1. Segmentation, Targeting, Differentiation, and Positioning Strategies E-M ARKETING /6E C HAPTER 8

2. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-2 C HAPTER 8 O BJECTIVES 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.

3. ©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. 8-3

4. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-4 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 firms 21 million customers. T HE 1-800-F LOWERS S TORY

5. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-5 THE 1-800-FLOWERS STORY, CONT. In Q4 2009, the firms 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?

6. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-6 S EGMENTATION & T ARGETING 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.

7. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-7 T HREE M ARKETS 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.

8. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-8 T HREE B ASIC M ARKETS

9. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-9 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) M ARKET S EGMENTATION B ASES AND V ARIABLES

10. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-10 G EOGRAPHIC S EGMENTS 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.

11. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-11 T OP I NTERNET L ANGUAGES

12. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-12 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. Three market segments are of great interest to e-marketers. Millennials Kids Online opinion leaders D EMOGRAPHIC S EGMENTS

13. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-13 M ILLENNIALS 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.

14. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-14 K IDS 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%)

15. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-15 E THNIC G ROUPS 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.

16. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-16 I NFLUENTIALS 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.

17. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-17 P SYCHOGRAPHIC S EGMENTS User psychographics include: Personality Values Lifestyles Activities Interests Opinions

18. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-18 I NTEREST C OMMUNITIES Exhibit 8.8 lists 10 important types of online communities, including social networking. Ways to target online communities. Provide online chats, bulletin boards, and events. Advertise on another firms community site. The firm can join the community and post as a member.

19. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-19 Psychographic information helps e-marketers define and describe market segments. Some marketers believe that a segments 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). A TTITUDES AND B EHAVIORS

20. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-20 CONSUMER TECHNOGRAPHICS SEGMENTS IN THE U.S.

21. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-21 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. B EHAVIOR S EGMENTS

22. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-22 B ENEFIT S EGMENTS To determine benefits sought, marketers can look at what people actually do online. Online activities Popular Web sites Most popular, according to comScore.com: Google Yahoo! Microsoft AOL Facebook

23. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-23 U SAGE S EGMENTS Marketers can segment according to how consumers use the Internet. Home and work access 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 Biggest use in 2010 was for text and Web browsing.

24. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-24 S OCIAL M EDIA E NGAGEMENT S EGMENTS

25. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-25 T ARGETING O NLINE C USTOMERS 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 Internets big promise is individualized targeting.

26. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-26 Kotler defines differentiation as the process of adding meaningful and valued differences to distinguish the companys offering from the competition. There are a number of differentiation dimensions and strategies for their accomplishment. D IFFERENTIATION O NLINE

27. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-27 DIFFERENTIATION DIMENSIONS A firm can differentiate along 5 dimensions: Product Service Personnel Channel Image

28. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-28 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 INTERNET-SPECIFIC DIFFERENTIATION STRATEGIES

29. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-29 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. INTERNET-SPECIFIC DIFFERENTIATION STRATEGIES, CONT.

30. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-30 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-marketers 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. P OSITIONING

31. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 8-31 Product or service attributes (Ivillage)(Ivillage) Technology position (My Virtual Model)(My Virtual Model) Benefits position (Kimberly Clarke-Huggies)(Kimberly Clarke-Huggies) User category position (U.S. Dept. of Commerce)(U.S. Dept. of Commerce) Competitor position (Vimeo)(Vimeo) Integrator position (The Knot)(The Knot) BASES AND STRATEGIES FOR POSITIONING

32. 8-32 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2012 Pearson Education, Inc. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall