Module 4: THE TOURIST MARKET SEGMENTATION, TARGETING AND POSITIONING

Topic Learning Outcomes:

1. To explain the concepts of tourist market segmentation, targeting and positioning and
recommend differentiation strategies for the target market.

2. To analyze the importance of market analysis and apply it in the tourism industry setting.

I. KEY CONCEPTS

Market segmentation, targeting, and positioning are the key terms useful in any
marketing process as it helps identify the market’s needs and wants.

According to Kotler (2010), a MARKET is a set of all actual and potential buyers of a
product or service. These buyers share a particular need or want that can be satisfied through
experience relationships. Marketing involves serving a market of final consumers in the face of
competitors.

The tourism product is not for all and that’s the reason why the tourism industry aimed to
target specific set of individuals. MARKETING STRATEGY is the marketing logic by which the
company hopes to create customer value and achieve profitable customer relationships. The
company must choose which customers to serve and how to serve them. This process involves
four steps such as the following: (1) Market Segmentation, (2) Market Targeting, (3) Positioning
and (4) Differentiation.

A. MARKET SEGMENTATION

A market is composed of different profiles, characteristics, wants or desires that can be

further segregated. The market can be similar to an entire pizza or a cake than can be divided
to several slices. Each slice or as we call in marketing as segments, has different characteristics
from the others. These segments differ in their needs and wants, socio-economic status, age,
behavior, etc. MARKET SEGMENTATION is dividing the market into smaller segments with
the distinct needs, characteristics or behavior that might require separate marketing strategies
or mixes. A MARKET SEGMENT is a group of consumers who respond in a similar way to a
given set of marketing efforts. Kotler and Keller (2016) suggested that market segments must
rate favorably on five key criteria:

Effective segmentation criteria:

1. Measurable: The size, purchasing power, profiles and characteristics of the segments
can be measured.

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 2. Substantial: The segments are large and profitable enough to serve. A segment
should be the largest possible homogeneous group worth going after with a tailored
marketing program. It would not pay, for example, for an automobile manufacturer to develop
cars for people who are under four feet tall.

3. Accessible: The segments can be effectively reached, served, and accessed by

marketing efforts and promotional activities. If they are difficult to reach, efforts to reach out to
the specific segment is useless.

4. Differentiable: The segments are conceptually distinguishable and respond differently

to different marketing mix elements and programs. If married and single women respond
similarly to a sale on perfume, they do not constitute separate segments.

5. Actionable: The company has enough resources and commitment in formulating

effective programs in attracting and serving the segments.

In order to find out which is the best and most effective way in segmenting the market,
different variables for market segmentation are used. The 4 Types of Market Segmentation
used in segmenting consumer markets include geographic, demographic, psychographic, and
behavioral.

1. Geographic Segmentation: Dividing the market into different geographical units such
as nations, states, regions, counties, cities, towns, barangays, and even neighborhoods.
There are companies that strengthens and concentrates their resources in ensuring deep
penetration of specific geographic location.

Example: Tour operators consider where their clients live when which departure airports
to offer flights from. Also, people from cool northern climates will often show interest in warmer
souther climates when selecting their holiday destinations.

2. Demographic Segmentation: Refers to segmenting or dividing the market into

segments based on variables such as age, gender, family size, family life cycle, religion, race,
education, occupation, income, generation and nationality. Age and life-cycle segmentation is
dividing a market into different age and life-cycle groups. Gender segmentation means
dividing a market based on gender, while income segmentation divides a market based on
income levels. It is a good idea to segment the market based on demographic variables
because consumers might have similar likes and possible consumption patterns and
behavior. Tourism marketers segment the market using demographic variables through age,
life cycle, gender and income. In terms of age, the young market would prefer more
adventurous destinations with nightlife. On the other hand, those tourists who are in their
retiring age would like to have a more relaxing and peaceful vacation.

Example: Hajj is an annual pilgrimage to Mecca that is mandatory for all Muslims as part
of their religion. For age segmentation, tour operator like Contiki offer tour packages specifically
for 18 to 35 years old age group.

