Chapter 8 Objectives

After reading Chapter 8, you will be able to:

Outline the characteristics of the three major

markets for e-business

!"plain why and how e-marketers use market

segmentation to reach online customers

#ist the most commonly used market segmentation

bases and variables

Outline five types of usage segments and their

characteristics

$escribe two important coverage strategies e-

marketers can use to target online customers
8-2
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
%&''( )earson !ducation, *nc
)ublishing as )rentice +all

, im -cCann started .-8''-/lowers as a

traditional retailer in 0ew 1ork City in .(23

*n .((4, he e"tended the brand to the

internet

+e used 5A5 data mining software to identify

customer segments for better targeting

As a result of segmentation and targeting

strategies, customer retention increased by
.46 and sales by .786 in &''7
8he .-8''-/lowers 5tory
8-2
8he .-8''-/lowers 5tory, cont
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
8-3

8he firm9s :eb site attracted .7. million

new customers and the repeat order rate
increased to ;76

*n &''3, the site had &. million monthly

visitors and <;7' million in sales

:hy do you think better segmentation and

targeting lead to reduced phone time and
lower costs=
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
5egmentation > 8argeting
Overview

-arketing segmentation is the process of

grouping individuals or businesses,
according to use, consumption, or
benefits of a product or service

-arket targeting is the process of

selecting market segments that are most
attractive to the firm
8-4
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
8hree -arkets

!"hibit 8& highlights three important markets

that both sell and buy to each other:

?usiness -arket

Online ?&? marketing is huge because more firms are

connected to the internet than consumers

@overnment -arket

8he A5 government is the world9s largest buyer

Consumer -arket

8he consumer market involves marketing goods and

services to end consumers
8-5
%&''( )earson !ducation, *nc
)ublishing as )rentice +all

@eographic location

$emographics

)sychographics

?ehavior with regard to the product

Companies can combines bases, such as

geodemographics Bgeography and
demographicsC
-arket 5egmentation ?ases and
Dariables
8-6
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
@eographic 5egments

)roduct distribution strategy is a driving force

behind geographic segmentation

Countries may be segmented based on

internet usage

A5 has .83 million users B3;6 of the

populationC

China has (43 million users

, apan has 22( million users

@eographic markets may also be evaluated by

infrastructure variables

#anguage spoken may also be a variable

8-7
%&''( )earson !ducation, *nc
)ublishing as )rentice +all

*n developed nations, users are much like the

mainstream population demographically

8he heaviest internet penetration in &''8 includes

.8 to &(-year-olds, who are white, live in urban or
suburban areas, earn <4','''E, and have high
education

8hree market segments are of great interest to e-

marketers

-illenials

Fids

Online opinion leaders

$emographic 5egments
8-8
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
-illenials

Of those born between .(2( and .((;, over

('6 use the internet

8hey grew up with the internet

8'6 have cell phones and 736 use te"t

messaging

-ost have broadband for downloading music

and watching videos online

8his group is a proving ground for the future

8-9
Fids
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
8-10

8he number of kids under .3 online is

increasing

8hey have spending power of <;' billion

Fids 8-.& do a number of activities online:

Online games B2'6C

#ook up information for homework B486C

Ase a search engine B;86C

Gead or send e-mail B7;6C

:atch online videos or movie trailers B&86C

%&''( )earson !ducation, *nc
)ublishing as )rentice +all
!thnic @roups

+ispanics, African Americans, and Asians are

important online markets

2(6 of +ispanics use the internet

8hey view .46 more :eb pages and spend (6 more

online than the average internet user

African Americans are one of the largest and fast

growing ethnic groups online

8hey have a 436 rate of adoption and tend to be

younger, more highly educated, and more affluent
than African Americans not using the internet

-ore than half of Chinese Americans have

internet access and high purchasing power
8-11
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
*nfluentials

*nfluentials are individuals who influence

others, driving change in America

Gepresent .'6 of the population and .46 of

internet users

8&6 of influentials have internet access,

compared with 3;6 of the general A5
population

8hey serve as opinion leaders for the rest of

the population
8-12
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
)sychographic 5egments

Aser psychographics include:

)ersonality

Dalues

#ifestyles

Activities

*nterests

Opinions
8-13
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
*nterest Communities

*nterest communities attract like-minded

individuals who post comments on :eb sites or
send e-mails to other members

5ocial networking is perhaps the most important type

!"hibit 88 lists .' important types of online

communities

8here are several ways to target online

communities

)rovide online chats, bulletin boards, and events

Advertise on another firm9s community site

8he firm can join the community and post as a

member
8-14
%&''( )earson !ducation, *nc
)ublishing as )rentice +all

-ost marketers believe that demographics

cannot predict who will purchase online or
offline

5ome marketers believe that a segment9s

attitudes toward technology can help
determine buying behavior

/orrester Gesearch measures attitudes toward

technology with a system called 8echnographicsH

/orrester identified .' consumer 8echnographics

segments in the A5 B!"hibit 8.'C
Attitudes and ?ehaviors
8-15
%&''( )earson !ducation, *nc
)ublishing as )rentice +all

8wo common segmentation variables are

benefits sought and product usage

-arketers using benefit segmentation form

groups of consumers based on the benefits they
desire from product

-arketers often segment by light, medium, and

heavy product usage

-arketers can segment users as brand loyal,

loyal to a competitive product, switchers, and
nonusers
?ehavior 5egments
8-16
?enefit 5egments
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
8-17

8o determine benefits sought, marketers can look

at what people actually do online

Online activities

)opular :eb sites

/or e"ample, travel benefits sought can include:

Ability to check flights, hotels, and car rentals

8ravel destination information

8ravel bulletins and alerts

ChatIforum areas
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
Asage 5egments

-arketers can segment according to how

consumers use the internet

+ome and work access

426 of all A5 users have broadband connectivity at

home

!stimated 3(2 million users at workJ &.27 million

from home

Access speed

0early 8'6 of broadband users will watch a video

online

Online engagement level

!"hibit 8.7

*ndustry-specific usage segments

8-18
%&''( )earson !ducation, *nc
)ublishing as )rentice +all
8argeting Online Customers

!-marketers select a targeting strategy

:hich targets to serve online

:hich locations

Other factors

8wo targeting strategies are well-suited for the

internet

0iche marketing

-icromarketing

8he internet9s big promise is individualiKed

targeting
8-19