Applying Technographics^®

This report describes Forrester's unique Technographics® Segmentation and outlines its value for businesses. Marketers are more likely to succeed if they know consumers' levels of openness to technology. Forrester's Technographics Segmentation is essential in the marketing of any technology-based product or service -- it helps determine target markets and the messages and channels to be used in order to reach those markets.

INTRODUCTION

During the last 18 months, Forrester surveyed more than 250,000 North American households to understand their levels of receptiveness to technology-based products and services. What helps us determine those levels is Forrester's unique Technographics Segmentation: a model designed to categorize consumers based on their attitudes, motivations, and abilities to use or acquire technology.

Our Technographics Segmentation is essential for the business decisions of companies that:

• Sell to consumers who are in the process of changing their banking, investing, and shopping behavior. Successful firms in these markets can capitalize on the changing role technology plays in customers' lives.
• Seek to identify fertile new technology markets, such as PC and consumer electronics. Targeting responsive consumers reduces the financial risks associated with bringing new products to market.
• Must build business plans for new infrastructure, as in the cable and telecommunications industries. Understanding consumer demand for communication and entertainment services is essential to effectively plan for a market rife with change and competition.

This report draws on data from Forrester's Technographics '99 Field Study of nearly 100,000 North American households. The data is weighted to demographically represent the North American population. Statistics based on this data are accurate to ± 1%.

FORRESTER'S TECHNOGRAPHICS SEGMENTATION

Three axes define the Technographics Segmentation: attitude toward technology, income, and primary motivation (see Figure 1). We developed a series of 15 attributes, called the Technographics Scale. Respondents rate those attributes on a scale of 1 to 10, depending on how strongly they agree or disagree with each attribute. Multivariate statistical techniques, such as factor analysis, cluster analysis, and discriminant analysis, generate 10 distinct consumer segments.

IDENTIFY RECEPTIVE CONSUMERS

The Technographics Segmentation identifies who is likely to be the most interested and, consequently, the best prospect for a technology-based offer. This is important because any new technology-related product or service, from Web TV to on-line banking, appeals to some but offers little benefit to others.

Attitude Determines Technology Use
The Technographics Segmentation divides consumers into two major camps: technology optimists and pessimists.

• Technology optimists embrace the idea that changing their behavior to use or acquire a new technology will make their lives simpler and more enjoyable.
• People indifferent, anxious, or hostile to technology are categorized as technology pessimists. These consumers show little interest in using technology for needs or desires that can be satisfied through traditional methods.
• Technology optimists and pessimists can be further split into roughly equal groups by their household income: 1) high-income consumers, with annual household incomes exceeding $40,000 for families or $25,000 for singles; and 2) low-income consumers, with incomes that fall below these cutoffs.

Experience Defines Attitude
The Technographics Segmentation also takes into account consumers' life experiences (see Figure 2).

• Optimists tend to be younger and better educated and earn higher incomes. These consumers are much more likely to use technology in their education, as well as in their jobs.
• Pessimists are usually older, with lower education and income, and they are less likely to use a computer at work.

OPTIMISM RULES

Our research shows that technology optimism provides the most important clue in determining the acceptance of a new technology. Optimists are much more likely to use technology for new activities and acquire new technology platforms than are pessimists. Their adoption of technology skews by income -- as a group, high-income optimists dominate new technology use (see Figure 3).

• High-income optimists are most likely to engage in on-line activities like tracking stock portfolios and shopping. More than half of this group already uses on-line services. More than a quarter conduct product research on-line for purchasing decisions. This group should be the prime target market for eCommerce marketing.
• Low-income optimists drive growth in the consumer PC market. These consumers are just starting their on-line journey and will begin transacting by 2000.
• High-income pessimists own technology but do not use it as extensively or passionately as optimists do. Children are often the primary users of technology in high-income pessimists' homes. These households replace their PCs at a slow rate and, compared with the optimists, exhibit less adventurous on-line behavior.
• Low-income pessimists lag behind in technology adoption and use. Only 20% own PCs; a minuscule 7% are on-line. These consumers enjoy watching TV and do not see the benefits of investing their scarce resources for new technology.

