ELC 310 Day 11. Agenda Questions? Marketing Plans due October 26 <<<<CHANGED Should be working on them 20% of final grade We are a week behind schedule…expect.

ELC 310 Day 11

Agenda Questions? Marketing Plans due October 26 <<<<CHANGED Should be working on them 20% of final grade We are a week behind schedule…expect the pace to accelerate after Oct break We will cover 3 Chaps (10, 11 & 12) in two lectures Exam 2 will be on OCT 22 Chap 6 – 12 Same Format as before Finish Discussions on Targeting Market Segments and Communities Begin Discussion on Differentiation and Positioning Strategies

Time Online Although the Internet has been growing, not all the people with access are as active logging on as others. Six user segments based on the active user’s time online, pages, domains accessed, and the amount of time spent per Web page: Simplifiers want end-to-end convenience. Surfers want what’s new. Connectors are novelty seekers. Bargainers look for deals.. Routiners want something special.. Sportsters desire highly interactive content. These segments are likely to overlap because people use the Internet for different purposes at different times—such as research, e-mail, chat, work, and so forth.

SegmentImportant FactsOnline Time Simplifiers 50% of total online purchases. 49% have been online for over 5 years. Longest online tenure. 7 hours per month. Surfers 8% of active user population. 32% of online time usage—far more than any other segment. More than the average 9.8 hours per month. Connectors 36% active user population. 40% have been online under two years. 42% have made online purchases. Less than the average of 9.8 per month. Bargainers 8% of active user population 52% are eBay users Less than the average of 9.8 per month. Routiners 6% have purchased online. They visit fewer domains. 9.8 hours per month. Sportsters 4% of active user population.7.1 hours per month. User Segments Based on Online Viewing Behavior Source: Adapted from McKinsey and MediaMetrix study

Industry Specific Usage Segments Segmenting by usage vary from one business type to the other.  Visitors to car sites behave differently than visitors to other e- commerce.  Even serious car buyers tend to visit car sites only a few times— 64% of all buyers complete their online research in five sessions or fewer. Three visitor segments for car Web sites: Explorers are the smallest group, but almost half buy their new vehicle within two months of visiting a car site. They want a convenient, explicit buying process. Off-roaders tend to do a lot of research online and subsequently are very likely to purchase in an offline showroom. Cruisers visit car sites frequently but only 15% buy a car in the short term Still, they have a strong interest in cars and heavily influence the car purchases of others, making them important visitors.

Targeting by Usage Occasions Marketers identify segments based on how consumers are using the Web at particular moments = occasionalization. Behavior patterns = “usage occasions.” 4 key variables for defining discrete clusters of online behavior: Session length—the time a user stays online. Time per page—the average time a user spends on each page during a session. Category concentration—the percentage of time a user spends at sites belonging to the most frequented category. Site Familiarity—the percentage of total session time a user spends at familiar sites, defined as those previously visited four or more times.

Targeting by Usage Occasions 7 Occasionalization Segments: 1.Quickies: users concentrate on visits to two or fewer familiar sites extracting specific bits of information or sending e-mail (duration = 1 minute). 2.Just the Facts: users look for specific information from related sites = transaction-oriented or time-consuming sites such as shopping, travel, and sports sites (duration = 9 minutes). 3.Single Mission: users want to complete a certain task or gather specific information (involve more reading), duration = 10 minutes.

Targeting by Usage Occasions 7 Occasionalization Segments: 4.Do It Again: users spend 95% of the session at familiar sites for auctions, games, investments (duration = 14 minutes). 5.Loitering: leisure visits to familiar sticky sites, such as news, gaming, and entertainment sites. (duration = 33 minutes). 6.Information Please: used to build in-depth knowledge of a topic by gathering broad information from a range of sites, typical for travel and automotive Web sites (duration = 37 minutes). 7.Surfing: 70 minutes, with few stops at familiar sites with wide, but not deep, exploration. Users gravitate to sites that grab their attention immediately, such as shopping, online communities, and news.

Why Use Occasionalization in Targeting? None of the session types was dominated by a single demographic group. Usage occasion data + demographics, online marketers: Raise the chances of communicating with their target consumers when they are paying attention to and influenced by the message. Can tailor their environments in real-time to meet the interests of the user + the occasion. By examining how the four session variables (session length, time per page, category concentration, and site familiarity) define the different segments,  A marketer can identify behavioral patterns that can help in the creation + placement of communications. Occasionalization allows marketers to reach a larger number of users more effectively by pinpointing when they are most likely to be receptive.

Reaching Users During Sessions When sessions are long:  Marketers want to post messages to generate click-throughs to their own sites as a way to build brand awareness. In Surfing occasions, user behavior is impatient, impulsive clicking.  Site or message need to be interesting to appeal to impulse users attracted to novelty. When the sessions are shorter: Users are less inclined to buy,  Click-throughs should be the goal only in very specific situations. How can marketers identify usage sessions?  Cookies are small bits of text placed on user hard drives that allow Web sites to identify users and send them the appropriate advertising.

Overview Segmentation and Targeting Overview Market Segmentation Bases and Variables Geographic Segments Important Geographic Segments for E-Marketing Demographic Segments Psychographic Segments Behavior Segments Targeting Online Customers Targeting Communities on the Internet

Targeting Online Customers Marketers must select the best potential segments for targeting: Review the market opportunity analysis, Consider findings from the SWOT analysis, Look for the best fit between the market environment and the firm’s expertise and resources. Sometimes it is easy to discover a new segment and experiment with offers that might appeal to this group Other times it is a lengthy and thorough process.  To be attractive, an online segment must be accessible through the Internet, sizable, growing, and hold great potential for profit.

Targeting Online Customers E-marketers select among 4 targeting strategy: 1.Mass marketing = undifferentiated targeting = when the firm offers one marketing mix for the entire market. 2.Multi-segment marketing = when a firm selects two or more segments and designs marketing mix strategies specifically for each. Most firms use a multi-segment strategy. 3.Niche marketing = when a firm selects one segment and develops one or more marketing mixes to meet the needs of that segment. 4.Micromarketing, = individualized targeting = when a firm tailors all or part of the marketing mix to a very small number of people. The Internet’s big promise is individualized targeting =giving individual consumers exactly what they want at the right time and place.

Overview Segmentation and Targeting Overview Market Segmentation Bases and Variables Geographic Segments Important Geographic Segments for E-Marketing Demographic Segments Psychographic Segments Behavior Segments Targeting Online Customers Targeting Communities on the Internet

The Internet is ideal for gathering people with similar interests and tasks into communities. People join communities to feel connected with others who have the following common interests: 44.8% with folks who share their hobbies; 31.5% with other professionals; 27.2% with family members; 15.7% in support groups… Targeting can be achieved by building community through online chat rooms, discussion groups, bulletin boards, and online events. Motivation: value received in both information and social bonding.  A firm needs to build and maintain the watering hole to present products and messages customized to the group’s interests.

Targeting Communities on the Internet Two of the most publicized consumer community sites include: Yahoo! GeoCities: Members build Web pages that Yahoo! hosts for free and also join in chats and bulletin board postings geocities.yahoo.com.geocities.yahoo.com Google groups provides Web access to the Usenet with over 35,000 special interest bulletin board discussion groups and 700 million community messages. Business communities also play a big role in B2B commerce.  Most professionals subscribe to discussion groups containing information in their field, and many Web sites promote community.

Targeting Communities on the Internet In discussion groups, users feel part of the site by posting their own information and responding to other users. Amazon allows users to write their own book reviews and read the reviews of others.  These kinds of Web sites encourage users to return again and again and see what their cyber friends are discussing and doing online.

E-Marketing, 3rd edition Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 9: Differentiation and Positioning Strategies © Prentice Hall 2003

Overview Differentiation of Online Businesses Channel Differentiation Service Differentiation Image Differentiation and the Customer Experience Product Differentiation Personnel Differentiation Customer Relationship Product-Service Differentiation Strategies Differentiation Strategies Site Environment/Atmospherics Tangibilize the intangible Build trust Efficient and timely order processing Pricing Customer Relationship Management Other Strategies Positioning Strategies Bases for Positioning on the Web Repositioning on the Web

Differentiation of Online Businesses Differentiation is what a company does to the product. The keys to differentiating online businesses are: The creation of a distinctive and superior customer experience, The development of one-to-one relationships with consumers. The real value added by the Internet: Ability to differentiate according to customer relationships, Provide a unique experience for each customer. Kotler: Defines “differentiation as the process of adding a set of meaningful and valued differences to distinguish the company’s offering from competitors’ offerings.” A company can differentiate its market offering along five dimensions: product, services, personnel, channel image

Differentiation of Online Businesses Offline: Differentiation emphasizes the product dimension. Online: Differentiation by product. Advantages: A greater assortment of products that companies are able to offer The ability to customize product offerings for individual customers. A powerful new avenue for differentiating by channel, services, and image.

