SEGMENTING AND

TARGETING
POSITIONING

Market segmentation
The word market refers not to a place but rather to all possible
consumers who might conceivably purchase the product. The
market is the largest number of consumers that could potentially be
reached with a promotional message.
Market refers to the people or organization that have the ability to
purchase a product/ service.
A market segment refers to a group of consumers in the market
who all share at least one and usually more characteristics. These
segments can be based on either external or internal characteristics.
A market segment consists of a large identifiable group within a
market, with similar wants, purchasing power, geographical location,
buying attitudes, or buying habits.

Definition of market segmentation

Market segmentation refers to the process of classifying
customers into groups based on different needs,
characteristics or behavior (Sarigll and Huang, 2005).
Market segmentation is a process through which people
with similar needs, wants, and characteristics are grouped
together so that a tourism organization can use greater
precision in serving and communicating with these.
Segmentation is defined as the process of dividing a total
market such as all visitors, or market sectors such as
holiday travel or business travel, into subgroups or
segments for marketing management purposes.

Market segmentation is the process of dividing up the

total market into identifiable, measurable and discrete
groups who share some common characteristics or needs
and whose attitudes or reactions towards
communications messages about products or services
might be similar.
Note: Market segmentation was identified as a
prerequisite for any organization endeavoring to create
products to fit customers' needs.
The segmentation concept was first developed by
Smith in 1957 and is concerned with grouping consumers
in terms of their needs.

Factors/ basis /Variables

commonly used for market
segmentation

So, how do tourism and hospitality organizations

segment their markets? Well, there are several types of
variables commonly used for market segmentation, and
these are
Geographic variables
Demographic variables
Psychographic, variables
behavioral variables.
Purpose
Price

Basis Of Market Segmentation

Geographic variables, Buyers are divided into different
segments based on such geographic units as nations,
states, regions, cities etc.. Buyers preferences may vary
because of their geographic differences.
Demographic variables, Buyers are divided into
different segments based on such variables as age,
gender, income, family size, educational level,
occupation, etc.. Buyers preferences may vary because
of their demographic differences.

Behaviour segmentation divides the market into

groups based on the various types of buying behaviour.
Common bases include usage rate (light, medium, and
heavy),
user status (former users, non-users, potential users,
first-time users, and regular users of a product),
loyalty status (many people stay in five-star hotels as
much for the status it confers on them as for the
additional
comfort),
buyer-readiness
stage,
and
occasions.

Psychographic Segmentation
In Psychographic Segmentation, segments are defined on
the basis of social class, lifestyle and personality
characteristics.
Afternoon tea at some restaurants is targeted at the
upper-middle and upper classes (i.e. the markets are
segmented based on social class).

Concluding example: The following is a list of initiatives commonly taken

by hotels worldwide; which clearly reflect the ways that the hotel industry
segments its markets.
a) A Ladies Executive Floor is exclusively provided for female executive
travelers given that women have accounted for more and more of all
business travelers in many developed or developing countries
(Demographic segmentation).
b) Spa has become popular among travelers in recent years. Thus, certain
city hotels (ex. the Langham Place in Hong Kong) have positioned themselves
as a true spa hotel in the region (Psychographic segmentation).
c) Many hotels segment their markets based on the origin of the guests (i.e.
American, Chinese, English, etc.) for effective promotional efforts and
advertising (Geographic segmentation).
d) Many hotels also segment their markets based on their frequency and
length of stay in order to formulate a marketing plan to increase loyalty and
frequency of use even further (Behavioral segmentation)

Requirements / Characteristic /
Criteria for Effective
Segmentation
A segment must fulfil the following requirements if it is to be successfully
exploited:
Measurable, it must be measured in terms of size and purchasing power other
variables
Accessible, it must be reached through promotion with existing or potential
distribution channels.
Substantial or large enough or profitable enough to serve as a target market
Durable in terms of continuing over time, sustainable. Segment should not have
frequent changes attribute in it.
Competitive in terms of providing an advantage over the competition by serving
this segment.
Appropriate, the segment must appropriate with company resources and policy

Steps in Segmenting Markets

There is a logical sequence that can be followed during
market segmentation. The stages of the segmentation
process.
1 Specification. The market to be researched and segmented
needs to be clearly identified, taking a broad definition of consumers
needs and wants in the sector.
2 Establish segmentation criteria. A set of criteria needs to be
developed against which the various segmentation opportunities can
be evaluated for market attractiveness. Segmented markets should
be:
Measurable, Accessible, Substantial, Durable

3 Generate segmentation variables. Segmentation

variables provide the basis for classifying consumers into
different market segments, Hospitality segmentation
variables include purpose of visit; geo-demographics;
buyer, user and lifestyle characteristics; price; and time.
Develop market segment profiles based on
segmentation variables. Detailed market segment
profiles include the size of the market in terms of value
and volume, customer purchase details (frequency of
visit, average room/food/bar spend, number in party),
consumer
characteristics
(benefits
sought,
price
sensitivity),
and
accessibility/responsiveness
to
marketing programs.

