Segmentation, Segmentation, Targeting and Targeting and

PositioningPositioningObjectiveObjective: Discussing the importance of : Discussing the importance of

segmentation, targeting and positioning in the segmentation, targeting and positioning in the communication process. communication process.

Importance of TargetingImportance of Targeting

In order to create effective In order to create effective marketing communications, marketing communications, managers need to identify their managers need to identify their companies’ target market(s) and companies’ target market(s) and then direct their communications to then direct their communications to these people. these people.

Messages need to be designed and Messages need to be designed and positioned in a way to connect to positioned in a way to connect to and attact specific target markets. and attact specific target markets.

MarketsMarkets

Originally, a Originally, a marketmarket is is defined as defined as a physical a physical place where buyers and sellers gather to place where buyers and sellers gather to exchange goods and services.exchange goods and services.

In marketing, a In marketing, a marketmarket is the set of all actual is the set of all actual and potential buyers of a product or service.and potential buyers of a product or service.

Since people’s buying behaviors and Since people’s buying behaviors and characteristics differ, it is not possible to characteristics differ, it is not possible to satisfy all consumers in the market for many satisfy all consumers in the market for many tourism and hospitality services. Therefore, tourism and hospitality services. Therefore, they need to determine target markets for they need to determine target markets for their operations. This task involves three their operations. This task involves three steps. steps.

Steps in Target Steps in Target MarketingMarketing

1. 1. Market segmentationMarket segmentation; dividing a market into ; dividing a market into distinct groups of buyers with different distinct groups of buyers with different needs, characteristics or behaviors who needs, characteristics or behaviors who might require separate products or might require separate products or marketing mixes. marketing mixes.

2. 2. Market targetingMarket targeting; evaluating each market ; evaluating each market segment’s attractiveness and selecting one or segment’s attractiveness and selecting one or more of the market segments to enter.more of the market segments to enter.

3. 3. Market positioningMarket positioning; setting the competitive ; setting the competitive positioning (difference) for the product and positioning (difference) for the product and creating a detailed marketing mix.creating a detailed marketing mix.

Market SegmentationMarket Segmentation

Involves the following steps;Involves the following steps;

1.1. Identifying bases for segmenting Identifying bases for segmenting the marketthe market

2.2. Developing profiles of resulting Developing profiles of resulting segments segments

Market TargetingMarket Targeting

Involves the following steps;Involves the following steps;

3.3. Developing measures of segment Developing measures of segment attractivenessattractiveness

4.4. Selecting the target segmentsSelecting the target segments

Market PositioningMarket Positioning

Involves the following steps;Involves the following steps;

5.5. Developing positioning for each Developing positioning for each segmentsegment

6.6. Developing marketing mix for each Developing marketing mix for each target segmenttarget segment

Bases Bases of Market of Market SegmentationSegmentation

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

Demographic Demographic SegmentationSegmentation

Companies divide the market into Companies divide the market into groups based on;groups based on; age and lifeage and life stage stage: needs and wants change : needs and wants change

with age, that is why, with age, that is why, tourism and tourism and hospitality organizationshospitality organizations may use different may use different marketing approaches for different age and marketing approaches for different age and lifelife stage stage. . E.g. Families with young children E.g. Families with young children have different requirements from a holiday have different requirements from a holiday compared to singles. Accordingly, the compared to singles. Accordingly, the package holiday market is mostly package holiday market is mostly segmented by age. segmented by age.

gendergender: : men and women have different men and women have different tastes and values. Accordingly marketing tastes and values. Accordingly marketing messages should be designed based on messages should be designed based on the targeted gender to be effective.the targeted gender to be effective.

sexual orientationsexual orientation: becoming a key : becoming a key segmentation variable for tourism and segmentation variable for tourism and hospitality organizations and destinations. hospitality organizations and destinations. Some destinations are known for Some destinations are known for attracting these groups e.g. Mykonos.attracting these groups e.g. Mykonos.

ethnicity and cultural backgroundethnicity and cultural background: race : race and ethnicity are also important variables and ethnicity are also important variables as cultural norms and customs influence as cultural norms and customs influence food choices, attitudes towards travel, food choices, attitudes towards travel, holidays and destinations. E.g. Visiting holidays and destinations. E.g. Visiting family and relatives during Bayram.family and relatives during Bayram.

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

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

Behavioral SegmentationBehavioral Segmentation

Companies may divide buyers into groups Companies may divide buyers into groups based on their knowledge, attitudes, uses or based on their knowledge, attitudes, uses or responses to a product. responses to a product. benefit soughtbenefit sought from the experience from the experience: :

benefit segmentation considers the benefit segmentation considers the reasons why people buy tourism and reasons why people buy tourism and hospitality services. While leisure hospitality services. While leisure travelers may look for otal relaxation, or travelers may look for otal relaxation, or authentic experiences, business travelers authentic experiences, business travelers would be interested in the speed of would be interested in the speed of service, access to wireless internet etc. service, access to wireless internet etc.

