Segmentation in the Holiday Market - Essay Example

Segmentation in the Holiday Market Introduction Market segmentation is defined as the "division of market into homogenous group of consumers (Market Segmentation 1)." Market segmentation is a very essential tool in devising an effective marketing strategy for a firm. Market segmentation allows every company to develop marketing strategies for each segment to maximize product profitability. This tool enables the company to gain competitive market positioning as well as deliver maximum customer value. The nature of modern markets highlighted company's need for market segmentation. As markets are continuously becoming more and more volatile and competitive, mass or standardized marketing is becoming an obsolete strategy. There are gaps in the needs of every customer which needs to be serviced by firms. SMART (4) has identified four benefits of market segmentation. Accordingly, market segmentation enables a company to design responsive products to cater to the needs of the marketplace. It can also help develop effective and cost-efficient promotional strategies and campaigns. As segmentation allows company to better position themselves in the marketplace, market segmentation gives the company an insight on how they are perceived by their current and prospective customers. Market segmentation also aids companies to develop and improve marketing strategies. This paper will take a look at market segmentation in the holiday market. It is notable that this market is becoming more and more lucrative especially for leisure and travel agencies. It is also irrefutable that the entire holiday market is huge and is comprised of diverse sets of consumers with different holiday preferences, inclinations, age, level of income, and activity preferences. This prompted players in the industry to identify the most profitable niches and develop products for them thus, the use of market segmentation. Among others, market segmentation in holiday market enables holiday companies to meet the needs of differing consumer groups by developing more appropriate product portfolios and fine-tuning their marketing strategies. Segmentation in the Holiday Market As discussed previously, the holiday market is comprised of vast and diverse consumer groups. To further illustrate the importance of market segmentation in holiday market, this paper will cite examples on how different companies segment their market through different methods and offer a specialized product for each segment. An empirical example of this is Tourism Victoria which aims to market Victoria to international travelers. In order to properly address the needs of its differing market and deliver maximum customer value to each customer, it has used market segmentation. The whole market of Tourism Victoria ranges from local Australian residents to international travelers. However, to identify the most lucrative groups and sub-groups in the market it had to classify customers into different sub-groups according to their unique characteristics and target only those profitable niches. Afterwards, the company was able to come up with three major target market segments. Methods of Market Segmentation In its market segmentation process, the company utilized three market segmentation techniques-Roy Morgan Value Segments, MOSAIC, and life cycle. Roy Morgan Value Segments Roy Morgan Value Segments is developed by Colin Benjamin in partnership with Roy Morgan Research Center. This technique is a proprietary methodology which divides the holiday market in terms of customer preferences, needs and motivations. This methodology largely relies in the employment of psychographic data which supplies information on the "deeper drivers of choice" through an evaluation of behaviors in addition to demographics data such as age, income, etc (Domestic Market Segmentation 3). The rationale of using Roy Morgan Value segments is for the company to "distinguish the market segment with highest yield potential and identify their value needs (Domestic Market Segmentation 4)." The wide market is divided by analyzing the travel behaviors, preferences and media consumption of each consumer. Furthermore, value segments are also identified by closely examining the market's propensity to travel, preference and intension to travel, expenditure, holiday activities, accommodation used and transport (Domestic Market Segmentation 4). Utilizing the Roy Morgan Value Segments method, the company was able to pinpoint ten sub-groups in the entire Australian population. These market segments are identified as Visible Achievement, Something Better, Traditional Family Life, Conventional Family Life, Young Optimism, Socially Aware, Look at Me, A Fairer Deal, Real Conservatism, and Basic Needs (Domestic Market Segmentation 5). After separating similar customers into their respective sub-groups according to their characteristics, the holiday company now picks its three holiday market segments as core target markets namely Socially Aware, Traditional Family Life, and Young Optimism. Life Cycle Segmentation The next method of market segmentation after applying the Roy Morgan Value Segment technique is Life Cycle Segmentation. Life cycle segmentation is employed in order to