8.2 Market segmentation and targeting
2 min read•july 24, 2024
is a crucial strategy in hospitality and tourism. By dividing customers into distinct groups, businesses can tailor their offerings and marketing efforts to specific needs and preferences, leading to improved satisfaction and loyalty.
Effective segmentation uses various bases like demographics, geography, psychographics, and behavior. This allows businesses to identify target markets, create , and develop targeted strategies that resonate with each group's unique characteristics and motivations.
Market Segmentation Fundamentals
Role of market segmentation
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- Market segmentation divides buyers into distinct groups based on needs, characteristics, or behaviors enabling businesses to tailor products and services to specific customer groups
- Allocates marketing resources efficiently by identifying underserved market segments and developing targeted messaging and promotional campaigns
- Enhances customer satisfaction and loyalty leading to improved competitive positioning, increased , and higher profitability
- Provides better understanding of customer needs allowing businesses to create more effective marketing strategies (personalized experiences, targeted promotions)
Bases for market segmentation
- categorizes customers by age, gender, income, education level, occupation, family size, and marital status (millennials, retirees)
- Geographic segmentation groups customers by country, region, city, climate, and population density (urban vs. rural, tropical destinations)
- Psychographic segmentation focuses on lifestyle, personality traits, values, attitudes, and interests (adventure seekers, eco-conscious travelers)
- Behavioral segmentation considers purchase frequency, brand loyalty, usage rate, benefits sought, and occasion-based purchasing (frequent flyers, luxury hotel guests)
Market Targeting and Customer Profiling
Techniques for target market identification
- Evaluate market segments based on size, growth potential, profitability, accessibility, and compatibility with business objectives
- Conduct market research through , , and analysis of existing customer data to gain insights into customer preferences
- Assess competitive landscape by identifying underserved segments and analyzing competitors' target markets
- Prioritize segments based on alignment with business strengths, resource availability, and long-term growth potential
- Develop targeting strategies:
- Concentrated targeting focuses on one specific segment
- targets multiple segments with tailored approaches
- uses a mass market approach
Customer personas and profiles
- Create detailed customer personas with name, background information, demographics, goals, challenges, and preferred communication channels (Sarah the Solo Traveler, Family-Focused Fred)
- Identify key characteristics including , , , , and
- Analyze from pre-trip research and planning through booking process, during-trip experiences, to post-trip feedback and sharing
- Utilize data sources such as customer surveys, social media insights, website analytics, and booking data to inform persona development
- Apply personas to marketing strategies by creating tailored content, personalized offers and promotions, targeted advertising campaigns, and customer service improvements
Key Terms to Review (16)
Accommodation preferences: Accommodation preferences refer to the specific choices and desires that travelers have when selecting places to stay during their trips. These preferences can be influenced by various factors such as personal tastes, budget, location, amenities, and the purpose of travel. Understanding these preferences is crucial for businesses in the hospitality industry to effectively tailor their offerings and marketing strategies to meet the diverse needs of different market segments.
Activity interests: Activity interests refer to the specific preferences and hobbies that individuals have, influencing their choices in leisure and travel activities. Understanding these interests helps businesses tailor their services and marketing strategies to attract particular segments of customers, ensuring a better match between what the customer desires and what is offered.
Booking preferences: Booking preferences refer to the specific choices and behaviors exhibited by consumers when selecting and reserving travel-related services such as accommodations, flights, and activities. Understanding these preferences is crucial for businesses in the hospitality and tourism industry as they help tailor marketing efforts and service offerings to meet the unique needs of different customer segments.
Competitive advantage: Competitive advantage refers to the unique attributes or conditions that allow a business to outperform its competitors. This can come from various factors, such as superior quality, innovative products, customer service excellence, or efficient operations. In the hospitality industry, achieving competitive advantage is crucial for attracting and retaining guests in a crowded marketplace.
Customer journey: The customer journey refers to the complete experience a customer has with a brand or service, encompassing every interaction from the first awareness through to post-purchase evaluation. This journey includes multiple touchpoints, allowing businesses to better understand customer behavior, needs, and preferences at various stages. By mapping out the customer journey, organizations can design more effective strategies for enhancing customer satisfaction and loyalty.
Customer personas: Customer personas are fictional representations of ideal customers based on market research and real data about existing customers. They help businesses understand their target audience's needs, behaviors, and motivations, guiding product development, marketing strategies, and customer engagement efforts.
Demographic segmentation: Demographic segmentation is the process of dividing a market into distinct groups based on demographic variables such as age, gender, income, education, and family size. This approach allows marketers to tailor their strategies to specific groups, ensuring that their offerings resonate with different segments of the population. By understanding the characteristics of each demographic group, businesses can create targeted marketing campaigns that are more likely to appeal to the intended audience.
Differentiated targeting: Differentiated targeting is a marketing strategy where a business targets multiple market segments with tailored marketing messages and product offerings for each segment. This approach allows companies to cater to the specific needs and preferences of diverse consumer groups, thus maximizing their reach and effectiveness in the market. By recognizing the differences between segments, businesses can create unique value propositions that resonate with each group.
Dining Habits: Dining habits refer to the patterns and preferences individuals or groups have regarding food consumption, including when, where, and how they eat. These habits are influenced by various factors such as culture, socioeconomic status, lifestyle choices, and personal preferences, making them a crucial consideration for the hospitality and tourism industry when developing marketing strategies.
Focus Groups: Focus groups are small, diverse groups of people brought together to discuss and provide feedback on a specific topic, product, or service. These discussions are guided by a moderator and are designed to gather qualitative insights that can inform marketing strategies, including market segmentation and targeting efforts. By tapping into the opinions and experiences of participants, focus groups help organizations understand consumer behavior and preferences, allowing for more effective targeting of specific market segments.
Market needs: Market needs refer to the specific requirements and desires of consumers that drive their purchasing behavior. Understanding these needs is crucial for businesses as it helps them tailor their products or services to satisfy distinct customer segments, thereby enhancing customer satisfaction and loyalty. By identifying market needs, companies can create targeted marketing strategies that resonate with their intended audiences.
Market segmentation: Market segmentation is the process of dividing a broad target market into smaller, more defined groups of consumers who share similar characteristics, needs, or behaviors. This approach allows businesses in hospitality and tourism to tailor their marketing strategies and offerings to meet the specific preferences of distinct segments, ultimately enhancing customer satisfaction and loyalty.
Market Share: Market share is the portion of a market controlled by a particular company or product, expressed as a percentage of total sales in that market. It reflects how well a company is performing compared to its competitors and is a key indicator of competitiveness within a specific industry or sector.
Surveys: Surveys are systematic methods used to gather information from individuals, often through questionnaires or interviews, to assess opinions, behaviors, or experiences. In the hospitality and tourism industry, surveys are crucial for understanding guest satisfaction and preferences, which can help inform service recovery strategies and refine marketing efforts aimed at specific market segments.
Travel motivations: Travel motivations refer to the underlying reasons or desires that drive individuals to engage in travel. These motivations can be influenced by various factors including personal interests, social interactions, cultural experiences, and the pursuit of leisure or adventure. Understanding these motivations is crucial for effectively managing attractions and segmenting markets, as they help tailor offerings to meet the diverse needs of travelers.
Undifferentiated targeting: Undifferentiated targeting is a marketing strategy where a company targets the entire market with a single offer, rather than focusing on specific segments. This approach relies on the assumption that all consumers have similar needs and preferences, allowing businesses to create a broad marketing mix that appeals to the largest possible audience.