As service As service benefitsbenefits, one of the following , one of the following product categories can be used;product categories can be used; Product benefitProduct benefit (core product):(core product): at the heart of at the heart of

the holiday experience, a set of values may be the holiday experience, a set of values may be offered as the main benefit e.g. ultimate offered as the main benefit e.g. ultimate luxury, paradise, total pampering, economy, luxury, paradise, total pampering, economy, etc.etc.

Product attributes (actual product):Product attributes (actual product): tangible tangible features of the service, servicescape or the features of the service, servicescape or the physical evidence, design, branding and physical evidence, design, branding and packaging may be offered as the main packaging may be offered as the main benefits.benefits.

Marketing support services (augmented Marketing support services (augmented product):product): including after-sales services, including after-sales services, guarantees, customer loyalty schemes, guarantees, customer loyalty schemes, etc.These can contribute to the benefits etc.These can contribute to the benefits sought. sought.

attitudes, perceptions, values, beliefsattitudes, perceptions, values, beliefs: as : as they are strongly linked to behavior, they they are strongly linked to behavior, they are helpful to understand how customers are helpful to understand how customers groups view tourism and hospitality groups view tourism and hospitality services. E.g. Backpackers.services. E.g. Backpackers.

decision-making processesdecision-making processes: brand loyalty, : brand loyalty, risk perception, adption of new innovations, risk perception, adption of new innovations, choice criteria, selection variables are choice criteria, selection variables are examples that influence decision making. examples that influence decision making.

usage patterns/frequency of useusage patterns/frequency of use: purchase : purchase occasions and type of use are important occasions and type of use are important segmentation variables for tourism and segmentation variables for tourism and hospitality e.g. leisure, business, hospitality e.g. leisure, business, convention, special occasion, overnight, convention, special occasion, overnight, short break, etc. short break, etc.

Psychographic Psychographic SegmentationSegmentation

Companies may Companies may also also divide the market into divide the market into different groups based on;different groups based on; ppersonalityersonality and identity and identity: : very useful for very useful for

tourism and hospitality services as these tourism and hospitality services as these services are consumed as an expression services are consumed as an expression of self-identity and personality. of self-identity and personality. Participation in certain leisure activites Participation in certain leisure activites are an expression of personality. are an expression of personality.

lifestylelifestyle: : this segmentation based on this segmentation based on activities, interests and opinions is also activities, interests and opinions is also common for tourism and hospitality. common for tourism and hospitality. Mezzaluna targets to a business lifestyle, Mezzaluna targets to a business lifestyle, whereas the rest of the restaurants in whereas the rest of the restaurants in Ankuva to a student lifestyle.Ankuva to a student lifestyle.

Target MarketingTarget Marketing

After segmenting the whole market, After segmenting the whole market, the the firm has to evaluate these segmentsfirm has to evaluate these segments and and decide how many and which ones to decide how many and which ones to target. The company should enter target. The company should enter segments only where it can offer superior segments only where it can offer superior value and gain advantages over value and gain advantages over competitors.competitors.

In evaluating different market In evaluating different market segments, a firm segments, a firm cancan look at look at whether whether the segment is;the segment is; AttainableAttainable MeasurableMeasurable Large enoughLarge enough DefendableDefendable SustainableSustainable

Selecting Market Selecting Market SegmentsSegments

The company must decide which and how The company must decide which and how many segments to serve, in other words, the many segments to serve, in other words, the company must decide which market-company must decide which market-coverage strategy to adopt.coverage strategy to adopt.

There are three market-coverage strategies:There are three market-coverage strategies: undifferentiated marketingundifferentiated marketing (exclusive (exclusive

segmentation)segmentation) differentiated marketingdifferentiated marketing (selective (selective

segmentation)segmentation) concentrated marketingconcentrated marketing (single segmentation) (single segmentation)

Undifferentiated Undifferentiated MarketingMarketing

A market-coverage strategy in which a A market-coverage strategy in which a firm decides to ignore market segment firm decides to ignore market segment differences and go after the whole differences and go after the whole market with one offer.market with one offer.

Here, the offer focus on what is common Here, the offer focus on what is common in the needs of consumers rather than on in the needs of consumers rather than on what is different. what is different.

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

It relies on mass advertising and a It relies on mass advertising and a superior image in people’s minds. superior image in people’s minds.

Provides cost effectiveness because of Provides cost effectiveness because of its low production, inventory, its low production, inventory, transportation, advertising, marketing transportation, advertising, marketing research costs.research costs.

Have difficulties in (1) developing a Have difficulties in (1) developing a product or brand that satisfies all product or brand that satisfies all consumers; (2) keeping a strong place consumers; (2) keeping a strong place in the market and making profit, when in the market and making profit, when several firms follow this strategy heavy several firms follow this strategy heavy competition develops; (3) satisfying competition develops; (3) satisfying smaller segments.smaller segments.

