Title: Market Segmentation, Targeting and Positioning for Travel and Tourism
1Market Segmentation, Targeting and Positioning
for Travel and Tourism
- Objective Introducing the meaning of marketing
implications of segmentation, targeting and
positiong for travel and tourism.
2Marketing 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
value.
3- 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.
4- To design a winning marketing strategy, the
marketing manager must answer two important
questions - What customers will we serve (whats our target
market)? - How can we serve these customers best (whats our
value proposition)?
5Selecting 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
marketing).
6- 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.
7Steps 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.
8Benefits 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)
9Note 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
10Methods Used to Segment Markets in Travel and
Tourism
- 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
11Segmentation 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.
12Multiple 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
13- 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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15Segmentation 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.
16- 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.
17Segmentation 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.
18Segmentation 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.
19Segmentation by psychographic characteristics and
lifestyle
- Dependent on sophisticated market research
techniques. - Psychographics aims to define consumer on
attitudinal or psychological rather than physical
dimensions.
20Geodemographic 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.
21Segmentation 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
pricing.
22Market 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
23- 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.
24Selecting 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
adopt. - There are three market-coverage strategies
- undifferentiated marketing
- differentiated marketing
- concentrated marketing
25Undifferentiated 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
different. - The company designs a product and a marketing
program that appeal to largest
26- 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
segments.
27Differentiated 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,
tennis - 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.
28- 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.
29Concentrated 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.
30Choosing 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.
31- 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.
32Positioning 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
products.
33Choosing 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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39- 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.
40Essentials 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
weaknesses, - Information on how customers perceive the
organization relative to competitor.
41Six Positioning Approaches
- Positioning on Specific Product Features
- 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
42Useful 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//www.hotelsmag.com
- http//www.tourism.bilkent.edu.tr/eda