivation for going online.
Exhibit 8.10
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33. Behavior Segments
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.
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.
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34. Benefit Segments
To determine benefits sought, marketers can look at what people actually do online.
Online activities
Popular Web sites
For example, travel benefits sought can include:
Ability to check flights, hotels, and car rentals.
Travel destination information.
Travel bulletins and alerts.
Chat/forum areas.
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35. Usage Segments
Marketers can segment according to how consumers use the internet. 3 important internet usage segments are:
Home and work access
57% of all U.S. users have broadband connectivity at home.
Estimated 69.7 million users at work; million from home.
Access speed
Nearly 80% of broadband users will watch a video online.
Industry-specific usage segments i.e segments vary from one industry to another.
Mobile access
Biggest use in 2010 was for text messaging and web browsing
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36. Social Media Engagement Segments
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37. Targeting Online Customers
E-marketers select a targeting strategy.
Which targets to serve online
Which locations
Other factors
Two targeting strategies are well-suited for the internet.
Niche marketing
Micromarketing
The internet’s big promise is individualized targeting.
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38. Targeting Online Customers
Mass Marketing (undifferentiated targeting)
Defined – when a firm offers only one marketing mix for the entire market
Wrigley’s gum
Banner ads on the Internet
 Multi-segment Marketing – when a firm selects two or more segments and designs marketing mix strategies specifically for each
 Niche Marketing
Defined – when a firm selects one segment and develops one or more marketing mixes to meet the needs of that segment
Amazon
Can be risky because competitors may be drawn into lucrative markets
 Micromarketing (individualized targeting) – when a firm tailors all of the marketing mix to a very small number of people.
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39. Targeting Online Customers
E-marketers select a targeting strategy.
Which targets to serve online
Which locations
Other factors
Two targeting strategies are well-suited for the Internet.
Niche marketing
Micromarketing
The Internet’s big promise is individualized targeting.
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40. Differentiation Online
Kotler defines 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.
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41. DIFFERENTIATION DIMENSIONS
A firm can differentiate along 5 dimensions:
Product
Service
Personnel
Channel
Image
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42. INTERNET-SPECIFIC DIFFERENTIATION STRATEGIES
There are 6 differentiation strategies unique to online businesses.
Site Environment/Atmospherics
Easy downloads, accurate and clear information, easy navigation.
Build Trust
Strong brand recognition.
Privacy policy.
Safe and encrypted payment process for transactions
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43. INTERNET-SPECIFIC DIFFERENTIATION STRATEGIES, CONT.
Efficient and Timely Order Processing
Pricing
Majority of firms today differentiate themselves in other ways besides pricing.
Customer Relationship Management (CRM)
Managing long-term relationships with customers.
Invite User-generated Content
The key is to trust customers, listen, respond, and learn.
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44. Positioning
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.
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45. BASES AND STRATEGIES FOR POSITIONING
Product or service attributes
Technology position
Benefits position
User category position
Competitor position
Integrator position
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