Differentiated MarketingDifferentiated Marketing

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

These companies hope for (1) higher sales; These companies hope for (1) higher sales; (2) a strong place within each market (2) a strong place within each market segment; (3) more loyal customers because segment; (3) more loyal customers because the firm’s offerings match each segment’s the firm’s offerings match each segment’s desires better.desires better.

Creates better total sales, but Creates better total sales, but increases the costs - developing increases the costs - developing separate marketing plans for the separate marketing plans for the separate segments requires extra separate segments requires extra marketing research, sales analysis, marketing research, sales analysis, promotional planning, channel promotional planning, channel management. management.

Because of the high costs involved in Because of the high costs involved in this approach, the company must this approach, the company must compare increased sales with compare increased sales with increased costs when deciding to use increased costs when deciding to use differentiated marketing strategy. differentiated marketing strategy.

Concentrated MarketingConcentrated Marketing

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

Suitable for smaller companies to achieve Suitable for smaller companies to achieve a strong market place in the segments (or a strong market place in the segments (or niches) that it serves because of its niches) that it serves because of its greater knowledge of the segment’s needs.greater knowledge of the segment’s needs.

Involves higher-than-normal risks Involves higher-than-normal risks because the target may not respond because the target may not respond or larger competitors may decide to or larger competitors may decide to enter the same market but offers enter the same market but offers operating economies because of operating economies because of specialization in production, specialization in production, distribution, and promotion.distribution, and promotion.

Market PositioningMarket Positioning

Once a company has decided which Once a company has decided which segments to enter, it must decide segments to enter, it must decide what “positions” it wants to occupy in what “positions” it wants to occupy in those segments.those segments.

A product’s position is the place the A product’s position is the place the product has in consumer’s minds product has in consumer’s minds relative to competing products. In relative to competing products. In other words, a product’s position is other words, a product’s position is the set of perceptions, impressions, the set of perceptions, impressions, and feelings that consumersand feelings that consumers

hold for the product compared with hold for the product compared with competing products. E.g. competing products. E.g. Southwest Southwest airlinesairlines is positioned on economy, is positioned on economy, Ritz and Four SeasonsRitz and Four Seasons on luxury on luxury..

Consumers simplify the buying Consumers simplify the buying process by categorizing products in process by categorizing products in their minds. Marketers do not leave their minds. Marketers do not leave their products’ positions to chance. their products’ positions to chance. They must plan positions that will They must plan positions that will give their products the greatest give their products the greatest advantage in selected target advantage in selected target markets. markets.

Marketing communications are based Marketing communications are based upon positioning statements expressed upon positioning statements expressed in the slogans of the firms. in the slogans of the firms.

While product positioning are mostly While product positioning are mostly based on technical features, quality, based on technical features, quality, packages, design, etc., tourism and packages, design, etc., tourism and hospitality services are largely hospitality services are largely positioned on physical qualities or positioned on physical qualities or attributes of the destination based on attributes of the destination based on the following resources; the following resources; Culture and society, heritage, wildlife, Culture and society, heritage, wildlife,

climate, landscape and physical attributes. climate, landscape and physical attributes.

In reality, marketers position their In reality, marketers position their products/services based on any aspect of the products/services based on any aspect of the marketing mix. marketing mix.

The following positioning strategies are The following positioning strategies are particularly used for tourism and hospitality particularly used for tourism and hospitality services;services; image/brandimage/brand price/value dimensionprice/value dimension referrals/testimonials/endorsementsreferrals/testimonials/endorsements physical evidence/destination physical evidence/destination

resources/product attributesresources/product attributes loyalty schemes/service loyalty schemes/service

guarantees/membership servicesguarantees/membership services access/place/distributionaccess/place/distribution people and service quality/service deliverypeople and service quality/service delivery

ResourcesResources

McCabe, S. (2009). Marketing McCabe, S. (2009). Marketing Communications in Tourism and Communications in Tourism and Hospitality: Concepts, Strategies and Hospitality: Concepts, Strategies and Cases. Butterworth-Heinemann: Oxford. Cases. Butterworth-Heinemann: Oxford.

Kotler, P.; Bowen, J. and Makens, J. (Kotler, P.; Bowen, J. and Makens, J. (20102010). ). Marketing for Hospitality and Tourism (Marketing for Hospitality and Tourism (5th. 5th. ed.). Prentice Halled.). Prentice Hall: New Jersey.: New Jersey.

Kotler, P. and Armstrong, G. (20Kotler, P. and Armstrong, G. (201010) ) Principles of Marketing (1Principles of Marketing (133th ed.). Prentice th ed.). Prentice HallHall: New Jersey.: New Jersey.