SEGMENTATION

INTERNET MARKETING 15.823PROF. GLEN L. URBAN

SPRING 2001

OUTLINE

• REVIEW OF SEGMENTATION – BASES– METHODS

• LEVELS OF SEGMENTATION– GLOBAL– LOCAL– ONE TO ONE --PERSONALIZATION

• CONSUMER RELATIONSHIP MANAGEMENT

WHY SEGMENT MARKETS

WHY SEGMENT• Preference Heterogeneity• Balance Versus Costs

– Variety versus Production• INTERNET -- Some Costs Down

– communicate individually– Interface customization

• Some Costs not Changed– Physical Production/Inventory– Software -- Service Design

DECISION

• Segment or Not? Low Cost or Custom• Basis of Segmentation -- Many Choices• Level of Segmentation -- Big Enough• Common versus Segment Attributes --

Product/Service or Communication

On Line Trading

• eTrade?• MLPFS• Bridge Trader

TRADITIONAL BASES OF SEGMENTATION

• Demographics• Attitudes -- Psychographics• Preferences

– products - like similar things– attribute importances -- benefit segmentation

• Uses -- Intensity (Heavy/Light)

TOP

RIGHT SIDE

LEFT SIDE

FRONTVIEW

EXAMPLES

• PRIZM• VALS

PRIZM

USA census

1000 measures -- 34 factors -- 5 domains

education and affluence

family life cycle

mobility

ethnicity

housing stock & urban

cluster ZIP areas

12 and 40 cluster

link to other zip data

consumption

PRIZMTHE 1980 ZIP CLUSTER MODEL

TWELVE ZIP-CLUSTER GROUPS, IN DESCENDING ZQ RANK

Group Codes Group Titles

S1 Educated, Affluent Executives & Professionals in Elite Metro Suburbs

S2 Pre & Post-Child Families & Singles In Upscale, White-Collar Suburbs

S3 Upper-Middle, Child-Raising Families In Outlying, Owner-Occupied Suburbs

U1 Educated, White-Collar Singles & Ethnics in Upscale, Urban Areas

T1 Educated, Young, Mobile Families In Exurban Satellites & Boom Towns

S4 Middle-Class, Post-Child Families In Aging Suburbs & Retirement Areas

T2 Mid-Class, Child-Raising, Blue-Collar Families In Remote Suburbs & Towns

U2 Mid-Class Immigrants & Minorities In Dense, Urban Row & Hi-Rise Areas

R1 Rural Towns & Villages Amidst Farms & Ranches Across Agrarian Mid-America

T3 Mixed Gentry & Blue-Collar Labor In Lo-Mid Rustic, Mill & Factory Towns

R2 Mixed Whites, Blacks, Spanish & Indians In Poor Rural Towns & Farms

U3 Mixed Blacks, Spanish & Immigrants In Aging, Urban Row & Hi-Rise Areas

43 LIFE STYLE QUESTIONS

• My idea of fun at a national park would be to stay at an expensive lodge and dress up for dinner

• I could stand to skin a dead animal• 1 to 7 agree --disagree scales• cluster • describe average person in cluster

Actualizers. These consumers have the highest incomes and such high self-esteem and abundant resourcesthat they can indulge in any or all self-orientations. They are located above the rectangle. Image isimportant to them as an expression of their taste, independence, and character. Their consumer choices aredirected toward the finer things in life.

Fulfilleds. These consumers are the high resource group of those who are principle-oriented. They aremature, responsible, well-educated professionals. Their leisure activities center on their homes, but theyare well-informed about what goes on in the world and they are open to new ideas and social change. Theyhave high incomes but are practical consumers.

Believers. These consumers are the low resource group of those who are principle-oriented. They areconservative and predictable consumers who favor American products and established brands. Their livesare centered on family, church, community, and the nation. They have modest incomes.

Achievers. These consumers are the high-resource group of those who are status-oriented. They aresuccessful, work-oriented people who get their satisfaction from their jobs and families. They arepolitically conservative and respect authority and the status quo. They favor established products andservices that show off their success to their peers.

Strivers. These consumers are the low-resource group of those who are status-oriented. They have valuesvery similar to Achievers but have fewer economic, social, and psychological resources. Style is extremelyimportant to them as they strive to emulate people they admire and wish to be like.

Experiencers. These consumers are the high-resource group of those who are action-oriented. They arethe youngest of all the segments with a median age of 25. They have a lot of energy, which they pour intophysical exercise and social activities. They are avid consumers, spending heavily on clothing, fast foods,music, and other youthful favorites—with particular emphasis on new products and services.

Makers. These consumers are the low resource group of those who are action-oriented. They are praticalpeople who value self-sufficiency. They are focused on the familiar—family, work, and phyusicalrecreation—and have little interest in the broader world. As consumers, they appreciate practical andfunctional products.

Strugglers. These consumers have the lowest incomes. They have too few resources to be included in anyconsumer self-orientation and are thus located below the rectangle. They are the oldest of all the segmentswith a median age of 61. Within their limited means, they tend to be brand-loyal consumers.

Source: Martha Farnsworth Riche, “Psychographics for the 199,” American Demographics, July 1989, pp. 24-26ff.

VALS2 GROUPS

• Actualizers• Fulfilleds• Believers• Achievers• Strivers• Experiencers• Makers• Strugglers

Levels of segmentation

• Global• Country• Local• Individual

EXAMPLES

• Surgua -- SE Bank• Wine.com -- California Wines• Lycos/Terra Case• Yahoo.Boston -- Local Audience• Personalization

LOCAL AUDIENCE

• Like Minded Individuals• Affinity• Targeted commerce• Segments

– local residents– college student– new comers– Tourists– Business Travelers– Displaced/relocated natives

Personalization

• Screen Layout• Targeted Marketing• Permissive Marketing

– ads– brochures/info

• Recommendations– Advisors– Intelligent Agents

• Mass Customization

CUSTOMER RELATIONSHIP MANAGEMENT

• Organize Data• Profiling -- algorithms • Rules Engine• Delivery -- Communication/promotion• Measurement• Learning

TAKEAWAY

• Segmentation Art– Basis– Level

• Segmentation Science– Profiling– Rules Engines

• CRM -- Case Prime Response