5 Evaluate the companys competencies. The

company needs to ensure that it has the competencies
and resources to serve and satisfy the segments needs
and wants profitably.

Advantages of segmentation
Customer analysis, by segmenting, the firm can get to understand its best
customers better.
Competitor analysis, it is much easier to recognize and combat
competition when concentrating on one small part of the overall market.
Effective resource allocation, Companies scarce resources can be
concentrated more effectively on a few consumers, rather than spread
thinly across the masses.
Strategic marketing Planning, Planning becomes easier once the firm
has a clear picture of its best customers.
Expanding the market, Good segmentation can increase the overall size
of the market by bringing in new customers who fit the profile of the typical
customer, but were previously unaware of the product

customers 'loyalty, Segmentation is more likely to

result in instilling customers loyalty since the firms
offering is better matched to those in the segment.
Production of demanded product or service, The
company can create a more fine-tuned product or service
offer and price it appropriately for the target audience.
The choice of distribution channels and communication
channels becomes much easier.
Segmentation improves profitability by maximizing
customer satisfaction, and generating repeat and
recommended sales.

Limitation of market
segmentation
The costs of carrying out marketing research
The additional costs of developing and communicating
separate offers for different
target markets
The complexity of constantly changing consumer
behavior

Marketing targeting
After the market has been divided into segments, the tourism marketer
then chooses the one or more segments most likely to enjoy a visit and
then aims the promotional message to these groups.
The word targeting refers to this process of choosing the segment or
segments to which the firm decides to communicate its message.
Targeting is defined as The process of evaluating segments and
focusing marketing efforts on a country, region, or group of people that
has significant potential to respond.
Target market (also called the served market) group of people a firm
believes is most likely to buy its goods and services

Approaches/ Strategies for

Reaching Target Markets
Differentiated Marketing (Multiple Segmentation) is the strategy
in which a firm decides to operate in two or more segments of the
market but designs separate product and / or marketing programs
for each.
This is strategy in which a firm produces numerous products and
promotes them with a different marketing mix designed to satisfy
smaller segments
Examples Holiday Inn aims to attract business travelers during the
week, but aims for the leisure market at the weekend, and
promotes to families. At the weekend, the hotels often have events
for children and special room rates for families.

Concentrated Marketing (niche marketing) This is also

known as single segment. when a firm commits all of
its marketing resources to serve a single market
segment. Attractive to small firms with limited resources
and to firms offering highly specialized goods and
services.
Undifferentiated Marketing (Mass Marketing) is the
strategy by which the firm ignores market-segment
differences and goes after the whole market with one
market offer. Focusing on a basic buyer need, it designs a
product and a marketing program that will appeal to the
broadest number of buyers.

Product Positioning
Product Positioning is the process whereby tourism and
hospitality companies try to develop a distinctive and
favorable position in the minds of target markets, compared
to competitors.
Product Positioning is the development of a service and
marketing mix to occupy a specific place in the minds of
customers within target markets.
The purpose of positioning is to ensure that target markets
clearly understand what the product, service or brand stands
for in the marketplace.

Product position
Is the image of the offer in tourists minds relative to
competitive offerings, and its development by the
marketer..
A products position is the place the product has in
consumers minds relative to competing products.

Positioning Strategies in
Tourism.
The following positioning strategies in hospitality companies have been identified:
Product feature or special attributes. This strategy focuses on a tangible-dominant
feature for example, the largest function suite in the area might position a company in
terms of space, grandeur and style.
Price/quality. This positioning strategy for a luxury property might focus on the high
quality, high price, and exclusive image; for a budget property, the focus might be a standard
quality at a lower price, implying better value for money in the economy product class.
Customer benefit. This type of positioning proposes solutions to solve customers problems
for example, Seouls Hotel Shilla advertising campaign emphasizes the quality, choice of
menu, convenience and efficiency of their 24-hour room service to international business
travelers.
Use or usage. This is a positioning strategy that focuses on the reasons why consumers use
a product, and is often targeted at specific markets for example, a resort hotel with a
championship golf course targets executives who enjoy mixing business with sport.