E-Marketing, 3rd

edition
Judy Strauss, Adel I. El-Ansary, and Raymond
Frost

Chapter 8: Targeting Market

Segments and Communities

© Prentice Hall 2003

 Segmentation and Targeting
Overview
 Companies need to clearly understand the needs
and behavior of its target market. It must have in-
depth:


Market knowledge,

A savvy segmentation,

Targeting strategy.

 E-marketing strategic planning occurs in two

highly interrelated tiers:


The first tier = segmentation, targeting,
differentiation, and positioning,

Second tier = the 4Ps and CRM.
 Segmentation and Targeting
Overview

 Marketing segmentation = the process of

aggregating individuals or businesses along
similar characteristics that pertain to the use,
consumption, or benefits of a product or service.

 Targeting = the process of selecting the market

segments that are most attractive to the firm and
selecting an appropriate segment coverage
strategy.
 S Internal Data Secondary Data Primary Data
Information: consumer behavior, competitive intelligence

D Product Customer/ Other Data/

Database Prospect Base Information

*Marketing Knowledge*

Tier 1 Tier 2

S Segmentation Marketing Performance

Targeting Mix Metrics
Differentiation CRM
Positioning

Sources, Databases, and Strategy: Tier 1 Strategies

 Market Segmentation Bases and
Variables
 Marketers can base their segmentation of
consumer markets on:


Demographics,

Geographic location,

Psychographics,

Behavior with regard to the product.

 Within each base, there are many sub categories.

 Market Segmentation Bases and
Variables
 Companies create segments:

Combining bases + focus on categories =
geodemographics.

Using any combination of variables that makes
sense for their industry.

That can be used to identify and reach the right
people at the right time.

Using any of these four bases alone or in
combination + many other variables.

 To know which variables broadly identify the target

segment + which simply further describe it
because marketers use identification variables to
enumerate and access the target.
Bases Geographics Demographic Psychographics Behavior
s
Identifying / City Age Activities Benefits
Profiling County Income Interests sought
Variable State Gender Opinions Usage level
Examples Region Education Personality Brand
Country Ethnicity Values loyalty
User status

Segmentation Bases and Examples of Related Variables

 Geographic Segments
 Geographic location of computers is not important to users
accessing Web sites, but it is very important to
organizations with an Internet presence.

 Most firms target specific cities, regions, states, or countries

with their product offerings
= develop multisegment strategies based on geographics.

 Product distribution strategy is a driving force behind

geographic segmentation:

Companies want to reach only customers in countries where it
distributes products.

Firms offering services online will only sell to geographic areas
where they can provide customer service.

Companies must examine the proportion of Net users in its
selected geographic targets before deciding to serve the Web
community.
 Posadas:
• The leading hotel chain in Mexico,
• Targets tourists in Mexican and United States markets.
• Focuses heavily on the U. S. market and built its first site for the
United States because it recognized that Internet penetration was
much higher.

Fiesta Americana Site in Spanish and English Source: [Link]

 Important Geographic Segments

for E-Marketing
 The United States = the largest Internet usage in the world.
 10 other country markets have more than 40% Internet
penetration.
= 11 countries represent good markets for new technology.

 E-marketers use geographic variables for segmentation also

evaluate online markets by region, city, urban area, and so
forth.

 The quality of a country’s market is evaluated using additional

criteria: infrastructure variables designed to predict their ability
to access and absorb information technology: computer
adoption, information, Internet, social.

 In 2001, Sweden and Norway held the top two positions as the
world’s dominant information economies because of a high
mobile Internet access.
 Percent of Percent of
Population Population
Internet Internet
Rank Country Users Rank Country Users
1 United States 64.0 6 United Kingdom 48.7
2 Iceland 60.1 7 Switzerland 46.6
3 Hong Kong 54.2 8 Canada 44.9
4 Sweden 49.4 9 The Netherlands 42.5
5 Norway 48.9 10 Finland 41.3
11 Japan 40.5

Country Markets With Over 40% Internet User Penetration

 Important Geographic Segments

for E-Marketing
 English is no longer the language of most Web pages and
online bulletin boards, a major change from just two years
ago.

 Top Internet languages:


English (42%),

Japanese (9%),

Chinese (9%),

Spanish (7%),

German (7%).

 Huge implications for e-marketers desiring to reach global

markets via the Internet
 Until more online text appears in local languages, users in
those countries will not able to participate in e-commerce or
other online activities.
 Portuguese
3% Other
Italian 9%
Korean 4%
5%
Dutch
2% English
Chinese 42%
9%
French
3%

Spanish
German Japanese
7%
7% 9%

Less Than Half of Web Users Access in English

Source: Adapted from Cutitta (2002)
 Demographic Segments
 In the Internet’s early years, the typical user was:
 A young male, college educated, with a high income = an
innovator.
 Now, this is true in countries with low levels of Internet
adoption.

 In developed nations,
 76% of U.S. users are 18-49 years old,
 The annual average household income: about $50,000,
 The population is almost equally divided by gender.

 Knowing that U. S. Internet users mirror the

population, marketers need to identify attractive
demographic niches.
 Occupation

 Few years ago, the Internet = a place for the

technologically- and financially-savvy.

 Today = a place where U.S. residents from all

professions find something of use.

 Huge implications for e-commerce and

advertising, and big changes are still taking place.
 Occupation
 Blue-collar workers:

Are currently the fastest growing online occupational
group in the U.S.

This group is busy surfing and exploring,

Represent a major marketing opportunity because
segment members have not yet developed site loyalty
and have some different product and entertainment
needs from users in other professions.

 Other fast growing occupational groups include

homemakers (49%), service workers (37%), and salespeople
(34%).

 E-marketers can use such facts about occupational

segments online as information and then knowledge to drive
e-marketing strategy.
 Teens and Children
 In the US, 75% of 14-17 year olds + 65% of 10-13
year olds use the Internet:


= “The Net Generation” or Generation Y,

= One of the fastest-growing online niches.

12-17 year old: send e-mail (81%), instant
messages (70%), play games, and purchase
music, tickets, and videos.

58% use the Internet for homework,

Teens’ repeated requests for online access is
what leads families into computer and ISP
purchases.
 Teens and Children
 Driving future growth in this market is the fact
that 95% of all U.S. schools now have Internet
access.

 This market:

Is not impressed with brand names online;

wants utility + particular activities.

 Teens spread the news through online word of

mouth (viral marketing).
 38% of teens share their online findings with
friends = a great marketing opportunity.
 Teens and Children
 One big problem = payment:

They do not have credit cards for online purchases (only 12%
have purchased online).

Some are allowed to use their parents’ credit cards.

Those over 16 years of age can obtain a debit card.

Innovative approaches such as “Splash Plastic” prepaid cards or
“cyber allowance” accounts deposited at designated online
retailers have emerged.

 Important characteristics of this market = the need to be

honest about marketing tactics: revealing the motives
behind asking for personal information.

 Teens are eager to play online games, download music and

movies, and sign up for sales promotion premiums and free
samples.
 Ethnic Groups
 African Americans:

One of the largest and most quickly growing ethnic groups
online in the United States.

Tend to be younger, more highly educated, and affluent.

Are heavy purchasers of music online and buy less clothing and
travel.

Go online from academic and public locations and are less likely
to register at Web sites.

 Hispanics:

A huge segment with 14.5 million users + 19-26% growth rate.

55% use the Spanish language when online = a market with
unique needs in the US.

Miami-Fort Lauderdale, Florida is the 15th largest market
overall, but 3rd largest for Hispanic Web users.

Hispanics who use the Internet outspend those non-users by a
margin of 7%, a statistic that has caught the eye of marketers.
 Ethnic Groups

 Chinese-Americans:

 More than 50% have Internet access,

 65% of those are online everyday,
 Purchase books, computer products and
electronics online and enjoy a large purchasing
power—the average income is $69,000.
 Differently Abled
= “The Internet’s next niche” :
 Spend 20 more hours a week online than other
Internet users.
 Fifty-four million U.S. consumers have
disabilities, health problems, or handicaps that
prevent full participation in work, school, or
housework.
 Web accessibility guidelines exist to
accommodate disabled people.
 BUT this segment is a demographically diverse
group, and tend to have low incomes, making
them difficult and undesirable targets for some
firms.
 Differently Abled

 Why do marketers target this segment, despite its

low income and accessibility challenges?

 Social values of full accessibility and potential legal action.

 To draw a larger consumer audience.
 The huge baby boomer group is headed for some of these
problems as they reach age 65 and older.
 This market can be a productive target: The 2000
Paralympic Games from Australia last fall experienced
good traffic.
 Most importantly, a market consisting of 54 million
Americans has a great deal of purchasing power.
 Psychographic Segments
 User psychographics include:
 Personality: Traits (other-oriented / self-
oriented)
and habits,
 Values: Deeply held convictions (religious
beliefs),

 Lifestyle: Non-product-related behavior

 Activities: (playing sports or eating out),

 Interests: Attitudes and beliefs people hold.

