About five years ago I sat on a panel discussion at an American Marketing Association conference. The topic was the Internet and unfortunately I was the last speaker. The speakers before me spoke lyrically about how customers' attitudes, behaviors and what they cared about would be fundamentally altered once they began purchasing products online.
The consequences for firms selling to customers would change dramatically as well.
Being last, I wanted say something different. So I told the audience that nothing about customers would change, except of course they would buy more stuff over the net than they did in 1995. In essence, marketing would stay virtually the same.
Did I know what I was talking about? No, nobody really did. Like everyone else on the planet at that time, all of us were guessing.
Five years later and now with about 300 million online users, we have research reports coming out practically every day telling us about customers on the Internet. They all purport to say something really new about customers and e-commerce. So let's see.
HEADLINES AND FINDINGS
Here are some headlines and key findings I've gathered from the Internet this past month dealing with customers and e-marketing. It's not everything, but it's probably representative. See if any of these findings really surprise you.
- "Profits Depend on Customer Loyalty" – Bain and Company, Mainspring
- "Researchers Divided on Price and Branding" (researchers find different customers want different things) – Activmedia and Cyber Dialogue (CYDI)
- "All Visitors Are Not Created Equal - Six Types of Online Customers Identified" – Media Metrix (MMXI) and McKinsey
- "66% of shopping carts abandoned for service related reasons" – Forrester (FORR)
- "4 out of 10 shoppers say they sometimes comparison shop" – Jupiter Communications (JPTR)
SURPRISING RESULTS ABOUT FIRMS?
Is the finding that profits depend on customer loyalty unique to the online world? No, of course not. Profits in every business since, well, the beginning of business, depend for the most part on customer loyalty. My plumber, for example, makes more money when he has loyal customers, and he's definitely of old economy stock.
Some of this, of course, isn't true with B-to-B commerce. Commodity trading businesses in the offline world where price is the main purchasing factor – like soybeans and corn – don't involve loyalty. The same is true online.
Companies like Ariba (ARBA) and Commerce One (CMRC) forge online trading markets where loyalty is probably an insignificant purchasing factor. I haven't seen a research report that declares this, but I suspect we'll soon see an expensive one with the title "B-to B Loyalty Not Always Necessary for Profits."
SURPRISING RESULTS ABOUT CUSTOMERS?
For some reason Internet researchers seem surprised that all customers are not the same. Firms on the net talk a lot about one-to-one marketing, but when it comes to what people care about, well, it's like a big surprise. It requires research studies to point out that people differ.
So what are we to make of this vigorous debate about whether people care about price or branding? I think it's ridiculous. Some people care about price and some care about whether it's a name brand product they're buying. Some people go to mass retailers like Walmart (WMT) for lowest price and others go to specialty retailers like Williams-Sonoma (WSM) offline, just as some people shop at places like priceline.com (PCLN) and others go to Ashford.com (ASFD) online.
These are simply different segments of people.
Speaking of which, we in academics are always amused when books (for example, Mary Modahl's book, "Now or Never: How Companies Must Change Today to Win the Battle for Internet Customers") and big time research studies demonstrate that the best way to segment the online market is by the type of customer or their interests. The market for gas stations has been successfully segmented this way, and so has the market for clothes, toothpaste, cars, coffee, and just about every other product.
That's why the research report stating there are 6 different types of people on the Internet is just not that surprising. What's far more interesting, however, is that so many Internet firms are trying to segment the online market by age, income, gender, zip codes and other easily observable consumer demographics.
I suspect they will find, just like academics have found in the offline world, that segmenting markets based on what customer care about rather than correlates like age and zip codes is far more productive.
I could go on. People need a certain degree of good service or they'll abandon a shopping cart? Some people do price comparisons and others don't? Really? You get the point.
Honestly, I just wonder what people were thinking when they started selling on the net. Did they really believe customers would be that different? I certainly can't fault anyone for making that mistake – we academics did back in 1995. But you don't need studies to demonstrate this anymore. What online companies do need is better execution and more faith that people are people, online and off.
You may like these other MarketingProfs articles related to Segmentation:
- Switching From Product-Centricity to Customer-Centricity With Personas
- How to Conduct Effective Audience Analysis in Six Steps
- Six Key Criteria for Market Segmentation [Infographic]
- Smoking Brisket and the Customer Experience: Art and Science With Christian Selchau-Hansen on Marketing Smarts [Podcast]
- Target-Audience Segmentation: Why You Need It and How to Do It in Five Easy Steps
- Five Segmentation Gaffes (And How to Avoid Them)