improve the analysis on each market segment. The company understands each value segment undergoes a change in motivation, needs, and attitudes as they go along different "life cycles." Further utilizing life cycle segmentation technique enables the company to provide for the different needs of each segment, allowing them to target more directly and efficiently. The results of the life cycle segmentation techniques in each previously identified core target markets are discussed in following section. Three Holiday Market Segments Socially Aware is the subgroup which is associated with the elite socioeconomic group. The life cycle analysis of socially aware revealed that most 50% belong to family groups, that is most of the Socially Aware are couples with their own children. They are upscale market professionals whose age ranges from 35-49. This group is characterized as being "information vacuum cleaners" who are interested in finding and trying new trends-often unmindful of the cost. They are the innovators in the market, always willing to be the first to take up new products and services. Since they are adept in persuading other people, they are likely to end up in business politics. Socially Aware utilizes all the sources of information in planning their holidays. They usually enjoy the holiday planning process through the use of all available planning guides. Flexibility and quality of holiday are essentials in fulfilling their demands. Their holiday style often includes experimental, interpretative, learning, indulgent, boutique, and nature experiences. Marketing Strategy for the Socially Aware Having utilized the essential market segmentation techniques, the company has come up with an efficient marketing strategy for the Socially Aware Segment. The awareness of the holiday company of the specific and unique characteristic of this target market enabled it to devise a holiday package tailored to fit its needs Since the Socially Aware segment is willing to try new and experimental holidays, a wide range of holiday activities are offered to them. These activities ranges from nature-based, beach based, active outdoor, cultural, food, wine and entertainment. Nature based activities provided to Socially Aware are trips to wilderness, bushwalking, national parks tour, visits to country and wildlife, gardens, parks, zoos and sanctuary. Beach based activities include surfing, sailing, and swimming. Socially Aware are also lured into active outdoor activities like snow skiing, golf, bike riding, tennis, horseback riding, spectator sporting events and other adventure activities. Due to the segment's willingness to be exposed to all social activities, they are also perceived to have a strong inclination in attending cultural activities like art galleries, exhibitions and cultural events, musical performances, historical places, theater and cinema. The Socially Aware segment is not price sensitive as they are the highest socioeconomic group. To be consistent with this, the travel package offer includes the most luxurious accommodation in hotels, motels, and host farms. Transportation ranges from plane, ship or boat though most of the travelers can afford to hire and bring their own car. Promotion of products to Socially Aware is usually done using high-end magazines and internet advertisements. Since the Socially Aware market segment is inclined to be involved in business and politics, advertisement are usually placed in magazines most read by businessmen and politicians. The company also utilized the internet as an effective advertisement tool considering that this market segment is comprised of internet savvy consumers who surf the internet more than eight times a week. The second core target market of the company is named Traditional Family Life. In contrast to the socially aware, this segment is comprised with more "mature" customers aged more than 50. This segment is usually focused on training and developing their grandchildren. As they are considered "empty nesters," their primary motivation, which is brought by security and reliability, is to provide better opportunities to their family. They are now more concern in "building a home" which prompts them to spend a great deal of time with family and friends. Regarded as traditional, they are commonly cautious of new things. In planning their holidays, Traditional Family Life are prefers an advanced planning process to gain familiarity with all the holiday activities. This market segment also prefers holiday activities which are nostalgic, involves visiting friends and family, and package trips. Marketing Strategy for the Traditional Family Life Using its knowledge about the characteristics and preferences of the segment, the holiday company is also able to come up with a unique marketing strategy that offers maximum customer value for the Traditional Family Life. In contrast to the Socially Aware, products offered by the company to the Traditional Family Segment are more "conservative" and limited. Nature based activities designed for the segment includes visits to garden and parks, and country and wildlife sight seeing. Beach based activities are not suited to the market as it is dominated by almost "inactive" aging population. Outdoor activities prescribed