MARKET SEGMENTATION

What is segmentation?Traditional marketing theory emphasises the importance of actively managing the segmentation, targeting and positioning process to inform the way in which tourism organisations implement the marketing concept and satisfy visitors and other tourism consumer needs successfully. In other words, segmentation aims to provide tourism organisations with a commercially viable method of understanding their markets and developing strategies for serving their consumers.

A tourism market consists of all those people with sufficient motivation, ability and opportunity to visit a destination or attraction. Market segmentation is a consumer-led technique that involves dividing the market into groups of like-minded people with similar needs, and behavioural characteristics and who therefore require similar tourism marketing mixes.

The more finely segmented the market, the greater the likelihood that the destination or attraction will be able to implement targeted marketing campaigns to usable, distinct groups of visitors rather than randomly marketing to the market generally. Market segmentation, therefore, has significant implications for the determination of tourism marketing strategy.

Before examining these innovative applications of data-driven multidimensional segmentation, it is useful to briefly review the conventional criteria used to segment markets.

Classical generic segmentation techniques

GeographicalAt a basic level, defines tourist consumers according to their geographic location on the assumption that behaviour is influenced by where people live.

Demographic

Attempts to define tourist consumers’ behaviour in relation to age, sex, family lifecycle stage, social class, income and other such criteria.

Psychographic

Assumes that tourist’s purchasing behaviour is related to their personality or lifestyle.

Behaviouristic

Focuses on tourist’s behaviour in relation to a particular tourism product, and attempts to segment the market based on differences in behaviour, for example the benefits sought, buying patterns and trends, or degree of loyalty.

Tourism markets can be segmented in a variety of ways. Each of the four basic techniques – geographic, demographic, psychographic and behaviouristic possess a number of advantages and disadvantages. Between them, they incorporate a wide range of descriptive, measurable, tangible and intangible characteristics.

The use of geographic and demographic segmentation methods as a basis for differentiating marketing strategies has traditionally been advocated by regional or demographic variations in tourist behaviour. These methods are a useful starting point for those tourism organisations constrained by limited resources to gain a better understanding of their market.They are relatively easy to define and measure and the data used to help segment the market is often freely available from public sources. In this respect they do provide a clear if rather restricted profile of visitors and other tourism consumers that could be used to develop marketing strategies such as deciding where and how to promote tourism products.

The travel market is often divided into four types of markets: personal business travel, government or corporate business travel, visiting friends and family, and leisure travel. Each type of market can be sub-divided further into segments. Market segmentation is based on the profiles of target groups and measuring the attractiveness of the market. Destinations select one or a few segments as their target markets and develop the products and marketing strategies accordingly. Effective market segmentation must exhibit the following characteristics:

(1) Measurability - the degree to which the size and purchasing power of the segments can be measured. Certain segmentation variables are difficult to measure;

(2) Accessibility – the degree to which the segment can be effectively reached and served;

(3) Substantiality – the degree to which the segments are large and /or profitable enough;

(4) Actionability – the degree to which effective programs can be designed for attracting and serving the segments.

Different criteria are applied in this research.

First, a regional perspective can identify a destination as an urban or a rural/peripheral area.

Second, types of accommodation distinguish the same ‘desires’ and ‘needs’ of tourists, therefore, it can identify the market segments.

Third, tourism markets show the potential directions for marketing, the same origins might have the same personal behaviors.

Fourth, after the above three criteria, the markets can be further segmented by tourist motivation and activities in order to understand what kind of products, services and experiences tourists really desire, then the market planners can have a deep understanding of tourists needs, so that they can make appropriate marketing strategies for the segments.

Tourism markets are characterized by multinational origin, multinational or multi-regional destinations and multiple motives. Segmentation criteria should consider the points mentioned above concerning measurability, accessibilities, substantiality of market segments. Destination planners should be aware of its comparative and competitive advantage in relation to

other destinations. Comparative advantage involves the resources available to a destination, while competitive advantage relates to a destination’s ability to use these resources Demographical trends in the main tourism markets and the changes in tourist motives should also be considered, as individual choice and tourism satisfaction do have influence on the destination development. Demographical trends in most western countries show growing shares of senior people and decreasing shares of young people in the population.

