Modern advertising was born back in the early 1900s intended as the use of madd media (from Radio going forward) enabled companies to communicate at scale with a simplified message. With the advent of the Internet, digital advertising with all its facets took off, and it enabled companies to reach small audiences with customized messages.
How the guide is structured
This is a guide about market segmentation, the technologies that allowed marketers to create more and better-segmented audiences and how the way of communicating changed from mass marketing to one-to-one marketing starting the 1920s until today.
Second, you’ll learn all the aspects of market segmentation. From how, why and when to create market segments. To the requirement necessary for creating market segments and the types of market segmentation.
Third, you’ll learn what tools today marketers can leverage to create audiences and small segments with the utmost details.
A brief history of advertising
Marketing has evolved through the technological devices that allowed marketers to convey the same message to millions of people a the time, like mass media.
To technologies that instead allowed marketers to speak to millions of people with customized messages, like social media and SEM.
Let’s dive a bit into the story of marketing associated with the technological devices that made it possible for marketers to develop new ways of reaching an audience.
I argue that as new technologies at the beginning of the 1900s became available for marketers, those allowed to speak to vast audiences.
That also meant crafting a message that could be understood by the masses. It was the rise of pop culture.
As technology has evolved, it allowed marketers to have accurate data about users. Thus, the marketer could finally craft a personalized message for each user.
It is interesting to notice also the change in terminology. From masses to users. From television viewership to the user experience.
That is also why marketing is now back to building communities, tribes, and personal relations. This is the story of how we went from mass markets to one-to-one conversations.
The rise of Radio and Mass media
As reported in the book The A to Z of Old Time RadioFrank Conrad, an electric engineer who worked for Westinghouse held more than 200 radio-related patents he started off with his own radio transmitter.
Initially, radio broadcasts consisted just of transmitting the location and equipment used. Yet Mr. Conrad was soon to be bored by this kind of set up.
That is why in 1920 he started a new format called The Radio Amateur News. During the show, Frank Conrad took his phonograph and began to transmit it. At the time 400 people listened to that show.
When another executive at Westinghouse noticed the potential for advertising, he understood they should test the same concept with a broader audience and more structured programming.
The chance to test that came with the Election Day:
When KDKA became the radio’s first commercial programmer, it started by asking “Will anyone hearing this broadcast, please communicate with us, as we are anxious to know how far the broadcast is reaching and how it is being received?”
On that occasion, more than a thousand listeners were reached.
Technology and marketing walk hand in hand. In the 1920s, radio had become the primary medium of communication.
Across the U.S. and Europe, broadcasting stations such as KDKA and British Broadcasting Company (BBC) began to rise.
The power and potential of mass media were still hard to foresee at the time. Experimentation allowed those first marketers to understand its potential.
In fact, disciplines like growth hacking claim to have brought the scientific methodology into the marketing world. In reality, good marketing has always been about experimentation.
Also, Frank Conrad was an electrical engineer, and for what we know he might have been the first mass media marketer. Even though he reached just a few hundred people, he changed the rules of the game.
Yet as this story shows broadcasts made it possible for companies to send advertising messages to large, undifferentiated audiences at once, giving birth to the mass market concept and the first mass marketing techniques.
Then television came, and mass markets became even more prominent.
Television and mass marketing
The Brooklyn Dodgers are playing the Philadelphia Phillies. It is July 1, 1941. Suddenly, before the game begins a 10-second advertisement from a watch company – called Bulova – gets broadcasted:
This ten-second spot was the first TV commercial US people saw. Imagine the effect of it – if any. From there a multi-billion industry was born. A bunch of commercials became part of the pop culture:
TV dominated the advertising together with other media outlets dominated the advertising industry:
One of the things for which 2017 might be remembered is the take over of the advertising spending by digital over TV.
The end of mass marketing and the beginning of niche targeting
As we’ve seen so far, back in the days, marketing budgets would be spent primarily on mass media channels. This enabled companies to channel the message toward the largest number of people possible.
Which in turn made it possible to create mass cultures, and manufacture mass consumer behaviors which spurred growth and profitability for these companies in years to come. Those brands which mastered demand generation managed to be on top of their game for decades.
Until the web reshuffled the rules of the game. Finally what used to be an odd person or a nerd who could not recognize herself in the mass culture. The web became a person who belonged to a small community spread across the world.
