Commentary & Analysis
Targeting the Consumer
How the Internet Changes Everything By Barbara Pellow August 30,
By WhatTheyThink Staff
Published: August 30, 2006
How the Internet Changes Everything By Barbara Pellow August 30, 2006 -- Everyone talks about target markets and taking aim, but not everybody does it. Yet target marketing is the only effective way to optimize business and marketing resources. Google's Web Definitions says that target markets are defined segments of the market that are the strategic focus of a business or a marketing plan. Normally, the members of this segment possess common characteristics and a relatively high propensity to purchase a particular product or service. Because of this, the members of this segment represent the greatest potential for sales volume and frequency. A primary purpose for segmenting a market is to allow your marketing/sales program to focus on the subset of prospects that are "most likely" to purchase your offering. If done properly, this will help to ensure the highest return for your expenditures. Depending on whether you are selling your offering to individual consumers or a business, there are definite differences in what you will consider when defining market segments. Segmentation in the B2B market is very different from its consumer cousin, B2C The majority of print service providers focus on the business-to-business (B2B) markets. Segmentation in the B2B market is very different from its consumer cousin, B2C. The number of customers supplied by a printing company is likely to number in the hundreds, while the number of consumer companies can reach the thousands or millions. Historically, the challenge for graphic communications service providers in the B2C market has been the diversity of requirements in the consumer market and the inability to reach consumers based on geographic dispersion. But as we all know, the Internet has changed everything. Today's consumer is linked in and online. According to Forrester Research and Internet World Stats: * There are 888 million Internet users. * The average worldwide penetration of Internet usage is 14 percent which means that 14 out of every 100 persons in the world use the Internet. * Internet usage has grown 146 percent since 2000. * US online retail sales will likely hit $316 billion by 2010. * US online sales pegged at $144 billion this year. For graphic communications firms, the Internet has become the great democratizer in reaching consumers and small businesses. Through Internet operations, firms like FedEx Kinkos, PrintingForLess and VistaPrint can focus on cost effectively serving the needs of consumers and small businesses. The consumer or small business can now order the small quantities they need at prices they can afford, obtain rapid service and delivery, and take advantage of good designs without having graphic expertise. Consumers and small businesses have few print resources. They tend to purchase products on an as-needed basis rather than with any type of contractual agreement and they have no internal capabilities. Ease-of-use and the user interface experience are important to this group. Segmenting the B2C Market Traditional business-to-consumer marketers segment consumer markets based on the following characteristics: * Geographic: Region, size of metropolitan area, population density, climate or weather pattern * Demographics: Age, gender, family size, income, occupation, education, ethnicity, religion, etc. * Psychographics: Lifestyle characteristics including activities, interests, opinions, attitudes and values * Behavioral: Actual consumer behavior toward products, including benefits sought, usage rate, user status (potential, first time, regular, etc.), readiness to buy, occasions (holidays or events that stimulate purchase). Graphic communications firms are focusing energies on behavioral segmentation in their aggressive pursuit of the Internet-driven consumer market. They are building strategies based on customer usage, user status, readiness to buy and special occasions. Several graphic communications service providers have differentiated themselves with consumers based on their ability to target consumers based on behavior. It's All in the Cards Teague Bengtzen, President of Card Café, built a digital print business predicated on consumer behaviors linked to special occasions. Card Café is a digital print subsidiary of Rocky Mountain Printing in Orem, Utah. Mr. Bengtzen purchased this business with his father, Gary, in May 1995. The Bengtzen's are visionaries who identified a common challenge that consumer's face -- staying in touch with friends and loved ones on special occasions and sometimes for no reason at all -- and linked that behavioral need to greeting cards. Remembering birthdays and anniversaries, fulfilling the Christmas card list, and getting Valentine's Day cards to special people is something that we all want to do in a personal way. The vision for Card Café was a site where the user could build a database that never forgets a birthday, always remembers a Christmas card list, adds a gift if desired, and inserts the consumer's signature with a personal note. As of September 1, 2006, the site has been up for less than a year and is averaging about 500 cards per day. Based on contracts being implemented, volumes are anticipated to triple in the next twelve weeks. They recently launched a new service called EZ Card. This allows the consumer or business person in a hurry or those less computer savvy to order a quality card in less than 30 seconds with Card Café assuming the responsibility for printing and mailing. EZ Card is being used by corporate clients for a series of branded cards. Card Café has also established more than 30 gift card partnerships with a