Relative Importance of Online and Offline Differentiation Dimensions

Channel Differentiation The Internet: = a distribution channel + a communication channel + a relationship channel, Used to forge one-to-one relationships with individual customers. The Internet expands: Companies’ geographic range + business hours + assortment of products available The channel through which it can reach customers +display a diversified assortment of offerings + differentiate itself.

Channel Differentiation There are multiple levels of online channel differentiation: Product or service information online = advantage over companies with no Web presence,  Exploits the Internet as a communication channel. Commercial transactions online,  Exploits the Internets as a transaction and distribution channel. The differentiation of competitors’ Internet-related service offerings.

Service Differentiation Customer service: Ability to receive customer feedback through e-mail 24 hours a day, Ability to respond more rapidly to customer concerns. The distribution of products ordered online: A way to differentiate services from traditional companies. Online services, such as online banking and securities trading: Are becoming increasingly popular, Are differentiated both by the features they offer and the service consumption experiences. Supplement traditional offline services, but replace the traditional offline services.

Image Differentiation and the Customer Experience Image differentiation is strongly affected by the Internet. Experience branding: When a company differentiates itself by creating a unique customer experience, Increases customer loyalty & retention + produce referral business. “firms can greatly improve their ability to retain customers, target key customer segments and enhance network profitability.”

Image Differentiation and the Customer Experience Differentiation has to be built upon the ability to create huge perceptual differences from other aspects of brand positioning. The Internet’s interactivity allows companies to respond more quickly to customer requests. The ever-increasing speed of the Internet allows companies to communicate more quickly with current and potential customers  Essential to retaining current customers and attracting new ones.

Product Differentiation Product differentiation: Includes customization and bundling, Offers a combination of products/services that the individual consumer needs + at attractive prices, Supports one-to-one relationship building with each customer, critical for a company’s long-term success. Product packaging: Offline: packaging are design to appeal to consumers, be eye- catching, compete with other products on store shelves, and sell the product. Online: consumers might require products with more utilitarian packaging + products will be shipped from the distributor directly to the consumer and thus never appear on retailers’ shelves.

Product Differentiation  Results:  Products don’t need the expensive, colorful packaging for store display.  Products only need a size and shape that is functional and useful for the consumer.  Packaging minimization will reduce waste and reduce packaging costs.  Lower prices, or more reinvestment in higher-quality, single-layer packaging enhancements.

Personnel Differentiation In the past, personalized service and one-to-one relationships required the interaction of skilled personnel. Now, the Internet allows companies to “deliver their products and services through low-cost channels that automate the process and remove the expensive human element.”  Lower transaction & marketing costs = cost leadership advantage over offline companies.  Cost reduction for the end user & higher levels of service.  BUT as more companies offer products and services online, this cost advantage between online and offline operations will gradually shrink over time.

Customer Relationship The Internet has made pricing information widely available to suppliers, customers, and competitors. Reduces price differences between suppliers, Reduces the importance of price competition and increases the importance of differentiation.  Important to create brand loyalty and use the Internet to build one-to-one relationships with customers.

Customer Relationship Data mining is used to predict customer behavior+ differentiate product and service offerings for individual customers = a way of fostering the one-to-one relationship. BUT this can have the opposite effect of driving away customers who object to providing their personal preferences to companies online, or who unexpectedly find a completely different customized experience every time they visit a company Web site.  The solution = allow the customers the freedom to opt-out and remain anonymous, or to provide personal information for customization purposes.

