The Digital Marketing Opportunity

5A3190 DMCMDavid Edmundson-Bird

The Digital Marketing Opportunity

• So what’s the problem?– You have to produce a target market report which

specifies the main audience for your product/service/offering

– You have to produce a viability report in which you compare suitable digital marketing approaches and make choices about which approaches you will use

– You have to produce an anti-viability report in which you discuss approaches that are not suitable for use on this occasion

The Digital Marketing Opportunity

• So what do you need to learn?– What the market opportunity analytic framework

is– How the two “generic value types” work– How we identify unmet and under-served needs– How we segment and target digital customers– What resources we have for evaluating digital

market opportunities

THE MARKET OPPORTUNITY ANALYTICAL FRAMEWORK AND “VALUE TYPES”

Market Opportunity Analytical Framework

See opportunity in (existing or new)value system

Reveal the heart of the opportunityIdentify unmet / underserved needs

Identify target segments

Identify organisation’s resources thatprovide opportunity for advantage

Check competitive, financial & technicalopportunity attractiveness

Decide whether to engage

NEW IMPACT OF NETWORK ECONOMY

Horizontal competition across industries not within industriesIndustry value systems rapidly reconfiguringNew speed of competitive behaviourCustomer behaviour easy to influence at early stagesThe concept of“co-opetition”

We have to workout where and howwe will compete

2 Types of Generic Value

VALUE THAT’S TRAPPED & UNTAPPED

VALUE THAT’S NEW TO THE WORLD

HYBRID COMBINATION

A value system is the linkage of processes and activities inside and between organisations that creates benefits for participants and end users

Create a more efficient marketplace

Create a more efficient value system

Customise your offering

Build a community around your offering

Introduce new functionality in your offering

Introduce a new experience in your offering

Wreck existing pricing

Make it easier to access your offering

Increase the reach of your offering

Exploring Generic Value

VALUE THAT’S NEW TO THE WORLD

VALUE THAT’S TRAPPED & UNTAPPED

More efficient markets lower search and transaction costs

More efficient value systems compress or eliminate steps in an existing value system

HYBRID COMBINATIONDisrupt pricing and change pricing-power relationshipsEnable ease of access and help customers find productsExtend reach and welcome distant customers

Customizing offerings allows customers to add and remove features

Build communities to leverage customers’ participationIntroduce new functionality to transform all or part of an industry value chain

Can you think of anyone that’s done any of this?

Spotting Value• Think about horizontal and vertical dimensions

– Horizontal “value plays” improve functional operations that are common to multiple industries and types of value systems

• E.g. being good at managing retail operations within any industry

– Vertical “value plays” create value within activities that are central to a particular business

• Oil companies suck the oil out of the ground and deliver it to your vehicle (and do everything in between)

• Look for clues to trapped value– Asymmetric information (The situation where one party in a bargain has

information which is superior to that of the other )– Poor access to information and advice– Significant time and resources required to do something– Little collaboration between key participants

THE CUSTOMER DECISION PROCESSA framework to look for unmet or underserved needs

The Customer Decision Process (CDP)ProblemRecognition

Search

Evaluation ofAlternatives

Choice

Post-acquisitionEvaluation

PU

RC

HA

SE

PO

ST-

PU

RC

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PR

E-P

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What causes the customer to engagein the first place?

What are the things that influencea customer’s decision?

What properties of an offering doesa customer consider?

What options do customers consider?What decisions do they make?

What does the customer do withthe decisions made?

Creating value is based on understanding and meeting customer needs

Do you want to know more? Read J. Mowen “Consumer Behaviour” in the Library

CDP for Eating OutProblemRecognition

Search

Evaluation ofAlternatives

Choice

Post-acquisitionEvaluation

PU

RC

HA

SE

PO

ST-

PU

RC

HA

SE

PR

E-P

UR

CH

AS

E

Social Hunger

No. of diners& relationship

With children?When & forhow long?

WeightingAmbience, costwine list, quality

Howclose?

Cuisine Reviews ExperienceDresscode

Stay home Fast Food Sit down Fine Dine Room serve

Home made Takeaway Eat in Takeaway

Food Service Ambience Memorability

Likelihood of repeat or referral

Using CDP• What is the customer’s ideal experience like? How does it change in the stages of

decision-making?• How closely does the real experience compare to the customer’s ideal? What are the

key frustration points? • Does the customer’s experience yield the result that best meets his needs? What

might help the customer achieve better results?• Does the desired customer experience change at all?• What are customer beliefs about the decision-making process and the options

available for purchase?• What barriers block participation by potential customers?• What technological, communication or digital opportunities might enhance the

customer experience?• How do customers define value for critical steps in the process? Would they be willing

to pay for certain elements of that value?• Whenever you write an answer for these questions – ask yourself: “What’s my

evidence?”

SEGMENTING & TARGETTING

Designing the Value Cluster

VALUE

WHO IS THE TARGET?

WHAT ARE THE BENEFITS? WHY DO WE BELIEVE THIS?

Who is the Target?How can we segment Customers?

