UNIT 5 MARKET SEGMENTATION, TARGETTING AND
POSITIONING
Structure
5.0 Objectives
5.1 Introduction
5.2 Segmentation in Tourism
5.3 Segmentation Theories
5.4 Segmentation and Targeting Approaches in Tourism
5.5 Segmentation Factors
5.6 Other Variables
5.7 Let Us Sum Up
5.8 Clues to Answers
5.0 OBJECTIVES
In this unit, we will seek to understand:
• general market segmentation approaches,
• need for market segmentation in tourism, and
• various variables used for segmenting the tourist markets.
5.1 INTRODUCTION
You have already read about market segmentation in TS-6 (Unit 2, of Block 1). Once again you
should recapitulate what you read about the general market segmentation theory needed for
segmentation and the various variables used for segmenting the tourism markets. Theory models for
STP would remain the same. In this Unit, however, we will make an attempt to apply this theoretical
model in to practice for various tourism markets which you have covered in Unit 1. After having
identified your market segment you have to position your product both in physical terms as well as
from the perspective of perception of customers towards your product in particular. Certain
segmentation and targeting approaches are also discussed in the Unit along with the various variables
used in this regard.
5.2 SEGMENTATION IN TOURISM
Market segmentation is a method of dividing a large market in to smaller groupings of consumers
each having common needs or behaviour. We have two types of markets:
a) Homogenous Market: a market in which people or organisation have similar characteristics
b) Heterogeneous Market: a market in which people or organisations have different characteristics
Market segmentation allows a marketer to take a heterogeneous market and carve it up in to one or
more homogenous markets which are made up of individuals or organisations with similar needs,
wants and behavioural tendencies. In short, market segmentation in tourism helps in.
a) efficient use of marketing resources to cater to a particular type of tourists,
b) better understanding of customer needs and providing better satisfaction,
c) better understanding of the competitive situation and emerging trends, and
d) achieving accuracy in the measurement of goals and performances.
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5.3 SEGMENTATION THEORIES
Although you have studied segmentation theory in TS-6, here it would be useful for you to
recapitulate it.
According to Victor T.C. Middleton , “Market segmentation is the process whereby producers
organise their knowledge of customer groups and select for particular attention, those whose needs
and wants they are best able to supply with their products”.
Hence, Market segmentation involves a division of the prospective market into identifiable groups. In
simple words, it can be defined as the division of a market into groups of segments having similar
wants. This theory is opposed to the diluting of efforts by appealing to an entire market. It is based on
a realisation of the fact that a product can be sold more effectively if efforts are concentrated towards
those groups which are most potential. Philip Kotter is of the view that different “competitors will be
in the best position to go after particular segments of the market” and each “organisation, instead of
trying to reach every one, should identify the most attractive parts of the market that it could
effectively serve”. At the same he mentions that this is not always the practise. The organisations, in
their thinking about operating in a market have generally passed through the following three stages:
1) Mass Marketing: This is a marketing style where the organisation makes efforts to attract every
eligible buyer to use its product which has been mass produced and will be mass distributed. Here
no attention is paid to consumer preferences.
Organisation Product Mass Market
2) Product Differentiated Marketing: In this marketing style the organisation produces two or
more products for the entire market. These products might have different characteristics but they
are not designed for any different group(s). Rather they only provide alternatives to every buyer in
the market.
Product
Organisation Market (Two Options)
Product
3) Target Marketing: Here, the organisation:
• differentiates amongst varied market segments,
• focuses on one or more of these segments (targets), and
• develops the product to meet the needs of the target market.
Organisation Product Segment 1 Segment 3
Segment 2 Segment 4
In tourism, the organisations practice each style of marketing though the emphasis on target marketing
is gaining ground. Let us take the example of Airlines vis-à-vis the tourist market.
• Under stage-1, airlines are available for everyone to travel.
• Under stage-2, the airlines offer Royal class, J class, Business class, Economy class or one can
hire charter flight or a chopper.
• Under stage-3, special airline services to pilgrim both domestic (dhams) or Vaishno Devi or
international (Haj, Jerusalem) which have set target of customers from among the up budget
tourist market.
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This shift of emphasis is because of the benefits in market segmentation.
• By selecting the market niches, i.e., suitable markets, an organisation can exploit the market much
better.
• An organisation can focus its strategies more appropriately on target groups, or
• Customer loya lties can be in instituted through segmented marketing because the product matches
the needs of that segment.
However, it must be noted that the same customer can be there under different descriptions for various
segments as illustrated in the following figures.
