Transcript Market segmentation

Market Segmentation, Targeting
and Positioning for Travel and
Tourism
Objective: Introducing the meaning of marketing implications of
segmentation, targeting and positiong for travel and tourism.
Marketing Management
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Marketing management is the art and science of
choosing target markets and building profitable
relationships with them.
The marketing manager’s aim is to find, attract,
keep, and grow target customers by creating,
delivering, and communicating superior
customer value.
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Marketing management is in a way, demand
(customer) management.
A company’s demand comes from two groups:
new customers and repeat customers. Marketing
management deals with finding ways (1) to
attract new customers and create transactions
with them and also (2) to retain current
customers and build lasting customer
relationships.
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To design a winning marketing strategy, the
marketing manager must answer two important
questions:
What customers will we serve (what’s our target
market)?
 How can we serve these customers best (what’s our
value proposition)?
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Selecting Customers to Serve
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The company must first decide who it will serve.
It does this by diving the market into segments
of customers (market segmentation) and
selecting which segments it will go after (target
marketing).
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Some people think of marketing management as
finding as many customers as possible and
increasing demand. But marketing managers
should know that they cannot serve all
customers in every way. By trying to serve all
customers, they may not serve any customers
well. Instead, the company wants to select only
customers that it can serve well and profitably.
Steps in Target Marketing
1. Market segmentation; dividing a market into distinct
groups of buyers with different needs, characteristics or
behaviors who might require separate products or
marketing mixes.
2. Market targeting; evaluating each market segment’s
attractiveness and selecting one or more of the market
segments to enter.
3. Market positioning; setting the competitive positioning
(difference) for the product and creating a detailed
marketing mix.
Benefits of market segmentation
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More effective use of the marketing budget,
Clearer understanding of the needs and wants of
selected customer groups,
Easier creation of a place in the minds of potential
customers within target markets about the product,
Greater accuracy in selecting promotional vehicles and
techniques (e.g. advertising media, sales promotion
methods, geographic placement)
Tour operators
 Young people 18-30
 Families with children
 Retired/senior citizens
 Activity/sports seekers
 Culture seekers
Destination attractions
 Local residents in the
area
 Day visitors from outside
local area
 Domestic tourists
 Foreign tourists
 School parties
Note that most businesses deal not with one
segment, but several segments.
Methods Used to Segment Markets
in Travel and Tourism
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There are seven main ways of dividing up
markets for segmentation purposes, all of which
are used in practice in the travel and tourism
industry. The main methods of segmentation are:
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Purpose of travel
Buyer needs, motivations, and benefits sought
Buyer behavior (characteristics) of product usage
Demographic, economic, and geographic profile
Psychographic profile
Geodemographic profile
Price
Segmentation by purpose of travel
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E.g. Conference markets require different
products to those supplied to other business
travelers and meetings for groups of different
sizes require special provision.
For a tour operator, customer’s purpose and
product needs will differ according to whether
they are looking for; main summer holiday,
additional holidays and short breaks, winter sun,
winter sports.
Multiple segments for producers in
travel and tourism
Hotels
 Business clients
 Group tours
 Independent vacationers
 Weekend/midweek
package breaks
 Conference delegates
Transport operators
 First class passengers
 Club class passengers
 Economy class
passengers
 Charter groups
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Within the broad categories of main and
additional holidays, typical subsidiary purposes
would include sea and beach holidays (with and
without children), cultural interests, walking and
other activity interests and an interest in exotic
destinations.
Segmentation by buyer needs and
benefits sought
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Within purpose of travel, the next logical
consideration for segmentation is to understand
the needs, wants and motivations of particular
customer groups (as discussed).
The range and perceived importance of benefits
sought by customer segments are not easy to
understand. They can only be discovered by
market research among identified target groups.
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Segmentation by benefits, makes it possible for
marketing managers to fine tune their products.
Focusing on promoting the benefits sought is a
logical objective for brochures and other
marketing communications.
Segmentation by buyer behavior
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Within purpose and benefits sought, there is
scope for refining the segmentation process
according to the types of behavior or
characteristics of use of products that
customers exhibit. E.g. frequency of usage of
products.
Frequent users (high frequency, high spending
high loyal); may represent only 10% of
individual customers in a year but up to 60% of
revenue for some hotel groups and airlines.
Segmentation by demographic, economic,
geographic and life-cycle characteristics
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By using previous segmentation processes,
considerable knowledge can be obtained.
However, for the purposes of efficient
promotion and distribution of products,
especially to prospective new customers rather
than to existing ones, it is important to know the
demographic profile (e.g. age, sex, occupation,
income, place of residence) and other defining
characteristics (life-cycle) of their target
customers, including potential users.
Segmentation by psychographic
characteristics and lifestyle
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Dependent on sophisticated market research
techniques.
Psychographics aims to define consumer on
attitudinal or psychological rather than physical
dimensions.
Geodemographic segmentation
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A very powerful and productive segmentation
tool; developed through combining an analysis
of census data with the postal area (zip) codes
that identify group of households in the
country.
Segmentation by price
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In leisure travel and tourism markets in all
countries, buyers are highly price-sensitive.
It is not a segmentation variable of the same
kind as the others.
There are segments of customers to be
identified and located who respond to different
price bands.
Yield management; segment targeted tactical
pricing.
Market Targeting
Evaluating Market Segments
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After segmenting the whole market, the firm has to
evaluate these segments and decide how many and
which ones to target. The company should enter
segments only where it can offer superior value and
gain advantages over competitors.
