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Market Segmentation, Targeting and Positioning for Travel and Tourism


Market Segmentation, Targeting and Positioning for Travel and Tourism Objective: Introducing the meaning of marketing implications of segmentation, targeting and ... – PowerPoint PPT presentation

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Title: Market Segmentation, Targeting and Positioning for Travel and Tourism

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
  • Marketing management is the art and science of
    choosing target markets and building profitable
    relationships with them.
  • The marketing managers aim is to find, attract,
    keep, and grow target customers by creating,
    delivering, and communicating superior customer

  • Marketing management is in a way, demand
    (customer) management.
  • A companys 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.

  • To design a winning marketing strategy, the
    marketing manager must answer two important
  • What customers will we serve (whats our target
  • How can we serve these customers best (whats our
    value proposition)?

Selecting Customers to Serve
  • 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

  • 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
    segments 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
  • 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)

Note that most businesses deal not with one
segment, but several segments.
  • 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

Methods Used to Segment Markets in Travel and
  • 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
  • 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
  • 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, customers 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
  • 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

  • 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.

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Segmentation by buyer needs and benefits sought
  • 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.

  • 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
  • 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
  • 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
  • Dependent on sophisticated market research
  • Psychographics aims to define consumer on
    attitudinal or psychological rather than physical

Geodemographic segmentation
  • 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
  • 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

Market Targeting Evaluating Market Segments
  • 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
  • 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

  • margin. But smaller companies may find these
    large segments too competitive and may find
  • 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

Selecting Market Segments
  • The company must decide which and how many
    segments to serve, in other words, the company
    must decide which market-coverage strategy to
  • There are three market-coverage strategies
  • undifferentiated marketing
  • differentiated marketing
  • concentrated marketing

Undifferentiated Marketing
  • 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
  • The company designs a product and a marketing
    program that appeal to largest

  • number of buyers. It relies on mass advertising
    and a superior image in peoples 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

Differentiated Marketing
  • 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,
  • These companies hope for (1) higher sales (2) a
    strong place within each market segment (3) more
    loyal customers because the firms offerings
    match each segments desires better.

  • 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
  • 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 segments 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
  • Factors needed to be considered when choosing a
    market-coverage strategy are
  • company resources when the firms 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.

  • products 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.
  • competitors 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
  • Once a company has decided which segments to
    enter, it must decide what positions it wants
    to occupy in those segments.
  • A products position is the place the product has
    in consumers minds relative to competing

Choosing a Value Proposition
  • The company must also decide how it will serve
    targeted customers how it will differentiate
    and position itself in the marketplace.
  • A companys 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 customers question Why should I
    buy your brand rather than a competitors?
  • Companies must design strong value propositions
    that give them the greatest advantage in their
    target markets.

Essentials for Effective Positioning
  • Information on the needs of customers in target
    markets and the benefits they look for,
  • A knowledge of the organizations competitive
    strengths and weaknesses,
  • A familiarity with competitors strengths and
  • Information on how customers perceive the
    organization relative to competitor.

Six Positioning Approaches
  • Positioning on Specific Product Features
  • physical attribute differentiation
  • service differentiation
  • personnel differentiation
  • location differentiation
  • image differentiation
  • Positioning on Benefits, Problem Solution, or
  • Positioning for Specific Usage Occasions
  • Positioning for User Category
  • Positioning Against Another Product
  • Positioning by Product Class Dissociation

Useful Links and Sources
  • 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//
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