segmentation, targeting, differentiation, and positioning strategies e-m arketing /6e c hapter 8

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E-MARKETING/6E CHAPTER 8

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

E-MARKETING/6ECHAPTER 8

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-2CHAPTER 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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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-3CHAPTER 8 OBJECTIVES,

CONT.

Outline several 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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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 and offer 24/7 worldwide delivery.

He used SAS data mining software to identify customer segments for better targeting. The software analyzed the clickstreams

and purchasing patterns of the firm’s 21 million customers.

THE 1-800-FLOWERS STORY

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-6THE 1-800-FLOWERS STORY,

Cont.

1-800-Flowers can respond to the segment of one person and their purchasing patterns.

The Web site’s Facebook page has nearly 500,000 likes, nearly 14,000 people talking about the site, and over 20,000 Twitter followers.

Over half of its 4.6M online customers were repeated buyers.

Why do you think better segmentation and targeting lead to reduced phone time and lower costs?

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-8SEGMENTATION &

TARGETING OVERVIEW

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. Targeting segments can include accessibility,

profitability and growth potential.

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-9 THREE MARKETS

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.

Outline the characteristics of the three major markets for e-business.

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-10THREE BASIC

MARKETS

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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) (Claritas PRIZM System)

Marketers create segments based on variables that can be used to identify and reach the right people at the right time.

MARKET SEGMENTATION BASES AND VARIABLES

List the most commonly used market segmentation bases and variables.

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-12GEOGRAPHIC SEGMENTS

Product distribution strategy is a driving force behind geographic segmentation.

Countries may be segmented based on Internet usage. China has 513M users. U.S. has 245M users.

Geographic markets may also be evaluated by rates of global Facebook and search engine adoption, language spoken, and other variables. Other countries have their own search engines

and social networks (Google.sa) Global markets require careful study

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©2014 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL

8-13TOP INTERNET LANGUAGES

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In the early years, Internet users were young, college educated males with above average income.

In developed nations, users are much like the mainstream population demographically.

Two market segments are of great interest to e-marketers. Millennials Kids

DEMOGRAPHIC SEGMENTS

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DEMOGRAPHIC SEGMENTS, CONT.

MILLENNIALS

Born between 1979 & 1994, over 95% use the Internet.

“Confident, connected, and open to change.” Skillful at multitasking and able to handle the

information overload Heavy social networking users Sleep with cell phones Live on text messages The first generation to ignore marketers Media channels used

Text, Email, Facebook , iPods, P2P Networks and Virtual worlds

This group is a marketing proving ground for the future.

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DEMOGRAPHIC SEGMENTS, CONT.KIDS

Spending power of $40 Billion Under 11 year old segment jumped to 20

million in 2011 and increasing. Under 17 online group is increasing. Online activities include:

Online gaming Homework Music Videos Email Shopping Music and game downloads Instant messaging Chat rooms

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PSYCHOGRAPHIC SEGMENTS

User psychographics include: Personality (traits; other-oriented vs self-

oriented) Values deeply held principles (e.g. religious,

and green environment beliefs) Lifestyles & Activities refer to nonproduct-

specific behavior (e.g. playing sports or eating out)

Interests & Opinions are attitudes and beliefs people hold (e.g. Facebook is waste of time, others they could not exist without e-mail)

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8-18 INTEREST COMMUNITIES

10 important types of online communities (Exhibit 8.7), including Social networking, Six degrees of separation (LinkedIn)

Three ways to target online communities. Provide online discussion groups, bulletin

boards, and events or through company-owned social network pages.

Advertise on another firm’s community site. The firm can join the community and post as a

member. Advantages & disadvantages

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Attitudes – internal evaluations about people, products, and other objects

Behaviors – what a person physically does (talking…).

Psychographic information helps e-marketers define and describe market segments.

Most 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.

ATTITUDES AND BEHAVIORS

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TECHNOGRAPHICS

Technographics – measures consumer and business attitudes toward technology by combining three variables optimistic or pessimistic toward technology Income level Primary motivation for going online Forrester identified 10 consumer

Technographics segments in the U.S. Results revealed that

Technology optimism declines with age Men are more optimistic about technology 40% of high income citizens are optimistic

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TECHNOGRAPHICS, CONT.