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 3. Psychographic Segmentation: The market is divided into different segments based
on psychographic profiles such as social class, lifestyle, psychological traits, values and
personality characteristics. Different social classes will have different tastes and preferences
on what they buy.

Example: Ferrari which produce luxury cars is only targeting customers with high income
and high social class. On the other hand, In relation to Tourism, newer forms of tourism such as
adventure tourism, cultural tourism and ecotourism focuses on younger generations.

4. Behavioral Segmentation: Dividing the market into segments based on the

consumer knowledge, attitudes, use or response to a product or service. This is based on
decision roles and behavioral variables. They have buying patters, using patterns and
patterns of spending their money. This can be done via occasion segmentation: dividing the
market according to occasions when buyers get the idea to buy, actually making their
purchase or use the purchased items. Benefit segmentation: dividing the market according to
the benefits that customers seek from the product. Markets can also be segmented based on
user states, usage rate and loyalty status.

Example: A loyal passenger who will only prefer to fly with Philippine Airlines every time
he or she will travel within the Philippines or abroad. Budget Airlines like Cebu Pacific promote
services and frequent flyer programs to consumer whose main ‘benefit sought’ is economy.

B. MARKET TARGETING

MARKET TARGETING is the process of evaluating each market segment’s

attractiveness and selecting one or more segments to enter. Everytime a marketer will evaluate
a segment, he/she must look at thesegment size and growth,segment structural attractiveness
and company objectives and resources. A TARGET MARKET consists of a set of buyers
sharing common needs or characteristics that the company decides to serve. There are several
forms of market targeting that can be helpful to a company:

1. Undifferentiated (Mass) Marketing: A company decides to ignore market segment

difference and go after the whole market with one offer. This market coverage strategy can be
used effectively for consumer products mainly because a lot of buyers would need the same
product. However, this strategy may not be that effective for tourism products.

Example: Walmart sell its products at a lower price than any of its competitors and they
have consistently done it for decades.

2. Differentiated Marketing: A company decides to target several market segments and

designs separate offers for each. A company may offer several products for different market
segments to capture a bigger chunk of the market.

Example: Crowne Plaza and Holiday Inn Galleria Suites share a common management
group. However, Crown Plaza is more upscale than Holiday Inn Galleria Suites; thus, giving
clients an option where to stay depending on that their budget can afford.

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 3. Concentrated Marketing (Niche): A company goes after a large share of one or few
segments or niches. Companies are able to allot its resources in making its presence felt in a
specific market with greater impact. It includes local marketing: tailoring brands and
promotions to the needs and wants of local customer segments; cities, neighbourhoods and
even specific stores. It also includes individual marketing: tailoring products and marketing
programmes to the needs and preferences of individual customers, also called one-to-one
marketing, customized marketing and markets-of-one marketing.

Example: Whole Foods Market only sell organic products. Thus, their market are the
people who are looking for organic products. On the other hand, Kidzania market their company
specifically for kids.

4. Micro marketing: Tailoring products and marketing programmes to the needs and
wants of specific individuals or local customer segments. It includes local marketing:
tailoring brands and promotions to the need and wants of local customer segments; cities,
neighbourhoods and even specific stores. It also includes individual marketing: tailoring
products and marketing programmes to the needs and preferences of individual customers,
also called one-to-one marketing, customized marketing and markets-of-one marketing.

Example: Burger King introduced Rendang Burgers in Singapore and Malaysia where
local palates prefer spicy food.

Discussion Question # 1: Why do you think Undifferentiated (Mass) Marketing will not be
effective for tourism products?

C. MARKET POSITIONING

MARKET POSITIONING is developing competitive positioning for the product and an

appropriate marketing mix (Kotler et al. 2010). POSITIONING is arranging a market offering to
occupy a clear, distinctive and desirable place relative to competing products in the mind of
target consumers. A PRODUCT POSITION is the way the product is defined by consumers on
important attributes: the place the product occupies in the consumers’ minds relative to
competing products. There are three positioning concepts that help reinforce the idea of market
position: (1) Unique Selling Proposition, (2) Competitive Advantage, and (3) Top of Mind.