Targeting Technology Optimists
Because technology optimists are the most likely prospects for technology products and services, marketers must clearly identify this group and gear their messages and channels to it. Forrester's extensive field research and predictive database modeling help businesses of different scopes in a variety of industries to:

• Map the demographic profiles of consumer segments for optimism/pessimism. This is essential for companies that sell products to all segments of the population, such as packaged goods suppliers.
• Market on-line offerings to customers most likely to change their behavior. This is imperative for companies with large consumer databases, such as airlines and telephone companies. Scoring databases to predict likely technology optimists provides an efficient direct marketing strategy to reach these customers.
• Target eCommerce initiatives at a local market with the most receptive consumers. This helps on-line start-ups and retailers maximize limited budgets. Ranking metropolitan areas by technology optimism and income gives these businesses an effective overlay to their marketing plans.
• Build a business case for introducing electronic bill presentment to reduce costs. This should interest utilities and Regional Bell Operating Companies (RBOCs) as well as financial institutions. Analysis of their customers by attitude toward technology enables these businesses to project how many of their customers will switch to paying bills and doing transactions on-line.
• Analyze technology usage of consumers based on their technology attitude. This gives consumer electronics and PC companies an understanding within various consumer segments of the adoption rate of new technologies like DVD players and replacement cycles for existing technologies such as PCs.

CREATE MARKETING MESSAGES

Once receptive consumers have been identified, marketers need to use the Technographics primary motivation axis to develop successful messages.

Motivation Complements Attitude
The Technographics Segmentation distinguishes consumers across three types of primary motivation: career, family, and entertainment. These motivations relate to people's need to feel fulfilled in their lives. For example, career motivation represents the need to get ahead or feel important at work; family motivations are associated with the need to nurture or provide care; entertainment motivations correspond with the need to have fun. The Technographics Segmentation assembles consumers into one of those three motivations, based on consumers' strongest needs.

Needs Drive Consumer Motivations
Fascinating differences emerge when we compare the demographics of consumers in each primary motivation group (Figure 4).

• Entertainment-motivated consumers are the youngest and least likely to be married. A high percentage have attended college, but not many own homes. Fewer family and household responsibilities allow these consumers to focus on fun.
• Career-motivated consumers are married and responsible for raising children and paying mortgages. These consumers are driven to get ahead in order to enable a lifestyle they envision for their families and themselves.
• Family-motivated consumers are the oldest and are the most likely to be married and have grown children. Maturity enables these consumers to keep their priorities in check and be most influenced by their hearth-minded needs.

Use Motivation To Create Message Appeal
The single most effective way to communicate with consumers about a new technology is to match a message with their primary motivation (Figure 5). This section outlines the types of messages that are most likely to attract various consumers according to their motivation.

• Family-motivated consumers are most receptive to messages about investing in their children's education.

   

  New Age Nurturers with children and PCs are 28% more likely to have purchased children's educational software than other PC owners with children.

• Career-motivated consumers feel the most pressure to tightly manage their schedules. Products and services that offer greater convenience and save time attract these consumers in droves.

   

  Fast Forwards who have purchased music or books on-line are 23% more likely than other on-line music or book buyers to make their decisions on the basis of convenience.

• Entertainment-motivated consumers need no excuses to purchase a product purely for their personal enjoyment.

   

  Mouse Potatoes without children are 31% more likely to own video game consoles than other households without children.

Use Motivation To Drive Business Decisions
Knowledge of the best appeals for the right audience empowers business strategies in many industries.

