Market Segmentation: A Tool in Tourism Marketing and Evaluation

1. Market Segmentation: A Tool in Tourism Marketing and Evaluation MARKET #2 MODERN EDUCATION MARKET #4 FACILITIES PROGRAMMING MARKET #1 You MARKET #3 ENTERTAINMENT HERITAGE Ed Mahoney, Michigan State University, PRTR

2. The origins of the term market segmentation can be traced back to Wendel Smith's trail-blazing article in the 1950s which introduced the concept as `based upon developments on the demand side of the market and represents a rational and more precise adjustment of product and marketing effort to consumer and user requirements' [Smith, 1956]. Market segmentation was identified as a prerequisite for any organisation endeavouring to create products to fit customers' needs.

3. Market Segmentation: Relationship Marketing Customer Bonding Data Base Marketing Strategic Service Improvement Spending and Economic Impacts Market Value Analyis Positioning Analyses Marketing Effectiveness Customer Satisfaction Inquiry Conversion 1. Is the central concept and basis for “modern marketing” including: 2. It should be the basis for many form of tourism evaluations and studies:

4. Tourism Spending Information Resident vs. Non-Resident Day vs. Overnight trips Party Size Equipment Type -- boating, camping “0” spenders & Heavy Half Spenders Spending by persons/parties attracted by different marketing messages/media Different target markets

5. 3. A central component in marketing strategies: Visioning TOURISM Strategic Objectives Facility& Attraction Objectives Economic Objectives Tourism Inventory and Performance Marketing Objectives Current Tourism System Supply Perceptions Cooperation Publics Marketing Situation Economic Political Social Demographic Technology Community Plans & Objectives Market Overview Current markets Market segments Market trends Competition and Potential Partnerships Cooperative Regional Tourism Development & Promotion Opportunities, Threats, Strengths, Weaknesses, and Issues Product/Service -- Segments -- Relationships Target Segments Positioning Strategy Cooperative Themes and Objectives Target Market Objectives Marketing Mix Objectives and Strategies Facilities - Events - Services - Prices - Packages - Accessibility -Communication - Education - Community Monitoring Evaluation - Reporting

6. 4. The emphasis is shifting to “CUSTOMER PORTFOLIOS” and “RETENTION.” Having identified potentially attractive market segments, the further task is that of evaluating and choosing between segments (what Kotler [1997] terms `market targeting') `The objective is to link revenues with the appropriate customer or market segment, and to match costs with their related revenues, in some systematic and rational manner’ [Barnes and Cumby, 1995).

7. Focus on activities and products Aggregate analysis Limited evaluation and assessment Lack of segmented data 5. Market segmentation is still not integrated or utilized fully in tourism marketing and development

8. P2 P2 P1 P1 Q1 Q2 Market P2 Q2 Q1 P1 Segment A Q1 Q2 Segment B Market Segmentation & Elasticities

9. PROMOTION PROMOTION Visits Visits Market Segmentation & Elasticities Segment A PROMOTION Segment B Segment C Visits

10. Attribute/ Service Attribute/ Service Satisfaction/Purchases Satisfaction/Purchases Segmentation and Service Enhancement Segment A Segment B

11. P2 P1 PRICE P1 QUANTITY ENTERTAINMENT/CULTURE PACKAGES QUIET EXCITING ON THEIR OWN OUTDOOR RECREATION

12. PROMOTION VISITS PROMOTION PURCHASES ENTERTAINMENT/CULTURE PACKAGES QUIET EXCITING ON THEIR OWN OUTDOOR RECREATION

13. STRATEGIC OBJECTIVES SEGMENTATION CRITERIA & PROFILING EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING MARKET(?) CAPABLE? INTERESTED? DATA GATHERING

14. MARKET(?) STRATEGIC OBJECTIVES SEGMENTATION CRITERIA & PROFILING DATA GATHERING EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING CAPABLE? INTERESTED?