Thus anyone no matter how weird she felt during the mass culture age; could find other people like her around the world, through the Internet.
That opened up new ways of communication and marketing.
Before becoming a tech giant Amazon was a niche player
When we become grown-up it’s hard to remember when we were kids. That seems to be the case for tech giants.
As we see them today as trillion empires, spanning across geographies it’s hard to remember that once a company like Amazon was simple e-commerce sold books on the web. Amazon, like any other tech giant, picked a niche, dominated it. Expanded to adjacent, larger niches, until it dominated an entire industry.
That applies also to Facebook. Started as a social network for top universities (it was open to just a few initially), it then rolled out only when there was massive demand from new colleges.
The Facebook timeline between 2004-2006 according to its S1
As you can see, while Facebook grew pretty quickly. It opened the registration to workplaces only in 2006. Interesting fact, Facebook rolled out the News Feed in the same year.
No doubt a feature like the news feed was a key element to enable Facebook to broaden its reach.
In other words, the rise of the web and the enablement of digital business models created a need to start from specific niches.
Below we’ll see the case of two companies, in particular, who have changed the way to segment the market: Google (with AdWords, now Google Ads) and Facebook (with its Facebook Ads Platform).
Google Inc., developer of the award-winning Google search engine, today announced the immediate availability of AdWords(TM), a new program that enables any advertiser to purchase individualized and affordable keyword advertising that appears instantly on the google.com search results page. The AdWords program is an extension of Google’s premium sponsorship program announced in August. The expanded service is available on Google’s homepage or at the AdWords link atadwords.google.com, where users will find all the necessary design and reporting tools to get an online advertising campaign started.
The beta debut saw the involvement of 350 businesses and advertising agencies worldwide. However, Google AdWords would be rolled out broadly in 2002:
In 2003 Google reported over $790 million in turnover!
Google’s advertising revenues have grown exponentially to monopolize the digital advertising market together with Facebook.
In 2017 Google’s revenues from its properties came primarily from AdWords. Revenues reached almost eighty billion in 2017!
The new Google Ads brand represents the full range of advertising capabilities we offer today—on Google.com and across our other properties, partner sites and apps—to help marketers connect with the billions of people finding answers on Search, watching videos on YouTube, exploring new places on Google Maps, discovering apps on Google Play, browsing content across the web, and more.
The aim is to provide under the same umbrella access to Google Marketing Platform:
Social networks, Facebook, and its advertising network
“Facebook Ads represent a completely new way of advertising online,” Zuckerberg told an audience of more than 250 marketing and advertising executives in New York. “For the last hundred years media has been pushed out to people, but now marketers are going to be a part of the conversation. And they’re going to do this by using the social graph in the same way our users do.”
If you want to know where the advertising money is, just follow the eyeballs
New technologies influence human behaviors for better or worse. Companies or people operating in the business world use those technological advancements to understand how to alter the responses of people to specific stimuli.
Technologies like Radio and TV allowed companies to speak to a broad audience. They also created a monologue between corporations and the public.
This also incentivized companies and marketers to use a sort of “universal language” that could be understood by anyone. It was the era of pop culture.
This kind of advertising model made sense because companies knew little about who they had on the other side.
Thus, they either used mass marketing campaigns that were undifferentiated, or they used invented customer groups based on what they thought were their ideal customer.
When tech giants like Google and Facebook entered the advertising industry, it all changed. Advertising was no longer something “magical.”
Those companies founded and run by engineers looked at advertising and tried to make it accountable, and measurable.
So that any business paying for advertising could stop focusing on metrics used in TV advertising like gross rating points (audience reached by the frequency of its exposure to the message during a given period); and focus more and more on conversion targets with PPC (pay-per-click) also known in the business as CPC (cost-per-click).
The reason why in the history of modern advertising I included mainly Google and Facebook is that those two companies combined took over the advertising industry. In fact, as Statista points out:
Over the past two decades, advertisers have gradually shifted their budgets away from traditional media (e.g. TV, newspapers and magazines) towards online ads. The rise of the smartphone has only accelerated this shift, as smartphones have fundamentally changed the way that people consume content. Ad dollars have always followed eyeballs and thus it doesn’t come as a surprise that mobile ad spending is currently growing at a breathtaking rate.
