Segmentation, Targeting and Positioning

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Segmentation, Targeting and Positioning

• Objective Discussing the importance of
  segmentation, targeting and positioning in the
  communication process.

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Importance of Targeting

• In order to create effective marketing
  communications, managers need to identify their
  companies target market(s) and then direct their
  communications to these people.
• Messages need to be designed and positioned in a
  way to connect to and attact specific target
  markets.

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Markets

• Originally, a market is defined as a physical
  place where buyers and sellers gather to exchange
  goods and services.
• In marketing, a market is the set of all actual
  and potential buyers of a product or service.
• Since peoples buying behaviors and
  characteristics differ, it is not possible to
  satisfy all consumers in the market for many
  tourism and hospitality services. Therefore, they
  need to determine target markets for their
  operations. This task involves three steps.

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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.

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Market Segmentation

• Involves the following steps
• Identifying bases for segmenting the market
• Developing profiles of resulting segments

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Market Targeting

• Involves the following steps
• Developing measures of segment attractiveness
• Selecting the target segments

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Market Positioning

• Involves the following steps
• Developing positioning for each segment
• Developing marketing mix for each target segment

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Bases of Market Segmentation

• There are various ways to segment a market. A
  marketer has to try different segmentation
  variables, alone and in combination to understand
  the structure of the market in the best way. The
  following are the major ones used to segment
  tourism and hospitality markets
• demographic segmentation
• behavioral segmentation
• psychographic segmentation

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Demographic Segmentation

• Companies divide the market into groups based on
• age and life stage needs and wants change with
  age, that is why, tourism and hospitality
  organizations may use different marketing
  approaches for different age and life stage. E.g.
  Families with young children have different
  requirements from a holiday compared to singles.
  Accordingly, the package holiday market is mostly
  segmented by age.

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• gender men and women have different tastes and
  values. Accordingly marketing messages should be
  designed based on the targeted gender to be
  effective.
• sexual orientation becoming a key segmentation
  variable for tourism and hospitality
  organizations and destinations. Some destinations
  are known for attracting these groups e.g.
  Mykonos.
• ethnicity and cultural background race and
  ethnicity are also important variables as
  cultural norms and customs influence food
  choices, attitudes towards travel, holidays and
  destinations. E.g. Visiting family and relatives
  during Bayram.

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• socio economic variables include occupation,
  income, education and social class. Although
  social classes differ by country, they are quite
  useful and easy to measure. In the same social
  class, people have similar consumption patterns,
  tastes, lifestyles and values. Since people in
  different social classes differ in what they
  read, which TV programs to watch and what
  activities they take, social class is a very
  important base in seg is mainly used for
  automobiles, boats, clothing, cosmetics,
  financial servicesmentation in designing arketing
  communications. People also differ by income.
  Accordingly tourism and hospitality operations
  offer different products, e.g. Holiday Inn offers
  upscale properties Crowne Plaza, economy
  properties Hampton Inn, luxury Embassy Suites

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• geographic region can be used in terms of pure
  geographic region, or in combination with
  demographic (geodemographic) variables by tourism
  and hospitality firms, e.g. higher income
  consumers live in the European side of Istanbul.

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Behavioral Segmentation

• Companies may divide buyers into groups based on
  their knowledge, attitudes, uses or responses to
  a product.
• benefit sought from the experience benefit
  segmentation considers the reasons why people buy
  tourism and hospitality services. While leisure
  travelers may look for otal relaxation, or
  authentic experiences, business travelers would
  be interested in the speed of service, access to
  wireless internet etc.

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• As service benefits, one of the following product
  categories can be used
• Product benefit (core product) at the heart of
  the holiday experience, a set of values may be
  offered as the main benefit e.g. ultimate luxury,
  paradise, total pampering, economy, etc.
• Product attributes (actual product) tangible
  features of the service, servicescape or the
  physical evidence, design, branding and packaging
  may be offered as the main benefits.
• Marketing support services (augmented product)
  including after-sales services, guarantees,
  customer loyalty schemes, etc.These can
  contribute to the benefits sought.

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• attitudes, perceptions, values, beliefs as they
  are strongly linked to behavior, they are helpful
  to understand how customers groups view tourism
  and hospitality services. E.g. Backpackers.
• decision-making processes brand loyalty, risk
  perception, adption of new innovations, choice
  criteria, selection variables are examples that
  influence decision making.
• usage patterns/frequency of use purchase
  occasions and type of use are important
  segmentation variables for tourism and
  hospitality e.g. leisure, business, convention,
  special occasion, overnight, short break, etc.

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Psychographic Segmentation

• Companies may also divide the market into
  different groups based on
• personality and identity very useful for tourism
  and hospitality services as these services are
  consumed as an expression of self-identity and
  personality. Participation in certain leisure
  activites are an expression of personality.
• lifestyle this segmentation based on activities,
  interests and opinions is also common for tourism
  and hospitality. Mezzaluna targets to a business
  lifestyle, whereas the rest of the restaurants in
  Ankuva to a student lifestyle.

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Target Marketing

• 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.

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• In evaluating different market segments, a firm
  can look at whether the segment is
• Attainable
• Measurable
• Large enough
• Defendable
• Sustainable

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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
  adopt.
• There are three market-coverage strategies
• undifferentiated marketing (exclusive
  segmentation)
• differentiated marketing (selective segmentation)
• concentrated marketing (single segmentation)

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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
  different.
• The company designs a product and a marketing
  program that appeal to largest number of buyers.

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• 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.

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Differentiated Marketing

• A coverage strategy in which a firm decides to
  target several market segments and designs
  separate offers for each. E.g. ETS tour offers a
  range of different products for different groups
  including cruise vacations, city breaks, culture
  tours, domestic and foreign tour packages, etc.
• 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.

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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.

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Concentrated Marketing

• A market-coverage strategy in which a firm goes
  after a large share of one or a few submarkets.
  E.g. Saga Holidays concentrate on the over 50s
  age group, Solos Holidays targets the single
  traveler market.
• 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.

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• 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.

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Market Positioning

• 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. In other words, a products position is
  the set of perceptions, impressions, and feelings
  that consumers

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• hold for the product compared with competing
  products. E.g. Southwest airlines is positioned
  on economy, Ritz and Four Seasons on luxury.
• Consumers simplify the buying process by
  categorizing products in their minds. Marketers
  do not leave their products positions to chance.
  They must plan positions that will give their
  products the greatest advantage in selected
  target markets.

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• Marketing communications are based upon
  positioning statements expressed in the slogans
  of the firms.
• While product positioning are mostly based on
  technical features, quality, packages, design,
  etc., tourism and hospitality services are
  largely positioned on physical qualities or
  attributes of the destination based on the
  following resources
• Culture and society, heritage, wildlife, climate,
  landscape and physical attributes.

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• In reality, marketers position their
  products/services based on any aspect of the
  marketing mix.
• The following positioning strategies are
  particularly used for tourism and hospitality
  services
• image/brand
• price/value dimension
• referrals/testimonials/endorsements
• physical evidence/destination resources/product
  attributes
• loyalty schemes/service guarantees/membership
  services
• access/place/distribution
• people and service quality/service delivery

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Resources

• McCabe, S. (2009). Marketing Communications in
  Tourism and Hospitality Concepts, Strategies and
  Cases. Butterworth-Heinemann Oxford.
• Kotler, P. Bowen, J. and Makens, J. (2010).
  Marketing for Hospitality and Tourism (5th. ed.).
  Prentice Hall New Jersey.
• Kotler, P. and Armstrong, G. (2010) Principles of
  Marketing (13th ed.). Prentice Hall New Jersey.