• Advertising messages that correspond with consumers' motivation should be a priority for technology and consumer electronics manufacturers. After creating the best-appeal messages, marketers must place them in the media outlets that are the most likely to reach the targeted consumers. Analyzing consumers' media habits by primary motivation provides marketers with concrete media strategies.
• On-line content ensures rewarding experiences when it appeals to consumers' primary motivation. Businesses that must master such content include media companies and traditional brands using the Internet as a new distribution channel, like financial service providers. Understanding the expectations of target consumers enables these marketers to extend their brands on-line.
• Portals can efficiently reach consumers who gather information to make a purchasing decision, especially for high-ticket items. Airlines, travel and real estate agencies, and automobile and appliance manufacturers will benefit from analyzing the habits of on-line users according to primary motivation, maximizing their budgets and increasing the revenue impact of the Internet.

HOW TO USE TECHNOGRAPHICS

The real value of Technographics depends on a company's ability to apply it in making business decisions. Forrester has developed special tools and established partnerships to help clients use Technographics in the most valuable way.

Enabling Tools

• The Technographics Scale -- 15 statements respondents rate on a scale of 1 to 10 -- can be incorporated into Technographics clients' proprietary research. This permits our clients to analyze their own research by the three Technographics axes.
• A focus group screener has been developed for Technographics clients to use in their own focus group research. Clients can recruit respondents based on their Technographics Segment to test marketing messages and conduct usability research.
• Predictive database modeling with CHAID functions enables clients to score customer databases for technology optimism and other factors. Forrester can develop algorithms for clients by building CHAID functions, using data consistent with the Technographics Field Study databases and clients' customer records, like age, income, or gender.

Partnerships

• Licensing the Technographics Scale to Mediamark Research (MRI) enables Technographics clients to analyze their research by the Technographics axes. MRI has embedded the Technographics Scale into its semiannual Field Studies.
• Resampling respondents of Technographics Field Studies is possible by contracting with NPD or Greenfield Research, the Technographics data partners. This feature enables clients to select a sample based on specific Technographics attributes and append a proprietary survey to the Technographics Field Studies.
• Database enhancement and direct mail campaigns through Experian that are based on Technographics enable clients to analyze their customer databases and target offers to prospect households. Forrester and Experian have partnered to score all U.S. households for Technographics and specific activity and technology usage like PC ownership, on-line subscriptions, electronic commerce, and demand for broadband services in the home.
• Recruitment and facilitation of Technographics focus groups with Plaza Research provide clients with the highest-quality recruitment and state-of-the-art facilities in 12 metropolitan areas in the United States. Forrester has trained Plaza Research on the proper execution of the Technographics focus group screener, and Plaza Research has programmed the screener into their CATI system.

If there's one tried-and-true statement about the effects of e-commerce on today's business world and consumers, it's that there are no tried-and-true statements. Consumers are finally getting the gist of things and realizing how e-commerce can improve their lives—whether through access to product information, added convenience, lower costs or improved selection. Business models are created and discarded constantly as both up-and-coming and established business race to be the first click for e-commerce consumers.

One of the companies that's been at the forefront of the study of the Internet and e-commerce is technology analysis firm Forrester Research in Cambridge, Massachusetts. Vice president of research Mary Modahl has culled her 11 years of experience studying the Internet in her recent book, Now or Never: How Companies Must Change Today to Win the Battle for Internet Consumers (HarperBusiness, $27). In it, she shares the knowledge of the dotcom consumer through "technographics," Forrester's new take on demographics as well as where the Internet will lead the business model.

Entrepreneur.com: What is "technographics"?

Mary Modahl: Technographics is basically a way to segment consumers just like psychographics or demographics except that it's custom-made for the Internet economy. It specifically looks at how consumers behave online and particularly what their shopping behavior is.

Entrepreneur.com: In your book, you discuss three main types of technographic groups—the early adopters, the laggards and the mainstreamers. What types of consumers make up these groups? Why are they important?

Modahl: The huge divide among consumers is really around attitudes toward technology. Some consumers are optimists about technology: They like it, they like to learn about it, they don't mind trying something new. Others are very pessimistic about technology, even fearful. This is really the biggest single divide among consumers when it comes to looking at online shopping behavior.