Figure I: Un -segmented Market Figure II: Segmented Market
• • • • • • • •
• • • • • •
• • • • Compare Figures III and • • • •
IV. You will find that out
of the nine tourists with
• • • sun and sand motives (3), • • •
three belong to higher
income group (A), four to
middle income group (B)
and two to lower income
Figure III: Market Segmentation Figure IV: Market Segmentation
group.
by tourist’s motives: by tourists’ income groups:
1. Business ** Can you give similar A. Up-market
2. Cultural figures for Adventure and B. Middle Income
3. Pilgrims Culture? C. Low-budget
•1 •2 •3 •2 (Answer at the end of the •B •C •B •B
Unit)
•3 •1 •3 •B •A •A
•2 •1 •1 •3 •A •A •B •A
•3 •3 •3 •C •B •B
•3 •1 •3 •2 •C •A •A •C
5.4 SEGMENTATION AND TARGETTING APPROACHES IN
TOURISM
It is true that product can be sold more effectively if efforts are concentrated towards those groups
which are most potential. In the words of Philip Kotler, “Competitors will be in the best position to
go after particular segments of the markets and each organisation instead of trying to reach
everyone, should identify the most attractive parts of market that it would effectively serve ”. He
also acknowledges that in practice marketers operating in the markets have generally passed through
following three stages:
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Mass Marketing
• Efforts are made to attract every
eligible buyers
• No attention is paid to consumer
preferences, e.g., airline for every one
who can afford, same by all airlines.
Target Marketing
• Varied segments are differentiated Product Differentiated Segmentation
• Focus on one or two of these segments • Organisation produces two or more products
for entire market but produces specialised
• Products are developed to meet their needs, products for particular groups
e.g., operating of short/shuttle services
between popular business destinations for • Only to provide alternatives to every buyer
corporate travellers or for pilgrims. For in the market, e.g., an airline offering
international pilgrimages, Haj, etc. and for different classes. “J” class, “Y” class, Royal
domestic, Vaishnodevi, Kedarnath, Ajmer, Class, etc. Some airlines provide more leg
Neelkanth, etc. and luggage space according to their class of
journey.
Figure 1
The purpose of market segmentation in tourism marketing is to:
• Segment the markets generating tourists, and
• Identify the prospective tourists according to lifestyles, socio-economic status, attitudes about
travel, etc.
This is done to best qualify these tourists for high prospect customer status. This high potential
prospect is defined in terms of how closely his/her vacation preferences and lifestyles match up to
what the destination has to offer. In other words, the purpose is to go for cost-effective marketing.
This can be achieved by designing, promoting and delivering the tourism products or services in such
ways that the identical needs of the target groups are satisfied. A crucial aspect here is what is
grouped in forming market segments. Consumers are not mutually exclusive categories and what is
grouped together is the customers’ probability of purchasing different types of product offers. Hence,
it is necessary to understand what is wanted and who is going to buy it. A marketing person has to
gain knowledge about this and he or she can approach this problem by asking certain questions like:
What
• factors influence the tourist demand?
• services do the tourists expect?
• is the basis for tourists comparing your product with other products?
• benefits do the tourists seek?
• risks do the tourists perceive?
• are the tastes of the tourist?
How
• do tourists buy ?
• much are the tourists willing to spend?
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• many vacations do the tourists take in a year?
• does promotion and advertising effect the tourists’ demand?
• does the product fit into the life styles of tourists?
Where
• is the decision made by tourists to buy?
• do the tourists seek information about the product?
• do the tourists buy the product?
When
• do the tourists take a vacation?
• do the tourists make a decision to buy the product?
• is the product repurchased?
Why
• do the tourists buy your product?
• do the tourists choose one destination over the other?
• do the tourists go to a particular destination?
• do the tourists prefer one type of service and not the other?
• do the tourists buy your competitors’ products?
Who
• buys your product?
• buys your competitors’ products?
• are likely to buy your product?
• may not be interested in your product?
You must remember here that this list of questions is only suggestive and the nature of questions will
depend on the nature of your product and certain specific situations. Besides, you will need the back
up data and information for finding answers to these questions which may not always be possible. But
you should not be discouraged by the limitations.
Depending upon the study’s purpose, various approaches are employed in the tourism industry to
identify market segments. Segments can be defined either by descriptive or casual factors. Descriptive
factors simply describe the characteristics of the person found in a segment. The “why” of a person’s
action, however, is better obtained through additional use of causal factor information which identifies
the motivation behind a decision.
A practical and Actionable Segmentation requires profiling of both:
• Past visitors, and
• Prospective visitors.
