Benefit segmentation in Cyberspace

The Internet has revolutionized the computer and communications world like nothing before. The invention of the telegraph, telephone, radio, and computer set the stage for this unprecedented integration of capabilities. The Internet is at once a world-wide broadcasting capability, a mechanism for information dissemination, and a medium for collaboration and interaction between individuals and their computers without regard for geographic location (Negroponte, 1995).

Benefit segmentation is widely acknowledged as one of the distinctive ways to segment markets. It divides a heterogeneous population into homogeneous groups on the basis of product benefits consumers perceive as important (Chang and Chen, 1995). Marketers who use this segmentation approach are able to identify the key benefits that consumers seek from a particular product type and which of these consumers require which benefits (Dibb, 2000). Benefit segmentation can be used in conjunction with several closely related segmentation bases/variables. These include product/firm loyalty, psychographics, perceptions, preferences, purchase intention and purchase situations/occasions (Weinstein, 1994).

This approach provides a more direct measure of the differences in preferences among customers and offers a more action-oriented analysis for managers (Haley, 1968). Once people have been classified into segments in accordance with the benefits they are seeking, each segment is contrasted with all of the other segments in terms of demographics, volume of consumption, brand perceptions, media habits, personality and lifestyle and so forth. Over the longer term, systematic benefit segmentation research is likely to produce a higher proportion of successes (Haley, 1995). In many markets, segmentation based on benefits, needs, or motivations has proven to be more powerful than demographic factors or product features in understanding market dynamics (Plummer, 1974, Wind, 1978, Lesser and Hughes, 1986, Cermak, File and Prince, 1994).

A study was conducted in 2004 by me which used benefit needs to segment the on-line market. It first used focus groups and a random sampling survey to search for the consumer benefit needs. The on-line market was then segmented using the benefits sought.

The result demonstrated that different segments seek different benefits and have different lifestyles, demographics etc. Thus, benefit sought is an effective segmentation variable for the on-line market. Based on the benefit segmentation results, marketing managers can focus on one or a few segments that exhibit a salient preference for the benefits provided by their products.

To focus the "Effectiveness and Modern seeker" the marketing manager should emphasise the effectiveness, promptness and modernisation of on-line marketing to match their benefit needs. This target segment is primarily female, married and living in cities, about 26 to 40 years old with regular life and they like music. The manager can promote products related to music such as CD, audio, etc. on online.

If the target segment is "Convenience, Information and Safety seeker", the manager should emphasise the benefits of on-line marketing for purchase convenience, information abundance, multiform and trade safety. This segment’s members are mostly group leaders, active, computer lovers, young males, students or executives, single, loves sports and live in the city. To focus on this group, on-line commerce for sports products is the target selection.

If the target segment is "Service and Freedom seeker", the manager should emphasise the advantage of on-line shopping for service quality, delivery speed, selection freedom, company name familiarity etc. This group is characterised by being knowledge seeker; attached to own appearance, spend time at home and like reading. They have the highest rate of on-line shopping but with lower income. The marketing manager might offer lower priced products related to reading such as maps, magazines or books for online shopping.

Through benefit segmentation, companies can divide large, heterogeneous on-line markets into smaller segments that can be reached more efficiently with products and services that match the consumers’ unique needs. As consumers obtain satisfaction for their needs, wants and desires a company can become further successful using this tool.

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