Appraisal of Segmentation and Advertising in the Marketing Strategies of Italy - Case Study Example

Focusing on Segmentation and Advertising Aspects of Marketing, a Discussion and Evaluation of How Effectively These Two Tools Have Been Used By Italyto Promote Itself for Tourism Table of Contents Introduction 3 Drawing on Academic Literature 4 Strengths and Weaknesses of Segmentation and Its Specific Use in Destination Marketing 5 Strengths and Weaknesses of Advertising and Its Specific Use in Destination Marketing 7 Appraisal of Segmentation and Advertising in the Marketing Strategies of Italy, as the Chosen Destination 8 Segmentation Strategies Applied by Italy 9 Advertising Strategies Applied by Italy 11 Conclusions and Recommendations 14 References 16 Appendix 22 Introduction With the ascended significance of tourism industry in the current phenomenon, cities, states and nations at the larger scale, have embarked on promoting itself as attractive destinations for tourism customers, competing with other similar players in both the national and international realms (Ashley & et. al., 2007). Such commercialisation of destinations to increase volume of loyal tourism customers have attracted theorists from various fields, leading to the introduction of multifaceted notions. Among these notions, the idea of ‘destination marketing’ has gained considerable importance, which very comfortably settles-in with the above described presumptions of tourism service marketing in the 21st century context (Pike, 2008). Following the ideology of destination marketing, places that attract tourism are being presented as brands to the targeted market segment. Subsequently, presented as a brand, destinations or places also require promotion amid the targeted customers to lure them for their ultimate purchase in competitive war with other, almost similar, destinations (Giannopoulos & et. al., 2011). This has certainly made the tasks for destination marketers challenging, having no tangible value. Nonetheless, marketing approaches in the services sector have taken pace and are continuously improving since the 19th century. This played a guiding role for destination marketers in strategizing their respective promotional initiatives (Dahlman, 2007). Unsurprisingly thus, most of the marketing strategies used in destination marketing seems to be directly inspired by modern service marketing approaches (Hartl, 2002). However, as the services being marketed through destination marketing function without any boundary in interpersonal dimension, rather extends to natural paradoxes presented by the geographic, economic and social dimensions of a place, promotional strategies used for destination marketing diversifies significantly from the marketing approaches applied when promoting any other service (Hoyle, 2002). Apparently, summing up the entire details, of how complex and unique destination marketing approaches are, is impossible within a handful of words. To describe the phenomenon, relative literature references can be drawn with emphasis to its two most prominent components i.e. segmentation and advertising. Emphasising this statement in justification to the need and scope for an in-depth study of the stated trend, in this thesis, illustration of various facets, strengths, weaknesses, uses and other specific core attributes for segmentation and advertising strategies used by Italy, as a tourism destination, will be provided. Drawing on Academic Literature Amongst the most prominently and tactfully used marketing strategies adopt by contemporary organisations today, are the segmentation and the advertising initiatives. While segmentation is argued to help marketers in stipulating the targeted customer population, advertising helps in persuading customers’ buying behaviour and contemplating the success potentials of the overall marketing strategies formulated (Dunn, 1995; Tynan & Drayton, 1987). Juxtaposed to such a high degree of significance carried by these two promotional tools, attention gained amid theorists concerning its scope and determinants is nothing unexpected. The above stated specific uses of segmentation strategies and advertising initiatives have formed the base for numerous promotional plans, including those followed in the tourism industry for destination marketing purposes (Pike, 2008). Attributes changing in the industrial contexts also lay a substantial impact on the use of these tools, which further shapes the strengths and weaknesses of segmentation as well as advertising approaches performed by a particular destination marketer (Hunt & Arnett, 2004). Strengths and Weaknesses of Segmentation and Its Specific Use in Destination Marketing Arguably, segmentation strategies used in the tourism industry is much different from that observable in other industry contexts, as these strategies depend largely on intra-industry heterogeneity, which again determines the differences of one industry sector from the other. It is the same characteristic, which further defines the need and the style of segmentation within a given industry, such as the tourism industry of 21st century (Pike, 2008). As argued by Hunt & Arnett (2004), it is the heterogeneous tastes persisting in the intra-industry demand that drives marketers towards segmenting the customer populaces in accordance with their features in common and subsequently, identifying the most suitable customer