This is done to ensure proper matches and to determine the actual size of each high potential segment,
in terms of:
• Geographics,
• Deomgraphics
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• Psychographics, and
• Travel Habits.
In other words, we can say that the:
Target for Marketing = Characteristics + Demographic profile
(of Consumers, Products and Services)
The studies of marketing experts like Kotler and Chisnall show that in order to make any segment
actionable for marketing, each segment must be:
1) Discrete, i.e., the separate identity of the sub-group must be established by using any criteria like
income, purpose, interest, etc.
2) Measurable, i.e., the characteristics that distinguish the sub-groups should be measurable through
the available data.
3) Viable, i.e., the projected earnings to be achieved should be more than the costs of designing the
market mix.
4) Appropriate, i.e., showing the inseparability of the tourism product which should contribute to
the overall image in the market.
5.5 SEGMENTATION FACTORS
In practice, the ground for tourism market segmentation shall be, of course, on the basis of:
a) Geographic factors
b) Demographic profiles,
c) Psychographic attitudes
d) Behavioural situations, and
e) Prices
a) Geographic factors: Since tourism involves movement of millions of people across the
international boundaries, it is an acknowledged fact that the tourists’ needs differ according to
geographic regions. For instance, tourist coming from Australasia region would have altogether
different needs than a tourist coming from North America. Not only this even tourists coming
from two different coasts of America have different needs, desires and attitudes. Therefore, to
market successfully your product or services you must understand varied needs of the tourists
coming from different geographic areas. It is only then that you can categor ise your potential
segments in a homogenous manner. Therefore, it is advisable that you should try to target a
segment for your product which lacks that particular product/service you are marketing. For
instance, you sell deserts of Rajasthan to tourists from Germany, UK or France which have no
deserts. Similarly, if you are trying to sell your mountain based activities to tourist from countries
who do not have such snow capped peaks. You may succeed but if you try to target tourist from
Switzerland or Austria you cannot succeed. On the same pattern don’t try to sell your coastal
beauties to tourist from Australasia or Pacific but try to sell them to tourists who don’t have such
coastal attractions in their countries. Kerala started marketing “monsoon tourism to tourists from
Middle East” but the same cannot be sold to tourists from North-East India. Here Kerala will have
to sell beaches and back waters.
b) Demographic Profiles: This factor is a vital factor for developing tourism products and services.
It means to segment your product service market on basis of income, age, sex, family size,
lifestyle, family life cycle, education, religion, race and nationality and so on. If you fail to design
your product or segment your market without giving due considerat ion to these factors then there
may be serious repercussions for your product or service. It is important because:
i) Consumer wants, preferences and usage rates are associated with demographic variables, and
ii) this method is easy in measurement and interpretation of data.
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For instance, India being a long haul destination (average length of stay is 27.2 days) and our
major markets are America, Europe, Far East and Australasia. The demographic profile of these
markets will help in marketing decision making. If we look at the demographic characteristics of
the European market, we see:
Age: between 25 – 59 years
Sex: majority of males, alone females very few
Family sizes: 2 – 4 members
Family Life Cycle: single/married without children (DINKS) or with children below the age of 14.
Income: Euro 7000 and above
Occupation: professionals, executives, teachers and professors
Education: Higher secondary and above
Nationality: German, French, Italia, Swiss, Dutch, Spanish and Swedes
Based on this data a marketer can develop, rejuvenate or alter his or her tourism products.
c) Psychographic Grounds: Division of groups on the basis of their social status, life styles and/or
personality characteristics is very essential in tourism marketing. While using demographic
parameters of income, we can divide the target segment in to upper middle class, middle class and
lower middle class. Each of these sub-variable will have different tastes, likings, status, product
preferences, etc. accordingly. Personality characteristics also play and important role in product
development and market segmentation. For instance, if you are targeting at tourists for adventure
sports related tourism, their real market segment would be tough and strong or adventure seekers
only. These people shall be young and so would naturally belong to low budget or lower income.
Another important criteria for segmenting the tourist market is on the basis of personality traits,
i.e., some members of potential targeted market are allocentrics. Money wouldn’t be a constraint
for this segment but they want to visit a new and adventurous place every time. They don’t like to
repeat the same destination. They love to be called first timers or trendsetters to be followed by
the masses (psycocentrics) who have a fear for unknown and who want to perform repeat visits.
In this category, as a marketer, you should also try to identify those who are self made, successful
socialite, mainstreamers, aspirers or innovator type of people because they are the ones who are
most likely to purchase tours to far away countries.
