Page 205 - Electronic Commerce

Chapter 4

customers and prospects. Social media can help companies create consistently themed
discussions about new products, promotions, and even advertising campaigns. Social media is
a general term for Web sites such as Facebook or Google+ and online communication
technologies such as Twitter that allow participants to exchange ideas and report news and
information updates to each other. You will learn more about social media and the mobile
180 device applications that many people use with social media in Chapter 6.
Blogs and social media provide ways for companies to engage in two-way online
communications that more closely resemble the high-trust personal contact mode of
communication than the low-trust mass media mode. They also allow companies to achieve
these benefits without incurring the high cost of traditional personal contact techniques.

Market Segmentation
Companies’ responses to the decrease in advertising effectiveness were to identify specific
portions of their markets and target them with specific advertising messages. This
practice, called market segmentation, divides the pool of potential customers into groups,
or segments. Segments are usually defined in terms of customer characteristics such as
age, gender, marital status, income level, and geographic location. Thus, for example,
unmarried men between the ages of 19 and 25 might be one market segment.
In the early 1990s, firms began identifying smaller and smaller market segments for
specific advertising and promotion efforts. This practice of targeting very small market
segments is called micromarketing. However, the low cost per viewer of traditional mass media
advertising campaigns becomes much higher when mass media methods are used to target
very small market segments. This cost increase hampered the success of micromarketing
strategies. Even though micromarketing was an improvement over mass media advertising, it
still used the same basic approach and suffered from the weaknesses of that approach.
Marketers have traditionally used three categories of variables to identify market
segments. One variable is location. Firms divide their customers into groups by where
they live or work. In this type of segmentation, called geographic segmentation,
companies create different combinations of marketing efforts for each geographical group
of customers. The grouping can be by nation, state (or province), city, or even by
neighborhood. Alternatively, companies can develop one marketing strategy for urban
customers, another for suburban customers, and yet a third for rural customers.
The second category uses information about age, gender, family size, income,
education, religion, or ethnicity to group customers. This type of segmentation is called
demographic segmentation. Demographic variables are frequently used by traditional
marketers because research has shown that customers’ need for and usage of products are
strongly related to these types of variables. Demographic segmentation also exists on the
Web. For example, a number of sites are devoted to women’s issues or directed at specific
age groups (such as teenagers) whose members tend to download music and purchase
trendy clothing or video games. Often, demographic and geographic segmenting strategies
are combined. For example, an airline might target middle-income families living in
Wisconsin and Michigan with midwinter advertising for vacation trips to Florida.
In psychographic segmentation, marketers try to group customers by variables such
as social class, personality, or their approach to life. For example, an auto company might
direct advertising for a sports car to customers who are gregarious and have a high need

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