This essay explores the idea that the use of e-marketing means that segmentation is no longer relevant. This statement is discussed in relation to organisations that use e-marketing to complement traditional marketing strategies and in the context of 1:1 marketing.
It is emphasised that e-marketing is not limited to the internet. Although a number of examples in the essay involve the internet, the same basic principles apply in relation to the other e-resources an organisation can use.
Traditionally, a firm can choose from 3 different marketing coverages. These are mass marketing, multi-segment marketing and niche marketing (Strauss, 2001). The evidence in the literature is overwhelming that segmentation still has a central role to play. The reasons for this include that segmentation enables an organisation to:
* group people and organisations with similar needs
* define marketing objectives
* allocate resources and evaluation (Study Guide, 2001).
In addition to the 3 traditional marketing coverages, more recently individualised or 1:1 marketing is being used by organisations. 1:1 marketing involves customising a product offering for individual customers. The very nature of targeting individuals seems to make segmentation no longer relevant. However, it is clear that this is only correct in part and that segmentation still has a significant role to play in 1:1 marketing.
This essay will first discuss segment action in the context of the 3 traditional marketing coverages.
Different ways to segment markets in an e-marketing context include using:
* cultural differences (Chaffey, 2000)
* lifestyle-type segmentation. (Bickerton, 1996), (Morgan 2002)
* behavioural traits (Lewis, 1997)
* the customer’s stage of the buying decision process (Berthon, 1998)
* motivational factors (Kotler, 2000)
The table below analyses a car maker’s website and Maslow’s hierarchy of needs that are being targeted.
Maslow’s hierarchy of needs being targeted
The Study Guide suggests that Volvo targets safety and not self-actualisation. I would disagree with that comment and suggest that text such as ‘Half the fun of skiing, climbing and mountain biking will now be getting there’, is targeted at the self-esteem/self-actualisation type of claim. This reflects the overall repositioning of the brand in recent years.
Self-esteem/self-actualisation type of claim.
The Study guide suggests that the new ‘rules’ for e-marketing in comparison to traditional marketing (Study Guide, 2002), will include:
* a shift from the seller to the buyer
* death of distance
* marketing deconstruction
* increased interactivity
These new rules will strengthen the need to segment markets as organisations will need to continue to improve their ability to meet customer needs in an increasingly competitive environment in many markets. It could be suggested that the e-marketing environment as a whole will become more segmented over time in this environment.
In terms of 1:1 marketing, Coupey suggests that firms’ strategies should be focussed on developing unique, sustained relationships with individual customers (Coupey, 2001), (Chaffey, 2001), (James, 2000). E-resources are likely to play an important role in 1:1 marketing because they can facilitate customised interaction between marketers and customers (Weaver, 2001).
The relevance of segmentation to 1:1 marketing will be discussed first in terms of its role in initially targeting people and later in terms of its role in managing the 1:1 relationship with existing customers.
The first step to achieving personalisation via the web is to initially attract customers (Chaffey, 2000). Although personalisation can occur once a relationship is established with a customer, target marketing is needed to attract them initially. With the proliferation of e-communications it is important for organisations to hold a defined market position. It is not possible to develop such an image if the organisation does not target particular customers.
As the e-market place becomes increasingly crowded, the establishment of a new brand becomes increasingly difficult. Very large resources are required to establish major new brands brand using both traditional and e-marketing activities. Some organisations, such as amazon.com, were able to achieve first mover advantage. However, the bursting of the dot com bubble clearly showed that an early mover advantage only brought success to those organisations that had a workable business model.
A number of existing brands have an advantage because they have an existing market position (Klein, 1996), (Kane, 1999). These are known as the ‘brick and clicks’.
Therefore, it appears certain that, in the context of 1:1 marketing, segmentation will continue to play a major role in targeting new customers because it will be highly unlikely that all businesses could be all things to all people. It is also important to consider that there are only approximately 200 million users of the web worldwide (Web References: Cyber Atlas (www.cyberatlas.com). Therefore, only people with access to the internet can be targeted.
There are a number of examples of web sites that customise their products to individual customers.
Amazon.com is a good example of the use of customisation. ‘Each time you make a purchase from their site, it modifies your site, so that when you log on, it shows what other people (who make the sorts of purchases you do) like to read and buy’. (Study Guide, 2002).
* Dell website has options on its home page for home users, small and medium-sized business and large corporations.
* Levis website allows you to design, have made and sent to you your own individual style of jeans. In a sense Levis is still segmenting the market because not all people would wish to design their own jeans. It is also suggested that this strategy would only be effective for existing strong brands where the brand has a clearly established position and has established a high level of trust with customers.
* www.disney.com is an example of a site that is targeted at 2 audiences; the children (consumer) and their parents (consumer and customer).
* xoom.com uses highly sophisticated personalisation technology
Buttle extends the need for targeting beyond initially ‘identifying customers to target’ in building customer relationship using e-resources. He recommends that there is a need to segment users to identify strategically significant customers (Buttle, 2000). Buttle states that not all customers are equally important’ (Buttle, 2000).
I will use a consulting project I was involved with to discuss the relevance of segmentation in a 1:1 marketing approach. The project involved the development of an integrated national communication strategy to encourage the increased use of spatial data in a particular sector (details cannot be given because they are confidential). There were a large number of different target markets involved. These included people ranging from politicians and senior bureaucrats to volunteer ground staff. The needs of these different groups was very diverse. A strategy was developed that focussed on the use of a website, customised electronic newsletters and an electronic discussion board where individuals were encouraged to participate in discussion relevant to their particular needs.
Segmentation was to play a central role in initially targeting people to access the website and be responsive to newsletters. The contents of the newsletters and website were also designed to be suitable to particular target groups.
The factors we used to segment the market included:
* their potential to be change agents in their particular communities
* their perceived potential to change and adopt new technologies
* their access to broad band internet connections
The planned strategy was not fully implemented. Rather than implementing a targeted strategy, the decision was made to target ‘everyone’ using generic promotional material and an electronic notice board for ‘everyone’ to use. The result has been that the project has had little impact and the electronic discussion board was left unused. It is suggested that the strategy of trying to target ‘everyone’ resulted in the resources of the project being spread too thinly. The fact that the needs of the particular target groups were not incorporated into the project meant that none on the target groups properly engaged with the project.
In conclusion, it is very clear that the advent of e-marketing has not diminished the relevance of segmentation when firms adopt mass marketing, multi-segment marketing and niche marketing strategies. Although 1:1 marketing does involve the customisation of a product to the needs of particular customers, segmentation remains a very important (if not essential) role in initially targeting and managing such a strategy.
It is suggested that segmentation will in fact become increasingly important as a result of the advent of e-marketing.