Introduction to Market Segmentation

Introduction to Market Segmentation

• Gaining and maintaining a competitive advantage in the broad consumer market for hospitality and travel products is a very difficult task.

Competitive Advantage

• An advantage over competitors obtained through lowering prices or including additional benefits that justify the higher prices. The End result for either technique offers consumer greater value
• It is much easier  to be successful if a firm tries to carve out smaller niche or segment of the market, in which firm can establish a competitive uniqueness; hence, the development of market segmentation.

Market Segmentation

•  is pursuing a marketing strategy whereby the total potential market is divided into homogeneous subsets of customers, each of which responds differently to the  marketing mix of the organization

Wrong Concept of Segmentation

Owners and managers of hospitality organizations believe that:

1. If they segment  the market and target their marketing and promotional efforts to just a few selected segments, their sales  volume will fall.
2. 2.They believe that they have to appeal to all potential customers, and that by segmenting the market they will weaken their competitive position and profits.

Nature of Market Segmentation

• Why need to segment market?

1. To improve the sales and profit because it allows the organization to target specific market segments that are more likely to patronize the organizations facilities

2. Through segmentation , companies could identify those target markets that are heavy users of their products and services.

3. . Segments that holds little potential for using a company’s product receive little attention.

4.Different product – service mixes can be promoted to meet the needs of the different segments

Criteria of Effective Segmentation

a. Substantiality

• A criterion used to evaluate the effectiveness of market segmentation. The size of the segment must be the large enough to warrant special attention to meet the needs of the segment and achieve the marketing objectives of the firm

So it ask the question

• Whether the market is large enough?

b. Measurability

• The criterion used to evaluate the effectiveness of market segmentation. The measurability should be assessed from two perspectives

Two (2) Perspectives measurability is assessed

1. The overall size of the target market segment and
2.  the projected total demand or purchasing power of the target market.

c. Accessibility

•  A criterion used to evaluate the effectiveness of segmentation. The large target markets must be reachable, or accessible  through a variety of marketing communication efforts.
• So it ask the question
• Is It possible to reach the large target market segments through variety of marketing communication efforts?

Marketing Communication

        - can include a wide variety of approaches, including but not limited to

1. advertising,
2. promotion,
3. direct marketing,
4. Telemarketing, and
5.  personal selling

• d. Actionability
• A criterion is used to evaluate the effectiveness of market segmentation. Consumer in the same market segment similarly react to the marketing program used to target them.
•  in other words, customer within a particular market segment should share similar characteristics, while those in different segments should vary in terms of their characteristics

SEGMENTATION Variables

• Involves finding out what kinds of consumers with different need exist.
• Indentifying meaningfully different groups of customers in selecting which segments to serve in order to implement chosen image and appeal to chosen segment  considering the price, product, promotion and distribution.
• Calls for some tough choices thus need to identify the  kinds of variables.

Segmentation Basis

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Segmentation Framewrok

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Variables in Segmentation

Can be used alone or in combination with others depending on the level of segmentation desired.