In evaluating different market segments, a firm must
look at three factors:
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segment size and growth; companies try to select the segment
with “right size and growth” for themselves. Some
companies prefer to target segments with large current sales,
a high growth rate, and a high profit
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margin. But smaller companies may find these large
segments too competitive and may find themselves
having lack of skills and resources, therefore, prefer to
target smaller segments
segment structural attractiveness; a segment may have the right
size, but not offer attractive profits if (1) there are strong
competitors; (2) actual or potential substitute products may limit prices and profits; (3) buyers with power buyers may have strong bargaining power relative to
sellers so that they may force prices down, demand more
quality, set competitors against another; (4) powerful
suppliers - can control prices, reduce quality.
company objectives and resources; a segment may have the right
size with attractiveness but may not suit with the long-run
objectives of the company.
Selecting Market Segments
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The company must decide which and how many
segments to serve, in other words, the company
must decide which market-coverage strategy to
adopt.
There are three market-coverage strategies:
undifferentiated marketing
 differentiated marketing
 concentrated marketing
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Undifferentiated Marketing
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A market-coverage strategy in which a firm decides
to ignore market segment differences and go after
the whole market with one offer.
Here, the offer focus on what is common in the
needs of consumers rather than on what is
different.
The company designs a product and a marketing
program that appeal to largest
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number of buyers. It relies on mass advertising
and a superior image in people’s minds.
Provides cost effectiveness because of its low
production, inventory, transportation,
advertising, marketing research costs.
Have difficulties in (1) developing a product or
brand that satisfies all consumers; (2) keeping a
strong place in the market and making profit,
when several firms follow this strategy heavy
competition develops; (3) satisfying smaller
segments.
Differentiated Marketing
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A coverage strategy in which a firm decides to
target several market segments and designs separate
offers for each. E.g. Nike offers athletic shoes for
different sports such as running, aerobics, cycling,
baseball, basketball, tennis…
These companies hope for (1) higher sales; (2) a
strong place within each market segment; (3) more
loyal customers because the firm’s offerings match
each segment’s desires better.
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Creates better total sales, but increases the costs
- developing separate marketing plans for the
separate segments requires extra marketing
research, sales analysis, promotional planning,
channel management.
Because of the high costs involved in this
approach, the company must compare increased
sales with increased costs when deciding to use
differentiated marketing strategy.
Concentrated Marketing
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A market-coverage strategy in which a firm goes
after a large share of one or a few submarkets.
Suitable for smaller companies to achieve a strong
market place in the segments (or niches) that it
serves because of its greater knowledge of the
segment’s needs.
Involves higher-than-normal risks because the target
may not respond or larger competitors may decide
to enter the same market but offers operating
economies because of specialization in production,
distribution, and promotion.
Choosing a Market-Coverage Strategy
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Factors needed to be considered when choosing a
market-coverage strategy are;
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company resources; when the firm’s resources are limited,
concentrated marketing is the better.
product variability; for uniform products e.g. grapefruit or
steel, undifferentiated marketing is more suitable. But for
products that vary in design e.g. cameras or automobiles,
differentiated or concentrated is more suitable.
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product’s stage in the life cycle; when the product is new, it
is better to produce only one version of the product
- undifferentiated or concentrated marketing. For
mature products, differentiated marketing makes
more sense.
market variability; when buyers have the same tastes
and react the same way to marketing efforts,
undifferentiated marketing is suitable.
competitor’s marketing strategies; when competitors use
segmentation, undifferentiated marketing can be
suicidal. On the contrary, when competitors use
undifferentiated marketing, a firm can gain an
advantage by using differentiated or concentrated
marketing.
Positioning for Competitive
Advantage
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Once a company has decided which segments to
enter, it must decide what “positions” it wants to
occupy in those segments.
A product’s position is the place the product has
in consumer’s minds relative to competing
products.
Choosing a Value Proposition
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The company must also decide how it will serve
targeted customers – how it will differentiate
and position itself in the marketplace.
A company’s value proposition is the set of
benefits or values it promises to deliver to
customers to satisfy their needs. E.g. Northwest
Airlines punctual, friendly, fun flight; Singapore
Airlines luxurious, prestigious, special flight
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Such value propositions differentiate one brand
from another.
They answer the customer’s question “Why
should I buy your brand rather than a
competitor’s?”
Companies must design strong value
propositions that give them the greatest
advantage in their target markets.
Essentials for Effective Positioning
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Information on the needs of customers in
target markets and the benefits they look for,
A knowledge of the organization’s competitive
strengths and weaknesses,
A familiarity with competitors’ strengths and
weaknesses,
Information on how customers perceive the
organization relative to competitor.
Six Positioning Approaches
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Positioning on Specific Product Features
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physical attribute differentiation
service differentiation
personnel differentiation
location differentiation
image differentiation
Positioning on Benefits, Problem Solution, or Needs
Positioning for Specific Usage Occasions
Positioning for User Category
Positioning Against Another Product
Positioning by Product Class Dissociation
Useful Links and Sources
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Kotler, P.; Bowen, J. and Makens, J. (1999).
Marketing for Hospitality and Tourism (2nd ed.).
Prentice Hall. NJ.
Kotler, P. and Armstrong, G. (2006) Principles
of Marketing (11th ed.). Prentice Hall. NJ.
Middleton, V.T.C. (2004) Marketing in Travel
and Tourism (3rd ed). Elsevier. Oxford.
http://www.hotelsmag.com
http://www.tourism.bilkent.edu.tr/~eda