As reported by Statista 25% of global ad spend goes to Google or Facebook.
Part of this process has been driven by the change in behaviors of users driven by new technologies. In fact, as mobile devices are becoming less and less expensive, most of the consumption of content and information is connected to those devices. That is why ad spending has followed.
This short history of advertising could have well been called the “history of eyeballs.”
In this landscape, we’ll see also how advertising has changed and how it has evolved from mass marketing, with the so-called shotgun approaches, to hyper-personalized approaches.
In other words, market segmentation moved from undifferentiated to highly personalized.
The rise of microniches and AI Marketing
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.
In the era of platform business models driven by algorithms and AI, micro-targeting had become the rule and engineers have become the designers of incredible advertising machines, that can work at scale.
This leads us to the era, or perhaps the nightmare of AI marketing.
Account-based marketing (ABM) is a strategy where the marketing and sales departments come together to create personalized buying experiences for high-value accounts. Account-based marketing is a business-to-business (B2B) approach in which marketing and sales teams work together to target high-value accounts and turn them into customers.
Ad Ops – also known as Digital Ad Operations – refers to systems and processes that support digital advertisements’ delivery and management. The concept describes any process that helps a marketing team manage, run, or optimize ad campaigns, making them an integrating part of the business operations.
Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.
Affinity marketing involves a partnership between two or more businesses to sell more products. Note that this is a mutually beneficial arrangement where one brand can extend its reach and enhance its credibility in association with the other.
As the name suggests, ambush marketing raises awareness for brands at events in a covert and unexpected fashion. Ambush marketing takes many forms, one common element, the brand advertising their products or services has not paid for the right to do so. Thus, the business doing the ambushing attempts to capitalize on the efforts made by the business sponsoring the event.
Affiliate marketing describes the process whereby an affiliate earns a commission for selling the products of another person or company. Here, the affiliate is simply an individual who is motivated to promote a particular product through incentivization. The business whose product is being promoted will gain in terms of sales and marketing from affiliates.
The bullseye framework is a simple method that enables you to prioritize the marketing channels that will make your company gain traction. The main logic of the bullseye framework is to find the marketing channels that work and prioritize them.
Brand building is the set of activities that help companies to build an identity that can be recognized by its audience. Thus, it works as a mechanism of identification through core values that signal trust and that help build long-term relationships between the brand and its key stakeholders.
According to inbound marketing platform HubSpot, brand dilution occurs “when a company’s brand equity diminishes due to an unsuccessful brand extension, which is a new product the company develops in an industry that they don’t have any market share in.” Brand dilution, therefore, occurs when a brand decreases in value after the company releases a product that does not align with its vision, mission, or skillset.
The brand essence wheel is a templated approach businesses can use to better understand their brand. The brand essence wheel has obvious implications for external brand strategy. However, it is equally important in simplifying brand strategy for employees without a strong marketing background. Although many variations of the brand essence wheel exist, a comprehensive wheel incorporates information from five categories: attributes, benefits, values, personality, brand essence.
The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
Brand positioning is about creating a mental real estate in the mind of the target market. If successful, brand positioning allows a business to gain a competitive advantage. And it also works as a switching cost in favor of the brand. Consumers recognizing a brand might be less prone to switch to another brand.
Business storytelling is a critical part of developing a business model. Indeed, the way you frame the story of your organization will influence its brand in the long-term. That’s because your brand story is tied to your brand identity, and it enables people to identify with a company.
Content marketing is one of the most powerful commercial activities which focuses on leveraging content production (text, audio, video, or other formats) to attract a targeted audience. Content marketing focuses on building a strong brand, but also to convert part of that targeted audience into potential customers.
One of the first mentions of customer lifetime value was in the 1988 book Database Marketing: Strategy and Implementation written by Robert Shaw and Merlin Stone. Customer lifetime value (CLV) represents the value of a customer to a company over a period of time. It represents a critical business metric, especially for SaaS or recurring revenue-based businesses.
Customer segmentation is a marketing method that divides the customers in sub-groups, that share similar characteristics. Thus, product, marketing and engineering teams can center the strategy from go-to-market to product development and communication around each sub-group. Customer segments can be broken down is several ways, such as demographics, geography, psychographics and more.