group that can be persuaded to obtain greater return from the investments made. Maintaining coherence with the assertions of Hunt & Arnett (2004), Dolnicar (2008) has strongly supported intra-industry heterogeneity within the tourism industry, which correspondingly influences the trend of destination marketing. Customers in tourism industry context are referred as tourists, with varying needs, ideals and preferences to enjoy the differences in their host destinations. Given the fact that services delivered in the tourism industry are wide ranging, whilst offers presented by destinations in the global market support such variety, tourists have a broad assortment of options to make their ultimate selections. Tkaczynski (2009) thus argued that differences persisting in the destination features ultimately shape the demands and the needs of the tourists, which at times often coincides making it more challenging for destination marketers to segment a specific customer group when promoting the destination. Hence, this can be determined as a weakness of the market segmentation strategies in use among the destination marketers (Dolnicar, 2008). The strengths of market segmentation approach in promoting a destination can be identified in terms of its effectiveness in assisting the classification of tourists in smaller homogenous groups. This makes it easier for destination marketers to build a satisfied customer base, being able to suffice their needs and demands to the highest possible extent (Pike, 2008). Another key strength of market segmentation strategy is its ability to systematically develop the promotional functions as measurable, actionable, accessible and substantial (Muratha, 2013). This further assists in making the marketing strategies highly differentiable when promoting a destination, rewarding better credibility amid the targeted tourists (Fuller & et. al., 2005). On the contrary, Fuller & et. al. (2005) have also argued that because it is impossible to differentiate tourists on the basis of their homogeneous choices in smaller groups and heterogeneous selections within larger sections, it is likely that market segmentation strategies may increase complexities and vagueness when promoting a destination. Literature studied with a similar objective proved that market segmentation strategies are seldom perfect, as there is no right way to segment a market (Mulec, 2010; Tkaczynski, 2009). Nevertheless, to avoid these complexities and weaknesses, destination marketers have been emphasizing market segmentation on the basis of service options and its need amid the customers, rather than being solely dependent on the tastes, preferences and aesthetic features of the customer groups. This might be similar in the case of two service options (like eco-tourism and sport tourists) but will impose limited effects in terms of complexities (Williams, 2008). Strengths and Weaknesses of Advertising and Its Specific Use in Destination Marketing Similar to the usage of market segmentation in destination tourism, advertising tools used for destination marketing also has its specific uses in the sector, which is determined on the basis of its rudimental strengths and weaknesses. As argued by Dunn (1995), the general purpose of advertising for any given sector is to promote brand awareness and generate more revenue for the applicant organisation. However, the equation is not quite that simple in the context of tourism industry, especially when promoting a destination. As argued in Alford (1998), the foremost limitation in advertising for a destination is its much wider scope and objective-oriented classification when applied in marketing a destination as a brand. Park & et. al., (2013) were also of the view that because destination marketing seldom has a quantifiable return being focused on generating brand awareness primitively, advertising strategies are often criticized as an extra cost for destination marketers. As a result, considerable budget economising has been observed in the advertising costs planned to be borne by destination marketers (Park & et. al., 2013). Moreover, advertising in destination marketing, as it operates within a specific objective to increase customers’ demand for the destination being promoted, often become confusing for the target audiences, given the lack of tangible and traditional features in its service deliverance procedure. Under such circumstances, strengths of advertising strategies in destination marketing becomes vague and ineffective (Alford, 1998). Nevertheless, destination tourism has its own strengths and benefits. Studies like Park & et. al., (2013), Marino (2010), McWilliams & Crompton (1997) and several others have revealed that destination advertising indeed plays a crucial role in rejuvenating brand image amid the targeted audiences, increasing possibilities of revenue acceleration for the destinations being promoted. It is in this context that the specific use of destination advertising can be argued as concentrating more on building brand image amid the target group of tourists with an expectation to further facilitate revenue obtained by the tourism industry in the destination (Pike, 2002). According to Molina & et. al. (2010), destination marketers need to understand that advertising, when promoting destination as brands, should emphasize that its specific use is to deliver brand message, convey market