The purpose of analyzing the target markets and motivations for destination choice is to understand the needs and desire of tourists better. Destinations can use the analysis to make appropriate strategies for tourism products and marketing mix. The paper uses two typical destinations as case studies to show the difference both in destination attributes and tourism motives for visiting the destination. The marketing strategies discussed here are focused also on these two types of destination. It should be noticed that some destinations have both features, such as one destination could be a rural-coastal area that is also close to a large city; or a destination has both cultural heritage, and at the same time it has an attractive natural environment. It really depends on how large the destination area is defined. Another notice is that the authors do not suggest that each destination should only make their own marketing efforts; instead it is suggested to have a cooperative strategy between the different regions, coordinated by a national or regional tourism organization. Each accommodation would need to find the right balance between marketing through destination marketing organizations and accommodation brand marketing.

Ark Leisure - refined tourism segmentationThe Ark Leisure psychometric segmentation model consists of three main elements.

1. Aspirations (value statements that identify segments on the basis of perceptions and judgements of quality).

2. Life factors and choice drivers (such as income and stage in the family lifecycle).

3. Tourism purchase scenarios (eg accommodation and attraction preferences, purpose of trip, satisfaction with choices previously made, and other purchase drivers and determinants).

Ark Leisure Segmentation Model

Why Ark Leisure?The Ark Leisure segmentation is considered to be more relevant for segmenting leisure and tourism markets because it recognises that values and beliefs shape visitors’ touristic need requirements, which subsequently influence and shape their visit and/or purchase behaviour.

The inclusion of the purchase situation dimension provides an additional segmentation benefit as it reflects the fact that people make travel and other tourism-related decisions based on whether the destination or attraction meets both their aspirations as well as practical and personal requirements. An overview of the eight Ark Leisure segments and their associated descriptors is shown in following figure

Ark Leisure Segment Descriptors

Cosmopolitans

Strong, active, confident Style and brand important, but as an

expression of their self-made identity High spenders especially on innovation

and technology Looking for new challenges, new

experiences Globetrotters

Discoverers

Independent in mind and action Little influenced by style or brand but

interested in new options Buy on function and value to them Looking for new and educational

experiences

Traditionals

Self-reliant, internally referenced Slow to adopt new options Strong orientation towards traditional

values Value individual attention and service

Functionals

Self-reliant Price-driven Value function over style Traditional values, but interested in

new experiences, not risk averse

Habituals

Largely inactive, low spending group Very traditional, strongly resistant to

change Risk averse Value relaxation, peace and quiet

Followers

Strongly influenced by what others will think

Don’t want to be seen as old fashioned Less active Slow to adopt Avoid risk

High Street

Mainstream early adopters Followers of high street fashion Care what others think Happy to buy packaged options

Style Hounds

‘Young Free Single’, impulsive Fashion counts Brand counts Looking for fun with friends Most not seriously sporty

Market segmentation involves a division of the prospective market into identifiable groups. In simple words, it can be defined as the division of a market into groups of segments having similar wants. This theory is opposed to the diluting of efforts by appealing to an entire market. It is based on a realisation of the fact that a product can be sold more effectively if efforts are concentrated towards those groups which are most potential. Philip Kotter is of the view that different “competitors will be in the best position to go after particular segments of the market” and each “organisation, instead of trying to reach every one, should identify the most attractive parts of the market that it could effectively serve”. At the same he mentions that this is not always the practise. The organisations, in their thinking about operating in a market have generally passed through the following three stages:

1) Mass Marketing: This is a marketing style where the organisation makes efforts to attract every eligible buyer to use its product which has been mass produced and will be mass distributed. Here no attention is paid to consumer preferences.

Organisation Product Mass Market

2) Product Differentiated Marketing: In this marketing style the organisation produces two or more products for the entire market. These products might have different characteristics but they are not designed for any different group(s). Rather they only provide alternatives to every buyer in the market.

Product

Organisation Market (Two Options)

Product

3) Target Marketing: Here, the organisation:

• differentiates amongst varied market segments,

• focuses on one or more of these segments (targets), and

• develops the product to meet the needs of the target market.