It is also advisable that you should try to segment your market with an idea that among certain
categories of tourists there can be found some common attitudes. For example, people in the age
group of 18-26, want to have vacation full of leisure and thrill, while others who look for
adventure can form another group.
d) Behavioural Grounds: In psychological terms the whole range of generation of wants and their
transformation in to buying or using decisions can be explained as behaviour. Before learning
about transformation process of attitudes of tourists in to action we should know who are users
and what is their base:
Foreign Tourist, Domestic Tourist, Youths, Students,
General Classification Executives, Artists, Politicians, Academicians, Pilgrims,
Representatives, Sportsmen
Sex as a base Male, Female
Region as a base Urban, Rural, Cosmopolitan, Sub-urban
Education as a base Professional, Worker, Vocational, Artists, Professor,
Craftsmen, business man, etc.
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Status as a base Upmarket, Budget Market, Low-Class Market
Occupation as a base White Collar or Blue Collar Tourist
(Adopted from the model of S.M. Jha, Tourism Marketing)
In view of this, the marketing decision cannot be sound unless the marketers make an in-depth
study of the visitors’ behaviour with focussed attention on customer satisfaction. Before arriving
at sound marketing decisions, the marketers are required to see that users are aware or unaware;
interested or intend to purchase either on trial or experimental basis; whether user is light user
(non-frequent) or heavy user (frequent users), etc. This kind of study will help the marketers to
focus their advertisements on the service sensitivity of the users. In tourism market segmentation
a large number of behaviouristic variables are used. Among important ones a few are:
I) Occasion for travel: You can segment your tourist market on the basis of the occasion they
use for travelling. For instance, you can segment your tourist markets as business tourist
market, holiday/leisure market, VFR (visiting Friends and Relations) market, adventure
tourist market, heritage tourism market, or honeymooners market and so on so forth.
II) Benefit derivation: Segmentation on the basis of benefits identifies the:
i) major benefits that the customer looks for in the product;
ii) kind of people who look for each benefit; and
iii) major brands that deliver each benefit.
According to Kotler many products are made-up of three “core benefit segments”, i.e.,
i) quality buyers – more concerned with product image rather than cost;
ii) service buyers – product that provides good service, i.e., best value for money; and
iii) economy buyers – who are more concerned with the cost and, therefore, would like to
keep it low.
Kotler further classifies customers on the basis of behaviouristic attitudes in to four
categories on the basis of behaviouristic attitudes:
i) hard-core loyals – would never think of switching over;
ii) soft-core loyals – may think of one or two alternatives;
iii) shifting loyals – gradually favour one product/organisation over other; and
iv) switchers – those who have no loyalty to any organisation.
Kotler’s this classification of customers is very useful form the perspective that you can pin-
point which brands are most competitive to you. By knowing the product and market
strategies of your competitor you can successfully convert your soft core loyals customers in
to hardcore customers by offering them incentives like free mileage or free accommodation
when they accumulate required mileage or number of nights.
III) Associated characteristics: Besides the benefits sought by tourists, you can also use other
associated characteristic for segmenting your market. These are:
i) User status: In this category a tourist may be segmented as first time visitor or repeat
visitor, past-visitor or potential visitor, etc.
ii) Usage rage: This can be illustrated as frequent usage called frequent fliers for an airline
or for hotels ex-numbers of night spent to earn points for complimentary services.
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iii) Loyalty status: This highlights the loyalty of your customer who remains loyal to you in
spite of many allurements to shift to other products or service. Therefore, your company
must study its own hardcore loyals and devise marketing strategies to maintain their
loyalty. For example, an airline offers members of its frequent fliers scheme, quick check-
in or extra baggage allowances, priority in confirmation of seats or special waiting
lounge.
IV) Buyer-readiness stage: This is a crucial factor for market segmentation since an in-depth
study of this allows marketers to launch their product at right time. For example, if you decide
to launch special packages for all family members, readiness stage would be when all the
members have leisure, i.e., when they have a vacation. In another example, private domestic
airlines started their services when they realised that domestic air travellers were weary of
monopolistic attitude of the national carrier.
V) Attitudes: No doubt tourism market can be classified by the degree of enthusiasm tourist or a
potential tourist shows in buying a destination. Keeping in view this you may encounter
tourists who are enthusiastic, positive, indifferent or hostile in their attitude towards the
destination. It would be easier for you to sell a destination to those who are enthusiastic and
positive in their attitude.
e) Price factor: By now you must have gathered a fair idea that tourism market constitutes of:
i) those who are high spenders and are prepared to pay high prices and they are described as up-
budget tourists;
ii) those who want to take low priced vacation; and
iii) those who may take a moderately priced holiday.