Product-Service Differentiation Strategies Differentiation strategies: Being the first to enter the market Owning a product attribute or quality in the consumer’s mind Demonstrating product leadership Utilizing an impressive company history or heritage Supporting and demonstrating the differentiating idea Communicating the difference

Product-Service Differentiation Strategies E- marketing strategy revolves around the image and product information available on the Web. A strong brand image helps to attain “ownership” of a product. (Amazon.com),Amazon.com Customers are drawn to brands they trust, an attraction that is enhanced by a positive company history. Monster.com has essentially gained ownership of online job searches. Monster.com

Differentiation Strategies Traditional strategies still apply to e-marketing. BUT some differentiation strategies are unique to marketing on the Web: 1.Site Environnent/ Atmospherics 2.Tangibilize the Intangible 3.Trust 4.Efficiency and Timeliness 5.Pricing 6.CRM

Internet-Specific Differentiation Strategies 1. Site Environment/ Atmospherics (Watson et al. 2000) 2. Tangibilize the Intangible (Watson et al. 2000) 3. Trust  Look and feel of site  User friendly  Accurate portrayal of company and product  Images  Virtual tours  Realistic descriptions  Clearly state privacy policy  Use encryption for secure transactions 4. Efficiency and Timeliness 5. Pricing6. CRM  Deliver what is promised to customers  Deliver in a timely manner  Be aware of competitor pricing  Potential customer savings  Customer tracking  Seamless communication  Greater relationship efficiency

Site Environment/Atmospherics Atmospherics = the in-store ambiance created by brick- and-mortar retailers. Web sites can be differentiated by providing visitors with a positive environment to visit, search, purchase, and so forth. Visitors want a site that: Easily downloads, Portrays accurate information, Clearly shows the products and services offered, Is easily navigated.  If customers like the home page, they will view additional pages and ultimately become a paying customer.

Tangibilize the intangible An online product or service cannot be seen except by an image or description. The goal: make offerings seem more tangible by showing them in a realistic and customer-friendly manner, using: Virtual tours, 3-D images, Product image enlargements, Trial downloads, Customer reviews.

Build trust Trust = a key issue on the Internet: Customers are expected to pay online, Their information is tracked for personalized service or supply chain management.  Trust-building should be an integral part of a Web site’s marketing strategy. Trust may be built in as a by-product of strong brand recognition: Company sites with lower brand recognition must project a secure environment: Clearly define company’s privacy policy+ strictly enforced it Use a safe and encrypted payment process for transactions. A live person can be contacted if customers encounter problems on the Web site, require personal assistance, or need to exchange or return a purchase.

Efficient and timely order processing One of the strongest motivators for customers who make Web-based purchases is the ease of ordering.  Organizations must market their alliances and delivery timeliness as an important benefit.  By following its promises, the company will build customer loyalty + receive referrals from satisfied customers..

Pricing Pricing as a method of differentiation has come under scrutiny. When products were first offered on the Web, companies tended to offer price discounts as an incentive. Today, prices are relatively comparable on the Web.  The majority of firms are choosing to differentiate themselves using methods other than pricing.  Pricing is easy to imitate and non-price differentiation is more enduring for all but the price leaders.

Customer Relationship Management Price is less used for differentiation + barriers to entry decrease on the Internet,  customer relationship management is becoming more predominant as a means of differentiation. Netflix rent movies on DVD by mail: Customers set up personal lists of the movies they want to rent. Customers can rent three or more DVD movies at one time—with no return deadlines or late return penalties. After viewing a movie, customers slip it into the prepaid return envelope to mail it back to Netflix; a few days later, they receive the next DVD on their list.  Netflix builds customer relationships one at a time through customer-driven personalization and convenience.

Other Strategies “E-Marketing Opportunity Model” developed by Feeny helps companies define their customers and products in order to determine the degree of differentiation required. 3 e-marketing opportunities: Enhancing the selling process, Enhancing the customer buying process, Enhancing the customer usage experience. Firms use perceived product differentiation and frequency of purchase to choose the best strategies.

Positioning Strategies Positioning: Help to create a desired image for a company and its products in the minds of a chosen user segment, Concerns brands, the company itself, or individual products, Help to control brand image. The concept is simple: To be successful, a company must: Differentiate itself and its products from all others, Position itself among its competitors in the public's mind to carve out its own market niche. Positioning is the process of creating this image. A position is the resulting view of the firm or brand from the consumer perspective.