are fishing and spectator sporting events. The package also includes cultural activities comprised of visits to historical places, watching musical performances, and other cultural events. Pricing strategy is also crafted to suit the Traditional Life segment. Though these customers have already achieved stability and security, they are price conscious. They typically choose packages which offer the maximum value for their money. With these considerations, they are usually accommodated in standard hotels and transported via train, caravan and car. Due to their age, it is presumed that almost all the consumers in this segment had never accessed the internet. The company therefore, has to resort to and heavily rely on traditional advertising techniques. The Young Optimism segment is a group of young consumers with progressive lifestyle whose primary motivation is to improve their prospects in life. As young individuals, they look at trends and prefer trendy image and style. At their young age, they want to experience all the things that life has to offer. This group is also branded as "work hard, play hard." Young Optimism's attitude towards travel greatly differs from the previous segments. The group does not believe on planning up to the very last detail yet enjoys spontaneous travel, planning only the basics. Their preferred holiday style ranges from experiential, discovery, adventure, fun and excitement, and backpacking. Marketing Strategy for the Young Optimism To suit the needs of the segment, the company has also designed a unique marketing plan according to the group's characteristics. The products offered to the Young Optimism is almost similar to that offered to Socially Aware group. Their packages also encompasses a wide range of activities ranging from nature based, beach based, active outdoor, and cultural activities. Nature based activities for the Young Optimism ranges from bushwalking, visiting national parks, gardens, zoos and sanctuaries. Sailing, surfing and swimming comprise the beach based activities in the package. Young Optimism are also very much into outdoor activities like snow skiing, golf, bike riding, tennis, horse riding, spectators sporting team, and other adventure activities. Also included in the company's holiday package are cultural activities which include visits to art galleries, exhibitions, cultural events, musical performances, theater and cinema. Pricing strategy for Young Optimism is mid-way between the price range offered to the two previously discussed segment. The holiday company offers the segment accommodations like backpackers, hotels, motels, camping, and host farms. Transportation is aided through plane, bus, coach, ship, boat and car. Promotion of products is done through the internet because like the Socially Aware, Young Optimism segment is also internet savvy. Relevant Marketing Models and Their Uses The use of relevant marketing models in ensuring an efficient marketing plan for the company is practiced by almost all companies worldwide. These marketing models become an effective tool in diagnosing the marketing needs of a firm at the same time that they also convey the marketing needs of a particular product or product line. One of the most widely used marketing models is the product lifecycle model. Accordingly, this marketing model takes into account the different "life cycles" or stages that a product goes through from introduction to death. The marketing mix of the products changes as they go through different stages in their life cycle. For instance, this model asserts that a company's advertising should be "informative at the introduction stage, persuasive during the growth and maturity stages, and be reminder-oriented in the decline stage (Product Life Cycle 4)." Relating this to the diffusion of innovation model, companies should use consistent marketing mix according to the product's life cycle. The diffusion model classifies customers according to their willingness to use a newly introduced technology namely, innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%) and laggards (16%) (Diffusion of Innovation 3). Consistent with the product life cycle model, advertising should be more intensive during the early stag to encourage the adoption of new technology. Conclusion An effective marketing strategy is often the key to the profitability and marketability of a product. In this past faced world, the key is in knowing your customers and efficiently serving them according to their needs. An analysis of the consumers' lifestyle, attitude, preference, and behavior is very essential in crafting an effective marketing strategy not just in the holiday market but in other industries. Likewise, it is also important to consider the life cycle of a product in making right marketing mix. Works Cited "Diffusion of Innovation." Wikipedia: The Free Encyclopedia. 15 Oct 2005. WikiMedia. 24 Oct. 2005. < http://en.wikipedia.org> "Domestic Market Segmentation." Tourism Victoria. 2005. Tourism Victoria. Com. 23 Oct. 2005 "Market Segmentation." Quick MBA. 2004. Internet Center for Management and Business Administration. 23 Oct. 2005 "Product Life Cycle." Wikipedia: The Free Encyclopedia. 15 Oct 2005. WikiMedia. 24 Oct. 2005. < http://en.wikipedia.org> Read More