1. Unique Selling Proposition: A term used to identify what makes the product or
service different or better from the competitors. This USP may occur due to the product’s
physical attributes, added services, personnel, location or image.

Example: The Glass Igloo Accommodation in Finland is the USP of Kakslauttanen Arctic
Resort. It would sell well all year round and not just on a specific season due to the different
kind of experience it offers plus the location as well.

2. Competitive Advantage: An advantage over competitors gained by offering greater

customer value, either by having lower prices or providing more benefits that justify high
prices.

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 Example: Cebu Pacific Air’s advantage is offering lower fares but limited benefits while
Philippine Airlines offer more benefits with higher fare.

3. Top of Mind: The highest level of recall that a brand receives. It means that the brand
occupies the top spot in a consumer’s mind. The ultimate top of mind level a brand can reach
is when it becomes synonymous to the generic.

Example: Through the years, the Filipinos are already used to the brand “Colgate” that
refers to as toothpaste.

Discussion Question # 2: What positioning concept will you use to effectively position
your hometown’s attraction to the consumers’ mind?

II. DIFFERENTIATION STRATEGIES

Differentiation means differentiating the market offering to create superior customer value. The
company can differentiate itself with the following differentiation strategies:

1. Product Differentiation: Is a strategy that strives to distinguish a company’s products

or services from the competition. Successful product differentiation involves identifying and
communicating the unique qualities of a company's offerings while highlighting the distinct
differences between those offerings and others on the market. Product differentiation goes
hand-in-hand with developing a strong value proposition to make a product or service attractive
to a target market or audience.

Example: Legoland Hotel offers a different kind of experience targeting kids and families.

2. Channel Differentiation: Is a strategy that will gain competitive advantage through

the way the company design their channel’s coverage, expertise and performance.

Example: amazon.com and GEICO set themselves apart with their smooth-functioning
direct channel. Different examples of direct channels are door to door sales, chain store sales,
telemarketing sales, direct online selling

3. People Differentiation: Is a strategy wherein company hire and train better people
than their competitors.

Example: The employees of Disney World are known to be friendly and upbeat. While
Singapore Airlines flight attendants are known for their excellent customer service to the
passengers.

4. Image Differentiation: Is a strategy where the company or the brand image should
convey a product’s distinctive benefit and positioning.

Example: Google has created the image of a user-friendly brand and it is also one of the
main reasons behind its worldwide popularity. Apple on the other hand differentiated its image
as a high-end technology brand that caters to high-end consumers as well.

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III. DIFFERENT TRENDS AND ATTRIBUTES OF VARIOUS TOURIST SEGMENTS

According to a recent study, the global trends in tourism which are expected to have a
major influence in the mid and long-term tourism development are the global tourist population.
The two main tourist segments are the Young Tourists and the Ageing Tourists.

Generation Y, also known as the Millenials, are those 20-29 years of age. The rapidly growing
segment of the millenials are expected to represent 50% of all travellers by 2025. Their focus is
on exploration, interaction and emotional experience. Millenials expect a greater link between
tourism services and their everyday life. Many providers are adjusting their value chain to meet
the lifestyle requirements of this segment. The trend is expected to be further boosted by the
accelerated implementation of digitalization, as technology is essential for this demographic.

Generation Z, also called iGen, Click ’n go childeren or screenagers, range in age from 6 to 20.
This generation is totally different from Generation Y as they already have higher access to
information, a more dynamic lifestyle, and a higher level of education.

Generation Z Profile

1. 85% of generation z have or owns a smartphone

2. They spend parent’s money faster

3. High level of involvement in digital trends-digital integrators

4. 17 jobs in a lifetime

5. 15 places of residence in a lifetime

6. Language change (International terms abbreviation)

7. 50% of generation z are university educated

Both of these groups are the tech-savvy and technology driven age groups. They are all
different from one another and have specific needs for communication, consumption and tourist
experience.