Bases for Positioning on the Web Firms can position on the basis of: Product or service attributes (“the smallest cell phone”), High-tech image (“our cell phones handle e-mail”), Benefits (“fits in your pocket”), User categories (“best cell phone for college students”), Comparison with competitors (“our phone is less expensive than the Nokia”), Take an integrator position (“a full range of electronic products and services”).

Product or Service Attribute Attributes = product or service features such as size, color, ingredients, speed, and so forth. A patented product or process, such as Amazon’s one-click check-out process, is an idea basis for positioning. iVillage allows users to build their own meal menus at its site using criteria such as ingredients and calorie counts. (www.ivillage.com) Pillsbury adds value through ideas, recipes, an advice service on its site (www.pillsbury.com).

Technology Positioning Positioning on the basis of technology shows that a firm is on the cutting. At the Lands’ End Web site:Lands’ End Women can build virtual models based on their physical features such as hair color, skin tone, hair style, and face shape. Users can then see how Lands’ End apparel would look on themselves by trying virtual outfits on the model. The model can be rotated for front, side, and back views. The American Airlines site:American Airlines Offers various tools to allow customers to manage their flight arrangements: Frequent flier account management, personalized travel planning, and personalized seat selection when booking flights. Customers can store user-profile information on preferred destinations, seating preference, companion travelers, and frequent flier rewards status and billing.

Benefit Positioning Benefits: The flip side of attributes—the customers’ perspective of what the feature will do for them. This positioning is generally a stronger basis because of its customer orientation. The Polo Web site:Polo Web Focuses on how its products shape an entire lifestyle. Its products are designed to help customers contemplate a dream world of adventure, style, and culture. The Miller Lite Beer Web site:Miller Lite Beer Offers a software package that can be downloaded and used as a social organizer for arranging meetings, mostly for entertainment. The Miller icon is then permanently present on the desktop, reminding the customer about the brand on a daily basis.

User Category This positioning relies on customer segments. It is successful when the segment has some unique quality that ties product benefits more closely to the group than to other segments. Kellogg’s: Kellogg’s The company has set up an interactive Web site for children, They can register online and enter code numbers found on Kellogg’s cereal packages, then use the codes as “money” on related Web sites or even earn interest in a “special” bank. Yahoo! Geo Cities: Yahoo! Geo Cities Hosts Web user pages that are organized into neighborhoods based on specific interests. Consumers can connect with others who share the same interests.

Competitor positioning Many firms position by touting specific benefits that provide advantages over competitive offerings. Online or offline companies often position themselves: Against an entire industry (“I Can’t Believe It’s Not Butter” margarine), Against a particular firm (Amazon.com for toys), According to relative industry position (AOL is the ISP connection leader and Earthlink a challenger).

Integrator Positioning Some companies want to be known for providing everything a consumer needs in a particular product category, industry, or even in general (e.g., Wal-Mart). This is a particularly important strategy online because busy consumers want convenience and one-stop shopping. Martha Stewart’s Web site: Brings together a wide spectrum of business units in one place, Effectively communicates the core identity of the brand—improving the quality of living in the home and encouraging do-it-yourself ingenuity, Is linked to Kmart’s site, where Martha Stewart’s branded domestics products are sold.

Positioning alone won't make a product successful. Marketers must also be sensitive to how the market perceives and views the company and the product.  Based on market feedback, a company must be flexible enough to react to those opinions by enhancing or modifying a position.

Repositioning on the Web Repositioning: Is the process of creating a new or modified brand, company, or product position. Is a long-term challenge when attempting to change the way customers perceive their brands.  Companies can easily check on progress by tracking customers' preferences and habits on the Internet. Amazon has repositioned itself within the last few years: Originally Amazon was positioned as the world’s largest bookstore. Today it promises the “Earth’s biggest selection” of a variety of products from music to electronics and more.

ELC 310 Day 11. Agenda Questions? Marketing Plans due October 26 <<<<CHANGED Should be working on them 20% of final grade We are a week behind schedule…expect.

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ELC 310 Day 11. Agenda Questions? Marketing Plans due October 26 <<<<CHANGED Should be working on them 20% of final grade We are a week behind schedule…expect.

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