Developer marketing encompasses tactics designed to grow awareness and adopt software tools, solutions, and SaaS platforms. Developer marketing has become the standard among software companies with a platform component, where developers can build applications on top of the core software or open software. Therefore, engaging developer communities has become a key element of marketing for many digital businesses.
A digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.
Field marketing is a general term that encompasses face-to-face marketing activities carried out in the field. These activities may include street promotions, conferences, sales, and various forms of experiential marketing. Field marketing, therefore, refers to any marketing activity that is performed in the field.
interaction with a brand until they become a paid customer and beyond.
Funnel marketing is modeled after the marketing funnel, a concept that tells the company how it should market to consumers based on their position in the funnel itself. The notion of a customer embarking on a journey when interacting with a brand was first proposed by Elias St. Elmo Lewis in 1898.
Funnel marketing typically considers three stages of a non-linear marketing funnel. These are top of the funnel (TOFU), middle of the funnel (MOFU), and bottom of the funnel (BOFU). Particular marketing strategies at each stage are adapted to the level of familiarity the consumer has with a brand.
A go-to-market strategy represents how companies market their new products to reach target customers in a scalable and repeatable way. It starts with how new products/services get developed to how these organizations target potential customers (via sales and marketing models) to enable their value proposition to be delivered to create a competitive advantage.
The term “greenwashing” was first coined by environmentalist Jay Westerveld in 1986 at a time when most consumers received their news from television, radio, and print media. Some companies took advantage of limited public access to information by portraying themselves as environmental stewards – even when their actions proved otherwise. Greenwashing is a deceptive marketing practice where a company makes unsubstantiated claims about an environmentally-friendly product or service.
Grassroots marketing involves a brand creating highly targeted content for a particular niche or audience. When an organization engages in grassroots marketing, it focuses on a small group of people with the hope that its marketing message is shared with a progressively larger audience.
Growth marketing is a process of rapid experimentation, which in a way has to be “scientific” by keeping in mind that it is used by startups to grow, quickly. Thus, the “scientific” here is not meant in the academic sense. Growth marketing is expected to unlock growth, quickly and with an often limited budget.
Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.
Hunger marketing is a marketing strategy focused on manipulating consumer emotions. By bringing products to market with an attractive price point and restricted supply, consumers have a stronger desire to make a purchase.
Integrated marketing communication (IMC) is an approach used by businesses to coordinate and brand their communication strategies. Integrated marketing communication takes separate marketing functions and combines them into one, interconnected approach with a core brand message that is consistent across various channels. These encompass owned, earned, and paid media. Integrated marketing communication has been used to great effect by companies such as Snapchat, Snickers, and Domino’s.
Inbound marketing is a marketing strategy designed to attract customers to a brand with content and experiences that they derive value from. Inbound marketing utilizes blogs, events, SEO, and social media to create brand awareness and attract targeted consumers. By attracting or “drawing in” a targeted audience, inbound marketing differs from outbound marketing which actively pushes a brand onto consumers who may have no interest in what is being offered.
Integrated marketing describes the process of delivering consistent and relevant content to a target audience across all marketing channels. It is a cohesive, unified, and immersive marketing strategy that is cost-effective and relies on brand identity and storytelling to amplify the brand to a wider and wider audience.
The marketing mix is a term to describe the multi-faceted approach to a complete and effective marketing plan. Traditionally, this plan included the four Ps of marketing: price, product, promotion, and place. But the exact makeup of a marketing mix has undergone various changes in response to new technologies and ways of thinking. Additions to the four Ps include physical evidence, people, process, and even politics.
Marketing myopia is the nearsighted focus on selling goods and services at the expense of consumer needs. Marketing myopia was coined by Harvard Business School professor Theodore Levitt in 1960. Originally, Levitt described the concept in the context of organizations in high-growth industries that become complacent in their belief that such industries never fail.
Marketing personas give businesses a general overview of key segments of their target audience and how these segments interact with their brand. Marketing personas are based on the data of an ideal, fictional customer whose characteristics, needs, and motivations are representative of a broader market segment.
Meme marketing is any marketing strategy that uses memes to promote a brand. The term “meme” itself was popularized by author Richard Dawkins over 50 years later in his 1976 book The Selfish Gene. In the book, Dawkins described how ideas evolved and were shared across different cultures. The internet has enabled this exchange to occur at an exponential rate, with the first modern memes emerging in the late 1990s and early 2000s.