 Opinions:
 Attitudes And Behaviors
How do attitudes and behavior differ?

 Attitudes:


Internal evaluations about people, products,
and other objects,


Either positive or negative,


The evaluation process occurs inside a person’s
head.
 Attitudes And Behaviors
 Behavior:

Refers to what a person physically does (calling a
1-800 number to order, shopping, or purchasing
a product),

Product behaviors are such a vital segment
descriptor that they form an entirely separate
category.

 Psychographics:

The general ways that consumers spend time,

Help e-marketers define and describe market
segments so they can better meet consumer
needs,

Important for Web page design.
 Attitudes Toward Technology

 Marketers believe that demographics are not

helpful in predicting who will purchase online.

 BUT it is important to know which demographic

target is online.

 The segment’s attitudes toward technology

determine whether or not these users will buy
when they surf the Web.
 Attitudes Toward Technology

 Forrester Research measures consumer and

business attitudes toward technology.

 The system, Technographics, works by combining

three specific variables:

1. Determine if a person is optimistic or pessimistic

toward technology,
2. Measure a user’s income level ( important
determinant of online shopping behavior),
3. Query users about their primary motivation for
going online.
 Attitudes Toward Technology
Examples of the 10 consumer technographics
segments in the United States:
Fast Forwards the biggest users of business software

New Age the most ignored group of technology

Nurturers consumers
Gadget Grabbers buy low cost, high-tech toys such as Nintendo

Traditionalists use VCRs but not much more

Media Junkies love TV and are early adopters of satellite

television
 Motivation for Using Internet

Career Family Entertainment

Technology High Fast Forwards New Age Mouse Potatoes

Optimists Income 12% Nurturers 9%
52% (>$40,000) 8%
Low Techno-Strivers Digital Hopefuls Gadget Grabbers
Income 7% 7% 9%
(<$40,000)
Technology High Handshakers Traditionalists Media Junkies
Pessimists Income 7% 8% 5%
48% Low Sidelined Citizens 28%
Income

Consumer Technographic Segments and Proportion in the United States

Source: Adapted from Modahl (2000)
 Attitudes Toward Technology
Forrester’s research revealed some interesting
findings:

 Technology optimism declines with age:


Older users tend to have a more negative attitude toward
technology,

Their attitudes may be less negative if they use a PC at
work or live in one of the largest 50 U.S. cities,
 Men tend to be more optimistic,
 Peer pressure can increase optimism in all
demographic groups,
 Income:

40% of high-income citizens are optimistic,

Certain low-income groups such as college students and
young families are also optimistic about technology.
 Attitudes Toward Technology
How do these findings translate to online purchasing?

 Twice as many high-income optimists shop online (19%)

compared with other groups.
 Only 2% of low-income pessimists shop online and,
therefore, are not a good target for e-commerce firms.

 Combining Technographics with adopter categories,


Early adopters = high-income technology optimists = the first
consumers to shop online.

Laggards = low-income pessimists = last to shop online.

 Technographic segments can be used to profile customers

who shop online and to determine where to allocate
resources to attract more of the same.
 Behavior Segments
Two behavioral segmentation variables are:

 Benefit segmentation: form groups of consumers based

on the benefits they desire from the product.

“70% of online shoppers can be segmented into two groups:


Bargain hunters: includes Hooked, Online & Single (16%),
Hunter-Gatherers (20%)

Convenience shoppers: includes Time-Sensitive Materialists
(17%), brand loyalists (19%), E-Bivalent Newbies (5%), and
Clicks & Mortars (23%).”

 Product usage:

Light, medium and heavy product usage.

Brand loyal, loyal to the competitive product, switchers (who
don’t care which brand they use), and nonusers of the product.
 Benefit Segments
 On the Internet, there is something for everyone:
information, entertainment, news, social meeting
places, and more.

 Marketers form segments based on the benefits

sought by users to design products to meet those
needs.

 What better way to determine benefits sought than

to look at what people actually do online?

Check which Web sites are the most popular.

Sites report monthly on the top online properties displays
the top Web site parent companies.

AOL, MSN, and Yahoo! are consistently among the top sites
in most countries.
 Benefit Segments
 Commonly used segmentation variables:

 E-mail: 8 billion e-mails flying over the Internet

worldwide.
 Shop.
 Information search.
 Online stock trading and online banking.
Online banking has a high usage but online
stock trading is quite active.