How these findings translate to online purchasing?1. high income optimists shop online while low-income

pessimistic not a good market 2. Early adopters: high-income technology optimists - first

consumers to shop online, while Laggards: low- income technology pessimists - last consumers to shop online.

3. Companies can use Technographics segments to profile consumers who shop online & where to allocate resources

Technographics survey results assist businesses with product development and launches, lead generations, cross-selling opportunities, customer service, and brand building.

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8-22 INFLUENTIALS

Influentials are individuals who are opinion leaders online. They include: Online journalists, such as Arianna Huffington

of The Huffington Post. Industry opinion leaders, such as Brian Solis,

author, speaker, analyst, and blogger. Influential social network authors, such as

Lady Gaga.

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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.

Product usage is applied to segmentation in many ways. 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.

BEHAVIOR SEGMENTS

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BEHAVIOR SEGMENTS, CONT.

BENEFIT SEGMENTS

The Internet offers something for everyone (information, entertainment, news, etc.), thus, design products and services to meet those needs.

This approach is more practical than demographic one

To determine benefits sought, marketers can look at what people actually do online. Online activities: connect, create, learn, enjoy, trade

and give. Marketers also check popular websites

Microsoft, Google, and Yahoo! are consistently among the top Web sites in most countries.

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BEHAVIOR SEGMENTS, CONT.

USAGE SEGMENTS

Marketers can segment according to technology-use characteristics such as smartphone, tablet, or PC and which browser they use.

Mobile access 55% of cell phone owners connect to the

internet using smartphones. 90% of smartphone users have taken an

action, such as booking a hotel, after searching.

Outline the five types of Internet usage segments and their characteristics

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BEHAVIOR SEGMENTS, CONT.

ONLINE ENGAGEMENT LEVEL

Customer Engagement Online: Users are actively participating by adding content for others to view.

Forrester categorizes social media users according to usage segments that are highly engaged online:

Creators who gather other people’s content, upload or share it.

Conversationalists Critics Collectors Joiners Spectators Inactives

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BEHAVIOR SEGMENTS, CONT.

INDUSTRY-SPECIFIC USAGE SEGMENTS

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TARGETING ONLINE CUSTOMERS

E-marketers select a targeting strategy. Which targets to serve online Which locations Other factors (catalog)

Two targeting strategies are well-suited for the internet. Niche marketing. Micromarketing (individualized

targeting).

Describe two important coverage strategies e-marketers can use to target online customers.

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TARGETING ONLINE CUSTOMERS, CONT.

Niche marketing Selecting one segment and develops one

or more marketing mixes to meet the needs of that segment (e.g. Amazon)

Can be risky because competitors may be drawn into profitable markets

Micromarketing (individualized targeting) When a firm tailors all of the marketing

mix to a very small number of people. The Internet’s big promise is individualized

targeting.

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AMA define a differential advantage1. A property of any product that is able to claim

a uniqueness over other products in its category. The differential advantage of a firm is often called its distinctive competences.

2. An advantage unique to an organization; an advantage extremely difficult to match by a competitor (economic definition).

Differentiation is what a company does to the product to convince the market that the product has specific advantages.

DIFFERENTIATION ONLINE

Define differentiation and positioning and give examples of companies using them.

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8-31DIFFERENTIATION

DIMENSIONS

A company can differentiate its offering along many dimensions, including: Product innovation Mass customization Service differentiation Customer relationship management (CRM) Personnel differentiation Channel differentiation Image differentiation Site atmospherics Efficient and timely order processing

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Positioning is a strategy to create a desired image for a company and its products in the minds of a chosen user segment.1. Determine the product category in which the brand

competes2. Determine whether the brand is differentiated in that

product category3. Tell the brand story from the consumer’s viewpoint

Examples of positioning bases online Product or service attributes Technology position Benefits position User category position Competitor position Integrator position

POSITIONING

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photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2014 Pearson Education, Inc.  Copyright © 2014 Pearson Education, Inc.  Publishing as Prentice HallPublishing as Prentice Hall