Tourism Marketing Segmentation

Segmentation refers to the way in which companies and organizations classify and categorize customers into clearly defined groups with similar characteristics, and similar needs or desires (McDonald and Dunbar, 1995). One of the most important strategic concepts contributed by the marketing discipline to business forms and other types of organizations is that of market segmentation. For segmenting a market, demographic segmentation has been one of the major used methods, which consists of dividing the market into groups based on demographic variables such, as age, gender, family life cycle, income, occupation, education, religion, race and nationality. Moreover, the reason for the popularity of this method is that consumer needs, wants and usage rates often vary closely with demographic variables (Bowen, 1998).

According to Middleton (2001), market segmentation is normally the logical first step in the marketing process involved in developing products to meet customers' needs. In addition, it is the necessary first stage in the process of setting more accurate marketing

objectives and targets and the basis for effective planning, as well as, budgeting and control of marketing activities. Also, it's the basis for positioning, branding and communicating relevant images to targeted users.

Definition of Marketing Segmentation

Middleton (2001) defines segmentation as:

‘The process of dividing a total market such as visitors, or a market sector such as holiday travel, info subgroups or segments for marketing management purposes’.

Its purpose is to facilitate more cost-effective marketing through the formulation, promotion and delivery of purpose-designed products that satisfy the identified needs of target groups.

Kotler et al (2003), define market segmentation as:

"Dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes ".

Marketing segmentation is not only a statistical technique used to analyze demand; it is also a management tool that leads to specific marketing decisions. Moreover, the marketing process of segmenting the tourism market should be the basis for strategic long-term marketing and management decisions. The identification of market segments and their individual characteristics are the ultimate stage to the development of a marketing strategy (Middleton, 2001).

The Importance of Segmentation

According to Sharma and Lambert (1994), segmentation has been used extensively in consumer marketing over the last 30 years. It is recognized that effective segmentation requires the segments to be measurable, accessible, substantial and homogeneous. In addition, segmentation should have strong links with the competitive strategy of the organization.

As a multitude of products and brands is offered by organizations, the need for market segments becomes essential. These organizations move away from mass marketing

towards a target marketing strategy where the focus is on a particular group of customers.

The purpose of market segmentation is to identify the taxonomy of consumption patterns by dividing a market into several homogeneous sub-markets (Lin, 2002). The market segmentation process aims to divide a market into several market groups. Customers in each market segment have similar product needs. Each segment requires a different mix of marketing strategies to satisfy its special consumer needs.

Criteria for Marketing Segmentation

In order to achieve an efficient use of marketing resources, segmentation should respect a number of conditions. Several authors including Lumsdon (1997), Baker (1991) and Smith (1989) have attempted to explain criteria for effective segmentation. A market segment must process the following distinct characteristics:

A) Identifiable

The segment must comprise customers who seek identifiable similar benefits from a tourism offering rather than having differing needs. This subsequently may facilitate the accuracy of data collection.

B) Measurable

The segment must be defined in order to obtain adequate information about buyer characteristics. The marketer should be able to estimate the size and potential spend associated with the segment, bearing in mind social and commercial aspects.

C) Substantial

The segment must be big enough to justify the cost and effort of an individual or organization. Organizations could segment each holiday programme in separate brochures. For example, for those who enjoy walking, cycling and sightseeing in one brochure and those who seek underwater exploration or water sports in another?

D) Accessible

The organization must be able to reach the segments through existing information channels. The channels should allow the message to reach only or predominantly the target audience and not other groups, which are not likely to respond to the message.

E) Actionable

There should be a match between source level, commitment and achievability in terms of penetrating the defined market segment. An organization needs to be able to action a database or other source of intelligence to ensure effective positioning.

Benefits from Market Segmentation

Achieving the potential benefits of segmentation requires that appropriate customer segments are identified and relevant marketing programmes implemented. While the academic literature offers wide-ranging advice on segmentation analysis issues, such as the selection of segment bases and choice of multivariate techniques, the actual practice of segmentation is comparatively neglected (Dibb and Wensely, 2002).

Meadows and Dibb (1998), indicate that the underlying aim of market segmentation is to group customers with similar needs and buying behaviour into segments, so that each segment can be reached with a distinct marketing programme. The concept attempts to bridge the gap between diverse customer needs and limited company resources, by encouraging distinct product and marketing offerings to be developed to suit the requirements of different customer segments. The marketing literature suggests that segmentation leads to more satisfied customers, because it offers the practitioner a number of clear benefits improved understanding of customer needs, more appropriate resource allocation, clearer identification of market opportunities, and better-tuned and positioned marketing programmes. However, segmentation at the specific level is especially useful for segmenting customer markets and using databases in direct marketing, in both customer and business-to- business markets. Often, a sort of pyramid approach is taken (Raaij and Verhallen, 1994). Market segmentation is central to the tourism company’s marketing planning process and has been used widely in the hospitality & tourism industry (Baloglu et al, 1998).

According to them, market segmentation offers suppliers of the tourist several benefits:

They are in a better position to compare market opportunities; they can analyze the needs of each segment in the light of the current competitive offerings and determine the extent of current satisfaction. In addition, sellers can make appropriate adjustments to their product and marketing appeals. In addition, sellers can improve marketing programmes

and budgets based on a clearer idea of the response characteristics of specific market segments. They can allocate funds to the different segments in accord with their likely levels or purchase response. Finally, for suppliers of the tourist product, it is possible to assess its strengths and weaknesses through identifying market segments. Therefore, systematic planning for future markets is encouraged.