Microtargeting is a marketing strategy that utilizes consumer demographic data to identify the interests of a very specific group of individuals. Like most marketing strategies, the goal of microtargeting is to positively influence consumer behavior.
Multichannel marketing executes a marketing strategy across multiple platforms to reach as many consumers as possible. Here, a platform may refer to product packaging, word-of-mouth advertising, mobile apps, email, websites, or promotional events, and all the other channels that can help amplify the brand to reach as many consumers as possible.
Multi-level marketing (MLM), otherwise known as network or referral marketing, is a strategy in which businesses sell their products through person-to-person sales. When consumers join MLM programs, they act as distributors. Distributors make money by selling the product directly to other consumers. They earn a small percentage of sales from those that they recruit to do the same – often referred to as their “downline”.
The Net Promoter Score (NPS) is a measure of the ability of a product or service to attract word-of-mouth advertising. NPS is a crucial part of any marketing strategy since attracting and then retaining customers means they are more likely to recommend a business to others.
Neuromarketing information is collected by measuring brain activity related to specific brain functions using sophisticated and expensive technology such as MRI machines. Some businesses also choose to make inferences of neurological responses by analyzing biometric and heart-rate data.
Neuromarketing is the domain of large companies with similarly large budgets or subsidies. These include Frito-Lay, Google, and The Weather Channel.
Newsjacking as a marketing strategy was popularised by David Meerman Scott in his book Newsjacking: How to Inject Your Ideas into a Breaking News Story and Generate Tons of Media Coverage. Newsjacking describes the practice of aligning a brand with a current event to generate media attention and increase brand exposure.
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.
We can define pull and push marketing from the perspective of the target audience or customers. In push marketing, as the name suggests, you’re promoting a product so that consumers can see it. In a pull strategy, consumers might look for your product or service drawn by its brand.
Real-time marketing is as exactly as it sounds. It involves in-the-moment marketing to customers across any channel based on how that customer is interacting with the brand.
Relationship marketing involves businesses and their brands forming long-term relationships with customers. The focus of relationship marketing is to increase customer loyalty and engagement through high-quality products and services. It differs from short-term processes focused solely on customer acquisition and individual sales.
Reverse marketing describes any marketing strategy that encourages consumers to seek out a product or company on their own. This approach differs from a traditional marketing strategy where marketers seek out the consumer.
Remarketing involves the creation of personalized and targeted ads for consumers who have already visited a company’s website. The process works in this way: as users visit a brand’s website, they are tagged with cookies that follow the users, and as they land on advertising platforms where retargeting is an option (like social media platforms) they get served ads based on their navigation.
Sensory marketing describes any marketing campaign designed to appeal to the five human senses of touch, taste, smell, sight, and sound. Technologies such as artificial intelligence, virtual reality, and the Internet of Things (IoT) are enabling marketers to design fun, interactive, and immersive sensory marketing brand experiences. Long term, businesses must develop sensory marketing campaigns that are relevant and effective in eCommerce.
Services marketing originated as a separate field of study during the 1980s. Researchers realized that the unique characteristics of services required different marketing strategies to those used in the promotion of physical goods. Services marketing is a specialized branch of marketing that promotes the intangible benefits delivered by a company to create customer value.
Sustainable marketing describes how a business will invest in social and environmental initiatives as part of its marketing strategy. Also known as green marketing, it is often used to counteract public criticism around wastage, misleading advertising, and poor quality or unsafe products.
Word-of-mouth marketing is a marketing strategy skewed toward offering a great experience to existing customers and incentivizing them to share it with other potential customers. That is one of the most effective forms of marketing as it enables a company to gain traction based on existing customers’ referrals. When repeat customers become a key enabler for the brand this is one of the best organic and sustainable growth marketing strategies.
360 marketing is a marketing campaign that utilizes all available mediums, channels, and consumer touchpoints. 360 marketing requires the business to maintain a consistent presence across multiple online and offline channels. This ensures it does not miss potentially lucrative customer segments. By its very nature, 360 marketing describes any number of different marketing strategies. However, a broad and holistic marketing strategy should incorporate a website, SEO, PPC, email marketing, social media, public relations, in-store relations, and traditional forms of advertising such as television.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
