8.2 Market segmentation and targeting

Market segmentation 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 customer personas, 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 market share, 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

• Demographic 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 surveys, focus groups, 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:
  1. Concentrated targeting focuses on one specific segment
  2. Differentiated targeting targets multiple segments with tailored approaches
  3. Undifferentiated targeting 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 travel motivations, booking preferences, accommodation preferences, dining habits, and activity interests
• Analyze customer journey 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