Organisation Product Segment 1 Segment 3

Segment 2 Segment 4

SEGMENTATION AND TARGETTING APPROACHES IN TOURISM

It is true that product can be sold more effectively if efforts are concentrated towards those groups which are most potential. In the words of Philip Kotler, “Competitors will be in the best position to go after particular segments of the markets and each organisation instead of trying to reach everyone, should identify the most attractive parts of market that it would effectively serve ”. He also acknowledges that in practice marketers operating in the markets have generally passed through following three stages:

Mass Marketing

• Efforts are made to attract every eligible buyers

• No attention is paid to consumer preferences, e.g., airline for every one who can afford, same by all airlines.

Target Marketing• Varied segments are differentiated

• Focus on one or two of these segments

• Products are developed to meet their needs, e.g., operating of short/shuttle services between popular business destinations for corporate travellers or for pilgrims. For international pilgrimages, Haj, etc. and for domestic, Vaishnodevi, Kedarnath, Ajmer, Neelkanth, etc.

Product Differentiated Segm entation

• Organisation produces two or more products for entire market but produces specialised products for particular groups

• Only to provide alternatives to every buyer in the market, e.g., an airline offering different classes. “J” class, “Y” class, Royal Class, etc. Some airlines provide more leg and luggage space according to their class ofjourney.

The purpose of market segmentation in tourism marketing is to:

• Segment the markets generating tourists, and

• Identify the prospective tourists according to lifestyles, socio-economic status, attitudes about travel, etc.

This is done to best qualify these tourists for high prospect customer status. This high potential prospect is defined in terms of how closely

his/her vacation preferences and lifestyles match up to what the destination has to offer. In other words, the purpose is to go for cost -effective marketing. This can be achieved by designing, promoting and delivering the tourism products or services in such ways that the identical needs of the target groups are satisfied. A crucial aspect here is what is grouped in forming market segments. Consumers are not mutually exclusive categories and what is grouped together is the customers’ probability of purchasing different types of product offers. Hence, it is necessary to understand what is wanted and who is going to buy it. A marketing person has to gain knowledge about this and he or she can approach this problem by asking certain questions like:

What

• factors influence the tourist demand?

• services do the tourists expect?

• is the basis for tourists comparing your product with other products?

• benefits do the tourists seek?

• risks do the tourists perceive?

• are the tastes of the tourist?

How

• do tourists buy ?

• much are the tourists willing to spend?

• many vacations do the tourists take in a year?

• does promotion and advertising effect the tourists’ demand?

• does the product fit into the life styles of tourists?

Where

• is the decision made by tourists to buy?

• do the tourists seek information about the product?

• do the tourists buy the product?

When

• do the tourists take a vacation?

• do the tourists make a decision to buy the product?

• is the product repurchased?

Why

• do the tourists buy your product?

• do the tourists choose one destination over the other?

• do the tourists go to a particular destination?

• do the tourists prefer one type of service and not the other?

• do the tourists buy your competitors’ products?

Who

• buys your product?

• buys your competitors’ products?

• are likely to buy your product?

• may not be interested in your product?

Depending upon the study’s purpose, various approaches are employed in the tourism industry to identify market segments. Segments can be defined either by descriptive or casual factors. Descriptive factors simply describe the characteristics of the person found in a segment. The “why” of a person’s action, however, is better obtained through additional use of causal factor information which identifies the motivation behind a decision.

A practical and Actionable Segmentation requires profiling of both:

• Past visitors, and

• Prospective visitors.

This is done to ensure proper matches and to determine the actual size of each high potential segment, in terms of:

• Geographics,

• Deomgraphis

• Psychographics, and

• Travel Habits.

In other words, we can say that the:

Target for Marketing = Characteristics + Demographic profile(of Consumers, Products and Services)The studies of marketing experts like Kotler and Chisnall show that in order to make any segment actionable for marketing, each segment must be:

1) Discrete, i.e., the separate identity of the sub-group must be established by using any criteria like income, purpose, interest, etc.

2) Measurable, i.e., the characteristics that distinguish the sub-groups should be measurable through the available data.

3) Viable, i.e., the projected earnings to be achieved should be more than the costs of designing the market mix.

4) Appropriate, i.e., showing the inseparability of the tourism product which should contribute to the overall image in the market.

I n practice , th e groun d fo r touris m marke t segmentatio n shal l be , o f course , o n t h e basi s of:

a) Geographic factors

b) Demographic profiles,

c) Psychographic

attitudes

d) Behavioural situations, and

e) Prices