• Old fashioned– Use just one segmentation type

• 21st Century– Increase number of segments used to 2 (or even

3, 4, 5……)– Think about forgetting demographics

Forgetting Demographics

• Many commentators think demographics is irrelevant in the digital economy– Demographics – age, gender, income, education

• Consider using alternative segmentation approaches

How can we segment digital customers?

Segmentation Description Example

Geographic Divides market into geographical units

Country, region, city

Demographic Divides market on the basis of demographic values

Age, gender, income, education

Organisational Divides market on the basis of company-specific variables

Number of employees, company size

Behavioural Divides market based on how customers actually buy and use the product

Website loyalty, prior purchases

Occasional (Situational) Divides market based on the situation that leads to a product need, purchase or use

Routine occasion, special occasion, time of day

Psychographic segment Divides market based on lifestyle and / or personality

Personality (laid-back, type A), lifestyle

Benefits of service Divides market based on benefits or qualities sought from the product

Convenience, economy, quality

Other segmentation ideas• Children’s Toys

– Relationship to purchaser (e.g. self, peer, parent)– Age of purchaser– Reason for purchase (e.g. entertain, reward, educate)

• Online Trading– Value of stock portfolio– Frequency of trades

• Internet Service Providers– Age of purchaser– History of Internet use– Primary online activities

• For each segment defined, how might you locate the customer?• Remember to think of all the possibilities

Geographic Digital Segmentation GDS

– Divides market into distinct geographical units, such as nations, states or regions

– In Digital world, geographic barriers are often removed– Still many industries where local relationships and

distribution channels play key role, maintaining the need for local focus

– Example GDS:• Country• Region• Urban vs. Rural• Density• Climate

Demographic Digital Segmentation DDS

• B2C Demographic– Market division into groups based on customer demographic variables– Most popular method for distinguishing customer groups, highly actionable

• Age• Income• Occupation• Nationality

• B2B Organisational Demographic– Market division into groups based on business demographic variables– Highly actionable, since business demographic data is readily available

• Industry• Company size• Location

Needs-Based Digital Segmentation NBDS

• Consumers and businesses purchase goods and services because they satisfy their needs– Same product may satisfy many different needs

• Why do people chew gum?

• Seeks to understand why a purchase is made (i.e., what needs are being satisfied) and to divide market into groups of buyers whose needs are homogenous

• Particularly compelling for technology companies– Can prevent companies from developing new technology features

because they are “cool” or possible

Behavioural Segmentation

• How do people behave in a digital world?– Search terms and key phrases– Abandoned shopping baskets– People who buy once– Converts & non-converts

• People who do “x” on the Internet

Does Segmentation Matter?• No

– Everything can be customized for each individual customer

– Good Web businesses attract customers from all segments

• It doesn’t make sense to treat them the same way

– Back-office supply systems and infrastructure can easily accommodate every type of customer

• Why limit it to a few segments?

– Multiple storefronts can be constructed in a real-time basis

• Yes– Segmentation happens,

whether intentional or not

– Segmentation is needed to help companies identify which classes of customer are profitable and unprofitable

Requirements for Effective Digital Segmentation

• Customers must demonstrate needs, aspirations or behavioural patterns that are similar within segment and different across segments– Distinction between a price-sensitive and a quality-seeking segment is

meaningful, since the two segments demonstrate distinguishable sets of needs• Organisation must be able to reach customers within segments through

effective and targeted digital marketing programs– Customer segment consisting of customers with blue eyes is not actionable,

since it is very hard to identify and reach only customers with blue eyes• Segments must be large and profitable enough to make the investment

worthwhile• Key characteristics of segments (e.g., size and spending patterns) must

be easy to measure

What are the Benefits?

Customer CriteriaCustomer Criteria

Do target customers understand the value proposition?

Is the value relevant to the target customers’ needs?

Do target customers believe the value proposition?

Will the value proposition provoke customer action?

Do target customers understand the value proposition?

Is the value relevant to the target customers’ needs?

Do target customers believe the value proposition?

Will the value proposition provoke customer action?

Organisation CriteriaOrganisation Criteria

Will the organisation support the proposition?

Does the organisation have the resources and capabilities to “own” the proposition?

Does selection of the proposition limit future growth into other markets?

Will the organisation support the proposition?

Does the organisation have the resources and capabilities to “own” the proposition?

Does selection of the proposition limit future growth into other markets?

Competitor CriteriaCompetitor Criteria

Are competitors trying to provide a similar value proposition?

Do current competitors have the resources and capabilities to copy the proposition?

How easy is it for the required resources and capabilities to be developed?

Are competitors trying to provide a similar value proposition?

Do current competitors have the resources and capabilities to copy the proposition?

How easy is it for the required resources and capabilities to be developed?

Three classes of considerations for assessing the value propositionThree classes of considerations for assessing the value proposition

Caution: Wrecking two benefits is less valuable than fully delivering one.Caution: Wrecking two benefits is less valuable than fully delivering one.

What we’ve seen today

– We’ve seen what the market opportunity analytic framework is

– How the two “generic value types” work– How we identify unmet and under-served

needs– How we segment and target digital customers– What resources we have for evaluating digital

market opportunities