Learning Objectives Chapter 7 Marketing Strategy Market Segmentation

Learning Objectives Chapter 7: Marketing Strategy: Market Segmentation and Trends 1. Define market segmentation. 2. Explain the importance of segmentation to effective marketing. 3. Explain the benefits and limitations of market segmentation. 4. List the eight criteria used to determine the viability of market segments. 5. List the bases for segmenting hospitality and travel markets.

Learning Objectives Chapter 7: Marketing Strategy: Market Segmentation and Trends 6. Describe the major demand supply trends influencing today’s hospitality and travel industry. 7. Describe the recent trends in the segmentation practices of the hospitality and travel industry.

Market Segmentation “The division of the overall market for a service into groups with common characteristics. ”

Benefits of Market Segmentation 1. More effective use of marketing dollars. 2. Clearer understanding of the needs and wants of selected customer groups. 3. More effective positioning. 4. Greater precision in selecting promotional vehicles and techniques.

Limitations of Market Segmentation 1. More expensive than using a non-segmented approach. 2. Difficult to select the best base for segmenting a market. 3. Difficult to know how finely or broadly to segment. 4. Tendency to appeal to markets that are not viable.

Market Segmentation Analysis: Two Steps Step 1 SEGMENTING the Market Dividing the overall market into subgroups (“market segments”) using one or more factors. Step 2 SELECTING Target Markets Selecting those market segments (“target markets”) that the organization is best able to serve and appeal to.

Eight Criteria for Effective Segmentation The target markets must be: g Measurable g Substantial g Accessible g Defensible g Durable g Competitive g Homogeneous g Compatible

Seven Segmentation Bases g Geography g Demographics g Purpose of trip g Psychographics g Behavior g Product-related g Channel of distribution

Segmentation Approaches Depends on number of bases (factors) applied: g Single-stage segmentation (one base). g Two-stage segmentation (two bases). g Multi-stage segmentation (three or more bases).

Trends in Market Segmentation Usage in the Hospitality and Travel Industry g Becoming increasingly sophisticated. g Computer programs and databases assisting with more thorough segmentation analysis. g Switching from “traditional” segmentation bases to more sophisticated bases such as behavioral and psychographic.

Demand-led Trends g Changing age structures. Changing household structures. Changing household roles and responsibilities. Increasing importance of minorities. Changing social/cultural patterns and lifestyles. g Increased demand for specific travel alternatives. g g

Supply-side Trends g More emphasis on the frequent traveler. g g More attention to fitness and health needs. More attention to luxury/executive travelers. Increased emphasis on longer-stay travelers. Greater variety of ethnic food offerings.

Supply-side Trends g Increased supply of cruises, gambling, travel agencies, special-interest travel, etc. g Increased emphasis on weekend packages and other “mini-vacations. ” g More emphasis on female travelers. g Greater emphasis on convenience in services and on service quality.