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Segmentation, Targeting and Positioning Objective: Discussing the importance of segmentation, targeting and positioning in the communication process. 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. 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 people’s 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. 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 segment’s 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. Market Segmentation Involves the following steps; 1. Identifying bases for segmenting the market 2. Developing profiles of resulting segments Market Targeting Involves the following steps; 3. Developing measures of segment attractiveness 4. Selecting the target segments Market Positioning Involves the following steps; 5. Developing positioning for each segment 6. Developing marketing mix for each target segment 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 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. 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. 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” 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. 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. 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. 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. 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. 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. In evaluating different market segments, a firm can look at whether the segment is; Attainable Measurable Large enough Defendable Sustainable 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) 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. It relies on mass advertising and a superior image in people’s 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. 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 firm’s offerings match each segment’s desires better. 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. 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 50’s age group, Solo’s 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 segment’s needs. 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. Market Positioning Once a company has decided which segments to enter, it must decide what “positions” it wants to occupy in those segments. A product’s position is the place the product has in consumer’s minds relative to competing products. In other words, a product’s position is the set of perceptions, impressions, and feelings that consumers 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. 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. 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 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.