Streamies: People who listen to online audio.
 • Rank • Parent Company Millions of
• Percent Reach of
•

Visitors all Users

• 1 Microsoft 39.4 50.7
• 2 AOL Time Warner 37.2 47.9
• 3 Yahoo! 33.8 43.5
• 4 Google 10.9 14.0
• 5 eBay 9.0 11.5
• 6 Terra Lycos 8.0 10.3
• 7 About-Primedia 7.3 9.4
• 8 Amazon 7.1 9.2
• 9 The Gator Corporation 6.0 7.6
• 10 USA Network 5.3 6.8

Top Web Properties in June 30, 2002 Source: Data from [Link]
 Usage Segments
 E-marketers:

Identify segments according to how users
behave and use the Internet.

Profile the segments by user characteristics,
geographical location, and so on.

Difference between usage-based

segmentation and user-based
segmentation
= when users shop online:

sometimes they browse aimlessly,

but sometimes they have a specific goal.
 Home and Work Access
Segmentation by access point is important because the needs
are different:

 Home:

80% of home users have slow connection speeds, making large
graphics and other files undesirable on sites frequented from
home.

A small but growing number of households have more than one
PC and are networking them within the home.

 Work:

42 million U.S. users access the Internet from work.

People spend nearly twice as much overall time online than
those who access only from home.

The audiences in all countries are much more heavily male.
 Home and Work Access
 The most popular sites for U.S. at-work access
follow:

Telecom or Internet services (29.7 million visitors)

Finance, insurance, or investment (21.2 million visitors)

Travel (18.4 million visitors)

Corporate information (14.6 million visitors)

Special occasions such as greeting cards, gifts or flowers
(14.1 million visitors)

 E-marketing strategists can use such information to

target their Web site offerings.

 Strategies might include special products, the

language in sites, and the amount of interactivity
and multimedia possible for work users.
 Access Speed
 The type of Internet connection + the information
receiving appliance both affect usage behavior.
Faster connections at work allow users to receive
larger data files filled with multimedia content.

20% of the U.S. population has broadband Internet access
from home (21.9 million).

25.5 million office broadband users (60%).

 Home users:

Are connected through ISPs offering cable modems and
DSL (satellite).

Cost is still a barrier for many home users.

Broadband penetration is nearly high enough to reach the
critical mass needed for true video and audio program
delivery on demand. This will certainly change the face of
the Web.
 Access Speed
 Broadband users operate differently from
narrowband users online. They:
 Play audio CD’s (75%),
 Play online games (60%),
 Download music (48%),
 Watch streaming video or DVD’s (67%).
 Mobile wireless users have very small screens and slow
access speed.

 About 200 million wireless devices were in use

during 2001 = hard for marketers to resist!
 13.1 million PDAs (personal digital assistants)
 The majority of the other 187 million devices are cell
phones.
 Access Speed
 Wireless users do a lot more than talk on their cell phones. They send
and receive data—anyplace, anytime:

E-mail and voice mail,

Online banking,

Access Internet,

Track information on package shipment, stock quotes, airline schedules and
changes, and news.

 Wireless devices cannot access typical Web pages on their tiny screens
 Site developers have a mobile viewing mode and a regular viewing
mode.
 The mobile mode = 100% text and serves precise information on
demand.

 The mobile wireless segment = huge opportunities for firms wanting to

produce wireless portals: a customized point of entry to the Net where
subscribers can access Web sites and information in text format.

 Big technical problems BUT the market is unstoppable and will grow
considerably.
 Data Data Service
Activity Service % Activity %
E-mail, Fax, Voice mail 30 Mobile office 7

Online banking 15 Telemetry 5

Location dependent 15 Games 3

information services

Internet access/surf 13 Payments 1

simple info services 10 Telematics (in car) 1

2002 Predicted Revenue Proportion for Data Type on Mobile Devices Worldwide Source: Fichter (2001)
 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.
 Segment Important Facts Online Time
50% of total online purchases. 7 hours per month.
Simplifiers 49% have been online for over 5 years.
Longest online tenure.

8% of active user population. More than the average 9.8 hours per
Surfers 32% of online time usage—far more than month.
any other segment.

36% active user population. Less than the average of 9.8 per
40% have been online under two years. month.
Connectors 42% have made online purchases.

8% of active user population Less than the average of 9.8 per

Bargainers 52% are eBay users month.

6% have purchased online. 9.8 hours per month.

Routiners They visit fewer domains.

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.
 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.
 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 [Link].

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.
Yahoo! Games: Chess
Source: [Link]. Reproduced with permission of Yahoo! Inc.
© 2000 by Yahoo! Inc. YAHOO! and the YAHOO! logo are trademarks of Yahoo! Inc.