Online targeting

Digital communications have allowed marketers to segment markets at ever tighter levels - right down to the individual consumer. This process is known as micromarketing, cyber-segmentation or hyper-segmentation. In effect, this allows to the marketer to pursue both a differentiated marketing strategy and a niche marketing strategy to reach the smallest groups in the marketplace. R

Hyper-segmentation relies on extensive information technology, big databases, computerized and flexible manufacturing systems, and integrated distribution systems. Data is captured from electronic communications devices, mapped and logged with a management information system. This enables the integration of observed behaviour (domains accessed) with motives (content involvement), geographics (IP addresses), demographics (self-reported registration details) and brand preferences (site-loyalty, site stickiness). Additional data inputs might include behavioural variables such as frequency (site visits), diversity including visitation across different landscapes and fluidity spanning multiple time periods. Programmed business intelligence software analyses this data and in the process, may also source data inputs from other internal information networks. Marketers and advertisers can then use an inventory of stock images and phrases to compile customised promotion offers in real-time which are delivered to prospective purchasers with a strong interest in the product, or who are in an advanced state of buyer-readiness.

With increased availability of electronic scanner data there has been a greater focus on research of micromarketing and pricing problems that retailers encounter. Research in 1995 by Stephen J. Hoch et al. provided empirical evidence for the micromarketing concept. In 1997, Alan Montgomery used hierarchical Bayes models to improve the estimation procedures of price elasticities, showing that micromarketing strategies can increase gross profits.

With the advent of social media, advertising has become a more efficient at reaching relatively small target audiences. People are constantly exposed to advertisements and their content, which is key to its success. In the past, advertisers had tried to build brand names with television and magazines; however, advertisers have been using audience targeting as a new form of medium. The rise of internet users and its wide availability has made this possible for advertisers. Targeting specific audiences has allowed for advertisers to constantly change the content of the advertisements to fit the needs and interests of the individual viewer. The content of different advertisements are presented to each consumer to fit their individual needs.

The first forms of online advertising targeting came with the implementation of the personal email message. The implementation of the internet in the 1990s had created a new advertising medium; until marketers realized that the internet was a multibillion-dollar industry, most advertising was limited or illicit.

Many argue that the largest disadvantage to this new age of advertising is lack of privacy and the lack of transparency between the consumer and the marketers. Much of the information collected is used without the knowledge of the consumer or their consent. Those who oppose online targeting are worried that personal information will be leaked online such as their personal finances, health records, and personal identification information.

Advertisers use three basic steps in order to target a specific audience: data collection, data analysis, and implementation. They use these steps to accurately gather information from different internet users. The data they collect includes information such as the internet user's age, gender, race, and many other contributing factors. Digital communications has given rise to new methods of targeting:

• Addressable advertising
• Behavioral targeting
• Location-based targeting
• Reverse segmentation (a segment-building approach rather than a segmentation approach)

These methods rely on data collected from consumer-browsing histories and as such, rely on observed behaviour rather than self-reported behaviours. The implication is that data collected is much more reliable, but at the same time attracts concerns about consumer privacy. Many internet users are unaware of the amount of information being taken from them as they browse the internet. They don't know how it is being collected and what it is being used for. Cookies are used, along with other online tracking systems, in order to monitor the internet behaviors of consumers.

Many of these implemented methods have proven to be extremely effective. This has been beneficial for all three parties involved: the advertiser, the producer of the good or service, and the consumer. Those who are opposed of targeting in online advertising are still doubtful of its productivity, often arguing the lack of privacy given to internet users. Many regulations have been in place to combat this issue throughout the United States.