Once you further divide these groups by income, what you find is early adopters tend to be people with higher incomes who like technology. The real laggards tend to be people who have lower incomes and don't like technology. And the mainstream is really composed of two big broad groups: high-income individuals who are uncomfortable with technology and low-income individuals who love technology.

Entrepreneur.com: Why are early adopters important?

Modahl: They're the first market for anybody coming online. And they're the initial target; that's where your first revenues will come from and do come from. I think that in particular, New Age Nurturers, who are family-oriented early adopters, are very important because they tend to be brand trendsetters among the population. What they do tends to hold a lot of credence with the mainstream, and they can really set the trend. So reaching those folks in particular is important.

Entrepreneur.com: What obstacles need to be overcome to attract mainstream groups?

Modahl: For the high-income pessimist, it's really about familiarity. High-income pessimists don't like new stuff so you have to make your Web site and your offerings as familiar as possible for these people who are a little bit uncomfortable about something new. Low-income optimists are seeking ultimate convenience. This is the younger generation. They expect information [instantly] on anything they're interested in. They're looking for speed and relevance in Web sites, which is a little bit different from the high-income pessimists, who want to feel comfortable and familiar.

Entrepreneur.com: How is the Internet changing the traditional business model and revenue streams?

Modahl: It really changes all the elements of the revenue stream. It typically makes it possible to offer a new product or value, perhaps even changing the definition of value in a product. If you look at the ways products are sold in traditional channels and the way they're sold on the Internet, you'll often find a new kind of value proposition on the Internet.

The Internet is also affecting pricing. It's making pricing much, much more competitive. And you see lower pricing levels overall as well as more variability in pricing on the Internet.

Then finally, it often changes your customer base. If you look at a product that's sold in the traditional marketplace, often that same product will find new customers online, people that maybe never bought it before. Take the example of eBay. This business has roots in want advertising—people listing their old swingset for sale. And now all of a sudden, eBay is serving a whole new group of people, who are essentially creating part-time jobs by listing stuff for sale on eBay and profiting from it. A whole new customer base has been created in this medium that really didn't exist in the parent business, if you will, which was the want advertiser.

Entrepreneur.com: How is business being affected by high ad revenues—some businesses may be making more money on the ads they sell than on the products they offer.

Modahl: I think you see a lot of cross-over of one revenue type for another in Internet businesses. A lot of that is due to the immaturity of the market, where people are really still trying to figure out what the revenue models are in a lot of industries.

Entrepreneur.com: Do you think that will change as business on the Internet matures?

Modahl: [It will] to some extent, although we're actually in a second generation of business model development. There was a first wave of radical business I talk about in the book. And right now as we're going forward, you're seeing second wave efforts to rejigger and attack the business models of dotcoms. I think we're still in period of turmoil on this. Eventually I would expect more stability.

Entrepreneur.com: In a chapter called "Company Value," you discuss building a brand. What are some unique challenges in this area for Internet companies?

Modahl: When it comes to building a brand, one of the most difficult aspects of that is that people will pick up and use your name and logo all over the Internet. People will write about you and talk about you, and you really don't have the kind of control people have been used to associating with branding. In fact, control really doesn't apply in this world. So while obviously you need to try and be consistent about your messages, it's actually much more important to be able to exchange in a dialogue—two-way conversation and things that no one party controls. And that can be very scary.

Entrepreneur.com: How are intangible assets changing business?

Modahl: Intangibles have certainly become very important in valuing companies. You can't really put a value on somebody's technology know-how or customer base, not the kind of hard value you put on factory assets. That's an important aspect of the new economy.

One thing I would say about intangible assets is that their value is variable. What is an incredibly valuable brand can be real third-rate goods the next day. And the volatility of value is a real challenge for management in the Internet economy. You can have great technology know-how and leadership, and that can be worth millions, even billions, of dollars, and you can lose that leadership in six months and find that's it worth a tiny fraction of what it was worth six months ago. That kind of volatility is something that everybody is really trying to get more accustomed to.