Chapter 8 ObjectivesThe 1-800-Flowers StoryThe 1-800-Flowers Story, cont.Segmentation & Targeting OverviewThree MarketsMarket Segmentation Bases and VariablesGeographic SegmentsDemographic SegmentsMillenialsKidsEthnic GroupsInfluentialsPsychographic SegmentsInterest CommunitiesAttitudes and BehaviorsBehavior SegmentsBenefit SegmentsUsage SegmentsTargeting Online CustomersChapter 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.Outline five types of usage segments and their characteristics.Describe two important coverage strategies e-marketers can use to target online customers.8-2©2009 Pearson Education, Inc. Publishing as Prentice Hall©2009 Pearson Education, Inc. Publishing as Prentice Hall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.As a result of segmentation and targeting strategies, customer retention increased by 15% and sales by 13.8% in 2003.The 1-800-Flowers Story8-2The 1-800-Flowers Story, cont.©2009 Pearson Education, Inc. Publishing as Prentice Hall8-3The firm’s Web site attracted 13.1 million new customers and the repeat order rate increased to 43%.In 2006, the site had 2.1 million monthly visitors and $430 million in sales.Why do you think better segmentation and targeting lead to reduced phone time and lower costs?©2009 Pearson Education, Inc. Publishing as Prentice HallSegmentation & 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.8-4©2009 Pearson Education, Inc. Publishing as Prentice HallThree MarketsExhibit 8.2 highlights three important markets that both sell and buy to each other:Business MarketOnline B2B marketing is huge because more firms are connected to the internet than consumers.Government MarketThe U.S. government is the world’s largest buyer.Consumer MarketThe consumer market involves marketing goods and services to end consumers.8-5©2009 Pearson Education, Inc. Publishing as Prentice HallGeographic locationDemographicsPsychographicsBehavior with regard to the productCompanies can combines bases, such as geodemographics (geography and demographics)Market Segmentation Bases and Variables8-6©2009 Pearson Education, Inc. Publishing as Prentice HallGeographic SegmentsProduct distribution strategy is a driving force behind geographic segmentation.Countries may be segmented based on internet usage.U.S. has 186 million users (64% of the population).China has 95.6 million users.Japan has 77.9 million users.Geographic markets may also be evaluated by infrastructure variables.Language spoken may also be a variable.8-7©2009 Pearson Education, Inc. Publishing as Prentice HallIn developed nations, users are much like the mainstream population demographically.The heaviest internet penetration in 2008 includes 18 to 29-year-olds, who are white, live in urban or suburban areas, earn $50,000+, and have high education.Three market segments are of great interest to e-marketers.MillenialsKidsOnline opinion leadersDemographic Segments8-8©2009 Pearson Education, Inc. Publishing as Prentice HallMillenialsOf those born between 1979 and 1994, over 90% use the internet.They grew up with the internet.80% have cell phones and 36% use text messaging.Most have broadband for downloading music and watching videos online.This group is a proving ground for the future.8-9Kids©2009 Pearson Education, Inc. Publishing as Prentice Hall8-10The number of kids under 16 online is increasing.They have spending power of $40 billion.Kids 8-12 do a number of activities online:Online games (70%)Look up information for homework (58%)Use a search engine (48%)Read or send e-mail (34%)Watch online videos or movie trailers (28%)©2009 Pearson Education, Inc. Publishing as Prentice HallEthnic GroupsHispanics, African Americans, and Asians are important online markets.79% of Hispanics use the internet.They view 15% more Web pages and spend 9% more online than the average internet user.African Americans are one of the largest and fast growing ethnic groups online.They have a 56% rate of adoption and tend to be younger, more highly educated, and more affluent than African Americans not using the internet.More than half of Chinese Americans have internet access and high purchasing power.8-11©2009 Pearson Education, Inc. Publishing as Prentice HallInfluentialsInfluentials are individuals who influence others, driving change in America.Represent 10% of the population and 15% of internet users.82% of influentials have internet access, compared with 64% of the general U.S. population.They serve as opinion leaders for the rest of the population.8-12©2009 Pearson Education, Inc. Publishing as Prentice HallPsychographic SegmentsUser psychographics include: Personality Values Lifestyles Activities Interests Opinions8-13©2009 Pearson Education, Inc. Publishing as Prentice HallInterest CommunitiesInterest communities attract like-minded individuals who post comments on Web sites or send e-mails to other members.Social networking is perhaps the most important type.Exhibit 8.8 lists 10 important types of online communities.There are several ways to target online communities.Provide online chats, bulletin boards, and events.Advertise on another firm’s community site.The firm can join the community and post as a member.8-14©2009 Pearson Education, Inc. Publishing as Prentice HallMost marketers believe that demographics cannot predict who will purchase online or offline.Some 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™.Forrester identified 10 consumer Technographics segments in the U.S. (Exhibit 8.10).Attitudes and