number of companies, including Eddie Bauer, Romano's Macaroni Grill, Linens 'n Things, Starbucks, and a supplier of gourmet popcorn. In these cases, the greeting cards will often be combined with a gift. Graphic communications firms are building strategies based on customer usage, user status, readiness to buy and special occasions. VistaPrint's model is an excellent example of a B2C model where there is a clear understanding of the behavioral aspect of readiness to buy. VistaPrint was founded in 1995 and launched in 2000. In 2006, it achieved recognition by Graphic Arts Monthly as the sales growth leader with revenues climbing by 55 percent to more than $90 million. VistaPrint has more than 7,000,000 customers worldwide. VistaPrint's value proposition is to provide consumers and small businesses with access to high quality, short-run, full color graphic design and print services vial the Internet. VistaPrint customers start an order by using one of the thousands of pre-defined templates provided or by uploading a design to the Web site. Users can modify color schemes and add images from VistaPrint's stock photo library. Using VistaStudio, the company's online creative tool, users can custom-design many types of print orders including business cards, letterhead, and brochures. Customer orders are taken and processed exclusively via the company's Web site and then sent to VistaPrint's own printing facility. Whether its customers need business cards, letterhead, and brochures for a small business or 10 custom-printed invitations for a child's birthday party, VistaPrint focuses on the delivery of premium-quality products and services at a surprisingly affordable price. VistaPrint is also a master at target marketing for consumers. To reach this market, the company has identified Web locations with users that have a high readiness to purchase. For example, VistaPrint runs banner ads that have high click-through rates on sites like Monster.com because Individuals using Monster.com will likely need business cards or stationery as they pursue career opportunities. How Much IS a Picture Worth? With digital camera ownership expanding daily, there are a number of firms intent on tapping the consumer energy around digital photography. This is a digitally savvy consumer market that is both ready to buy and wants to leverage special occasions. Firms like Shutterfly and Kodak with its EasyShare Gallery realize that consumers have an intrinsic desire for social expression, as they wish to capture and share their experiences and pass them on to future generations. Today, with the evolution of digital cameras and technology, millions of people around the world are capturing their memories and communicating in deeper, more meaningful ways. This tremendous growth in digital photography presents new consumer centric-Internet-driven revenue opportunities for digital print providers. With more than half of all U.S. households owning a digital camera, consumers continuously seek new ways to use and display their images. Applications include wedding-themed products from engagement announcements to thank you notes, photo books, calendars, and greeting cards for every occasion. According to the Photo Marketing Association (PMA), the value of the custom service market approaches $1 billion and projections it to more than double in the next two years. Tremendous growth in digital photography presents new consumer centric-Internet-driven revenue opportunities for digital print providers. Shutterfly was formed in 1999. Jim Clark, Netscape's co-founder and CEO, and Shutterfly's chairman, recognized that digital cameras were taking off and seized the opportunity to provide an easy way to get digital camera output into hardcopy photos. Initially, Shutterfly's offering was designed so that the user would come to the web site, upload images and place an order. The order would get submitted to an order database; the credit card would be authorized; and the order would be passed to the lab for printing. Shutterfly has uniquely developed software that color-corrects and enhances images prior to printing, unless the user opts not to use it. Once the image is rendered, it is scheduled for printing. As Shutterfly's management team looked at the market, they realized there was an opportunity to affordably offer a new array of products and services leveraging digital color print technologies. More than 65 percent of Shutterfly's consumer market was women continually looking for new ways to stay in touch with friends and family. When Shutterfly assessed the needs of its consumer-oriented base, the company found that they wanted personalized greeting cards, photo books, note cards and calendars at an attractive price, driving their firm into the world of digital print. Graphic communications firms need to develop marketing skills and strategies to deliver profitably what customers really want. And In Conclusion Graphic communications service providers are neophytes when it comes to marketing to B2C markets, but the Internet is providing tremendous reach for new products and service offerings. Graphic communications firms need to develop marketing skills and strategies like those at VistaPrint, Card Café, and Shutterfly to deliver profitably what customers really want. At a minimum, that means using market research to uncover customer needs and analyze the impact of improving a process for a consumer, whether it is sending a greeting card or building a photo album. The key to success in this segment is understanding consumer behavior and needs. It means knowing your customers. Only companies that identify what customers really want and position themselves to provide that can build strong brands in the consumer centered graphics communications market.