Ageing Tourists or popularly known as “Silver-Haired Tourists” are considered as one of the
fastest growing segments in the tourism market. In 1950, 8% of the world’s population are
shared by those aged 60 and above. It increased to 12% in 2013 and based on forecast, the
share will possibly reach 21% by 2050. The ageing population will increase specifically in China,
India and USA as it is expected for those countries to reach over 100 million people aged 60
and above by 2050. The ageing population is now increasing in developing countries and
majority are found in Europe, the Americas and Asia, which are also the world’s major travel
sources.

Characteristics of Ageing Tourists:

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1. Senior population is ready to spend: Senior members of the society are often more
financially secure whether they are still working or have retired. Those that still work can
relatively have high-paying jobs. While for seniors, they enjoy the benefit of the pension they
are receiving.

2. They live well beyond the age of 65: With the advance science, medicine, and even
society, the life expectancy of the world’s population has been extended to 82 years for
females and 79 years for males.

3. They are active travellers: The older population has a greater desire to travel and to explore
the world as they are motivated by the widened availability of travel information on different
media and social media channels.

4. Highly personalized services: Senior travellers require tailor-made services and prefer to
build trust through face-to-face interaction with providers. They have different preferences
and interests, expectation and needs, and their focus is on special interest.

5. Soft adventure for “feeling young”: The ageing population is relatively fitter and healthier
and they do not considered themselves too old to travel. They look for more “experience-
driven” travel products rather than material goods.

6. Health and wellness products: They travel fo health reasons or purely medical reasons with
the general purpose of promoting health and well-being through physical, psychological or
spiritual activities.

7. New playground for everyone: Travel products demanded by senior travellers are highly
diverse and enable tourist suppliers to find their own niche segment among this growing
market.

IV. MARKET ANALYSIS

Market analysis is the process of gathering information and examining a particular sector,
industry, market or niche. Often, it involves studying and knowing the market potential, the
competitors, the customers and the stakeholders. According to Aaker (2012) the goal of market
analysis is to determine the attractiveness of a market and to understand its evolving
opportunities and threats as they relate to the strengths and weaknesses of the firm. He outlined
seven (7) dimensions of a market analysis.

1. Market Size (current and future): This is the key factor in a marketing analysis. The
size of the market can be evaluated based on present sales and on potential sales if
the use of the product were expanded. The information sources that determines the
market size are through government data, trade associations, financial data from
major players and customer surveys.

2. Market Growth Rate: A simple means of forecasting market growth rate is to

extrapolate historical data in the future. This is where the company gets the idea on
how long the said market will last in the industry. Some of the market growth drivers
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 includes demographic pattern, growth of sales in products, income level, changing
lifestyle of users or products and services, changing customers’ taste and
preferences. While price competition, decline in brand loyalty, availability of new
substitutes, market saturations and lack of growth drivers are the indicators of the
decline phase of a product.

3. Market Profitability: Michael Porter devised a useful framework to evaluate the

attractiveness of an industry or market. The framework is known as Porter’s Five
Forces, which identifies five factors that influence the market profitability. Porter’s
Five Forces are the following: (1) Buyer Power, (2) Supplier Power, (3) Barriers to
Entry, (4) Threat of substitute products, (5) Rivalry among competitors.

4. Industry Cost Structure: This is important in identifying key factors for success as it
helps formulates strategies to develop competitive advantage.

5. Distribution Channels: There are three aspects of distribution system that are useful
in a market analysis. (1) Existing Distribution Channel, (2) Trends and Emerging
Channels, (3) Channel Power Structure

6. Market Trends: Changes in the market are important because they often are the
source of new opportunities and threats for an organization. The relevant trends may
be industry specific or general. Industry-dependent influences those organizations
under the same industry category. However, for general market trends, it affects all
organization. Some example of such trends include changes in price sensitivity,
demand for variety, and level of emphasis on service and support. Regional trends
also may be relevant.

7. Key Success Factors: Element that are necessary in order for the firm to achieve its
marketing objectives. These factors include access to essential unique resources,
ability to achieve economies of scale, access to distribution channels and
technological process.