It is true that price range communicates to consumers the quality expectations of a product along
with the producer’s image. Today destinations in South Eat Asia are cheaper than travelling
within India. For example, Bangkok is being sold at $25 per night, Singapore at $40 per night, etc.
This is able to attract large volume of outbound tourism from India.
5.6 OTHER VARIABLES
Tourism markets are also segmented on the basis of travelling habits of tourists, which include:
a) Distance Travelled: Whether potential tourist segment belongs to long haul, short haul or mid
haul tourist. This is classified on the basis of the distance a tourist travels. For India, tourists from
Europe, Far East or USA are long haul market segments whereas Nepal or Bangladesh are short
haul.
b) Duration of Trip: Segmentation of tourist markets can also take place on basis of short-break
holidays of 2-3 days or long trips of 20 or more days for instance to USA or Europe.
c) Time of Travel: Tourist markets can also be segmented on the basis of time period when they
travel. For example some tourists prefer to travel during summer holidays while some prefer to
travel during winter holidays or some take a holiday in both summer and winter. In Europe,
normally, longer trips are taken during summer seasons, since vacation is longer in summer than
winters.
d) Organisation of Trips: Marketers also segment the market on the basis of how do they travel,
i.e., whether they travel individually (FIT) or in groups (GITS). On the other hand, some of your
customers will buy only air tickets or in some cases only hotel bookings will be sought.
e) Religion as Travel Motive: Since ancient times man has travelled for religion motives be it to
have a holy dip in the revered rivers or to visit any temples devoted to their deities or even for the
sake of visiting religious fairs or melas. Undoubtedly religion has always been one of the prime
motive for travel. However, in present times specialise services are prepared and delivered to this
niche market whether they are Muslim tourists (Haj); Hindus (Dhamyatra) or Christians (Hoy
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visit to Jerusalem). You must have noticed that there is a particular time for each of there
segments to travel. For instance, Haj travellers travel between the month of January and March;
Hindu tourists visit their dhams or other religious shrines like Vaishno Devi, Shirdi, Kalka, etc.
during summer vacations, i.e., May to July; and, of course, Christians travel during October and
December. If you look at the time and spatial distribution of there religious tourists it would
appear to be a much more potential market segment on regular basis. Therefore, it is advisable
that you should treat this segment as a solution provider to your seasonality problem.
It must be noted here that you can apply one or a combination of more than one variables
simultaneously for market segmentation. In tourism for selecting the basis for segmentation. There are
no fixed method but certain methods have worked successfully all through years. These are:
• intuitions,
• experience,
• market research; and
• trial and error, etc.
But at the same you must assess your own resources, size, growth potential, capacity risks,
competition, infrastructure and support system, etc.
In the end it is advisable for all that now since you have segmented your markets in to smaller
homogenous markets, as a tour operator or a hotelier, etc., you must decide upon which niche market
you would like to cater to and accordingly develop upon your services or products. If you are a tourist
transport operator you shall decide on which segment you are targeting at only then you will be able
to make your purchases of motor vehicles. It would always be a wise decision to make your efforts to
capture specialised market segments. For instance, if you are a hotelier you have the option to choose
from catering walk-in customers or groups, corporate customers to cabin crew members and so on so
forth.
Check Your Progress
1) What do you understand by Pricing Segmentation?
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
2) Why it is important to study behaviour of customers in tourism?
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
……………………………………………………………………………………………………….
5.7 LET US SUM UP
Market segmentation in tourism helps in identifying and understanding the needs of consumer and
also helps in profiling the tourists. Market segmentation is an essential activity to be undertaken for
planning, designing and delivering a marketing mix. You have seen that there are different approaches
to segment tourism markets along with various variables. However, at times these variables are
interdependent or simultaneously applicable. Market segmentation is not only relevant for
international tourism markets but has equal importance to domestic tourism markets.
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5.8 CLUES TO ANSWERS
** Answer to question between Figs. I and IV
Adventure:
Total 5
Higher income 3
Middle income 2
Lower income 0
Total 4
Higher income 1
Middle income 2
Lower income 2
Check Your Progress
1) Refer Sec. 5.4.
2) Refer Sec. 5.5.
Activities
1. Form a questionnaire to find out the travel motivators of prospective tourists in your
neighbourhood.
2. Interview five tourists who have had a journey to find out their travel motives and the
extent to which they were fulfilled.
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