15. SEGMENTATION CRITERIA There is no generally accepted and validated way to segment markets Geographic Segmentation. Demographic (Socio-economic) Segmentation. Psychographic Market Segmentation -- social class and lifestyle variables. Behavioural Market Segmentation -- purchase occasion and method, benefits sought, degree of usage and loyalty, buyer readiness stage, and marketing focus sensitivity

16. MARKET(?) DECIDE ON SEGMENTATION CRITERIA EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING CAMPERS CAMPGROUND ATTRIBUTES TARGET THE DEVELOPED CAMPERS PRIMITIVE CAMPERS DEVELOPED CAMPERS ATTRACT RV CAMPERS DEVELOP PROGRAMS ENHANCE SITE HOOKUPS IMPROVE ACCESS • POSTION ON: • MODERN FEATURES • FULL SERVICES • MUCH TO DO! • CONVENTIENT

17. Data Base Marketing 1. Database marketing is a MARKETING ISSUE NOT a technology issue. 2. Clearly identify decisions/uses and information required 3. Draw a picture or process diagram of how the marketing database needs to work. 4. Build the database manually first, before you automate it. Then build a prototype-not a pilot. 5. Collect only data that will absolutely be used in the next 12 months. 6. Use a simple but proven software package. MARKET(?) POTENTIAL 1. SECONDARY STUDIES 2. PURCHASED PROFILES-LISTS 3. SURVEYS STRATEGIC OBJECTIVES SEGMENTATION CRITERIA & PROFILING DATA GATHERING EXISTING POTENTIAL EXISITING EVALUATION AND TARGETING SEGMENTATION AND PROFILING 1. REGISTRATIONS 2. INQUIRY CONVERSIONS 3. SURVEYS 4. INTEGRATED DATA BASES TARGET MARKET OBJECTIVES POSITIONING

18. MARKET(?) STRATEGIC OBJECTIVES SEGMENTATION CRITERIA & PROFILING DATA GATHERING EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING POTENTIAL 1. SECONDARY STUDIES 2. PURCHASED PROFILES-LISTS 3. SURVEYS EXISITING 1. REGISTRATIONS 2. INQUIRY CONVERSIONS 3. SURVEYS 4. INTEGRATED DATA BASES

19. MARKET(?) Evaluation STRATEGIC OBJECTIVES 1. Different elasticities 2. Servicability 3. Competitiveness Current Position 4. Value in present & over time 5. ROI 6. Fit and Compatability SEGMENTATION CRITERIA & PROFILING DATA GATHERING EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING

20. MARKET(?) Objectives STRATEGIC OBJECTIVES 1. Increase length of stay. 2. Loyalty/relationship building. 3. Increase purchases 4. Enhanced perceptions. 5. Satisfaction 6. Word-of-mouth SEGMENTATION CRITERIA & PROFILING DATA GATHERING EXISTING POTENTIAL EVALUATION AND TARGETING SEGMENTATION AND PROFILING TARGET MARKET OBJECTIVES POSITIONING

21. MARKET SEGMENTS FOR “CULTURAL TOURISM” MARKET #2 MODERN EDUCATION MARKET #4 FACILITIES PROGRAMMING MARKET #1 You MARKET #3 ENTERTAINMENT HERITAGE

22. PRODUCTS FOR “CULTURAL TOURISM” MARKET SEGMENTS MARKET #2 WORKING RANCHES MUSEUMS MODERN EDUCATION MARKET #4 PROGRAMMING FACILITIES MARKET #1 REINACTMENTS CATTLE DRIVES LIVING HISTORY GUIDED TOURS MARKET #3 HERITAGE ENTERTAINMENT

23. INQUIRIES TARGET MARKET B TARGET MARKET A TARGET MARKET C TARGET MARKET D HOW TARGET MARKETS ARE DEFINED INFORMATION COLLECTED ON INQUIRIES

24. SUMMER PLANNER DIRECT MAIL METHOD OF INQUIRY MODE OF INQUIRY TIMING OF INQUIRY TRAVEL MICHIGAN REGIONAL COOPERATIVE ADS TARGET MARKET INQUIRIES NUMBER OF INQUIRIES INFORMATION REQUESTED

25. Do Not Buy Art Buy Art Day Trippers Light Buyers Heavy Buyers Overnight Day Trippers Overnight Overnight Day Trippers Art Fair Tourists

26. Do Not Buy Art Buy Art Art Fair Tourists Light Buyers Heavy Buyers Overnight Overnight Overnight

27. Do Not Buy Art Buy Art Profiles Strategies 1. Positioning 2. Coop ad/promos 3. Packaging 4. Retention effort 5. Relationships 1. Years of attendance 2. Family life cycle 3. Other activities 4. Other art fairs 5. Preferred lodging 6. Organizations 7. Art buying info 8. Planning 9. Spending Art Fair Tourists Light Buyers Heavy Buyers Overnight = Overnight Overnight