Discussion Question # 3: Why do you think marketing analysis is important before

establishing or creating a tourism product?

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Topic Highlights:

• Market is a set of all actual and potential buyers of a product or service. These buyers
share a particular need or want that can be satisfied through experience relationships.
Marketing involves serving a market of final consumers in the face of competitors.

• Marketing Strategy is the marketing logic by which the company hopes to create
customer value and achieve profitable customer relationships.

• The four steps in marketing strategy are the following: (1) Market Segmentation, (2)
Market Targeting, (3) Positioning and (4) Differentiation.

• Market Segmentation is dividing the market into smaller segments with the distinct
needs, characteristics or behavior that might require separate marketing strategies or
mixes.

• Market Segment consists of a group of customers who share similar set of needs.

• Kotler and Keller (2016) suggested that for segmentation to be effective, market segments
must be measurable, substantial, accessible, differentiable, and actionable.

• The 4 Types of Market Segmentation used in segmenting consumer markets includes

geographic, demographic, psychographic and behavioral.

• Geographic is diving the market into different geographical units such as nations, states,
regions, counties, cities, towns and neighborhood. Demographic is dividing the market
segments based on variables such as age, gender, family size, life cycle, religion, race,
education, occupation, income, generation and nationality.

• Psychographic is dividing the market segments based on social class, lifestyle,

psychological traits, values and personality characteristics. While Behavioral is dividing
the market based on consumer knowledge, attitude, use or response to a product or
service.

• Market Targeting is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.

• A Target Market consists of a set of buyers sharing common needs or characteristics that
the company decides to serve.

• The several forms of market targeting that can be helpful to a company are
undifferentiated (mass) marketing, differentiated marketing, concentrated marketing
(niche), micro marketing.

• Market Positioning is developing competitive positioning for the product and an

appropriate marketing mix. Positioning has to do with the deliberate way by which
marketers would want to position their product in the consciousness or mind of its
prospective customers.

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 • There are three positioning concepts that help reinforce the idea of market position: (1)
Unique Selling Proposition, (2) Competitive Advantage, and (3) Top of Mind.

• Differentiation means differentiating the market offering to create superior customer

value.

• The four differentiation strategies are product differentiation, channel differentiation,

people differentiation, and image differentiation.

• The two main tourist segments are the Young Tourists and the Ageing Tourists.
• Generation Y, also known as the Millennials, and Generation Z, also known as iGen, are
both considered as young tourists. These groups are tech-savvy and technology driven,
and very different from each other, with specific needs for IT needs, communication,
service- consumption and tourism experience.

• Ageing Tourists or popularly known as “Silver-Haired Tourists” are considered as one of

the fastest growing segments in the tourism market. The characteristics of ageing tourists
are the following: they are ready to spend, they live well beyond the age of 65, active
travellers, wants highly personalized services, soft adventure for “feeling young”, health
and wellness products, new playground for everyone.

• Market analysis is the process of gathering information and examining a particular sector,
industry, market or niche.

• According to David Aaker (2012), there are seven dimensions of market analysis:
market size, market growth rate, market profitability, industry cost structure, distribution
channels, market trends, key success factors.

References:

Badilla, M.G. (2015). Tourism Marketing. Manila: Rex Bookstore

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Kotler, P. (2016). Principles of Marketing 16th Edition. Boston: Pearson

Tourism Megatrends (2020). Retrieved from:

http://corporate.cms-horwathhtl.com/wp-content/uploads/sites/2/2015/12/Tourism-Mega-
Trends4.pdf | September 2020

Kamboj, R. & Sharma, P. (2016). Tourism for Tomorrow: Travel Trends across Generations:
From Baby Boomers to Millennials. Amity Research Journal of Tourism, Aviation and Hospitality
1.(2), 70-83. Retrieved from: https://amity.edu/arjtah/pdf/vol1-2/9.pdf | September 2020

Internet Center for Management and Business Administration, Inc. 2010. Retrieved from
http://www.netmba.com/marketing/market/analysis/ | September 2020

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