information to the target audiences and build on the relationship between industry stakeholders. Correspondingly, it can be expected that with a clear purpose, destination marketers will be able to mitigate the challenges associated with destination advertising and make proper use of the promotion tool. Appraisal of Segmentation and Advertising in the Marketing Strategies of Italy, as the Chosen Destination 21st century business environment has witnessed the rise of tourism activities unprecedentedly, empowering economic developments even in the plight of economic instability. Undoubtedly, it’s somewhat recession prove characteristics, allowing better information and resource flow amid international channels, have increased its significance to the economic institutions, with no less impact as compared to any particular manufacturing sector of Italy (Turner, 2013; Babalola & et. al., 2011). As per the recent reports, the tourism industry in Italy has been able to reward it with employment stability generating around 11.7% of the aggregated employment figure in the economy as on 2012 along with a total GDP contribution of 10.3% in the same year (Turner, 2013). These statistical figures apparently verify the importance of tourism sector for Italy, to preserve its economic stability remaining compatible with other nations. Such contributions made by Italy’s tourism industry have also motivated it to promote itself as a suitable destination for a varied range of target tourist groups (i.e. the customer segments) to gain a competitive advantage over other destinations such as France, Germany, Spain and various Euro areas. Statistical reviews further reveal that Italy has been quite efficient in promoting itself yielding better position in terms of competition with the above-mentioned tourism brands and is further expected to keep improving in marketing itself as a preferable destination among its targeted customers (OECD, 2011). These detections further arouse questions regarding the key attributes, contributing to the competencies of Italy as a destination, which might be also linked with its segmentation and advertising strategies, postulating the way it is embedded in its overall marketing strategy. Segmentation Strategies Applied by Italy As mentioned in the above discussion, when drawing from academic literatures on various functionalities of segmentation strategies for destination marketing, it was observed that in most instances, destinations emphasise their characteristics to offer wide-ranging service options to the tourists, rather than segmenting the target market in accordance with their choices (Williams, 2008). The same can also be observed in the case of Italy. As a country rich in its medieval architecture, ancient culture, scenic beauty, unique food and wine ethnicity and modern sport customs, Italy enjoys the capacity to offer many services to its target market customers, differentiating itself from other rival destinations in the global market. Correspondingly, Italy segments its target market on the basis of 7 products that it is able to offer (Invitalia, 2011). One of these constitute of art cities, suitable to attract shoppers from the global market to enjoy luxury brands as well as collectors of ancient and modern art pieces (Manente, 2007). As both these groups of target tourists prefer luxurious lifestyle, majority of its 5 starred hotels are located in art cities of the country (Invitalia, 2011). Seaside also constitutes another major attraction feature for Italy, where individual tourists, adventure seekers, couples and other vacation tourists flood all year round. Likewise, to accommodate these, Italy has promoted its water sports culture along with accommodation facilities to offer its visitors with a long-sustaining vacation experience (Invitalia, 2011). The 7 products offered by Italy in segmenting its market also include sophisticated sports like Golf and corporate venture platforms through Meetings, Incentives, Conferences, and Exhibitions (MICE). Thus, it also becomes a favourable destination to corporate tourists within the national as well as international platforms (Invitalia, 2011). As already stated, Italy is undisputedly categorized as a host with enriched and unique geographic characteristics in the world tourism sector. Such features have also powered the destination to host independent adventurers as well as luxury travellers or tourists who are also categorized the most suitable market segment for relax tourism as to enjoy the mountains in Italy and the sumptuousness of its thermal and wellness services. These further constitute the destination’s other two products among the primary 7 (Invitalia, 2011). Last but not the least, food and wine remains a major attraction for all the above mentioned segments of tourists in Italy. It is with this understanding that major emphasis has been laid to boost traditional cuisine heritage and regional wine production, where high quality accommodation facilities have been funded in wineries along with other traditional hubs (Peeples, 2012; Invitalia, 2011). Based on the findings obtained in the above discussion, it can be inferred that Italy delivers utmost focus on the rudiments of destination management when segmenting its target market. However, with such extensive range of suitable tourist groups to consume services offered by the destination, it has indeed been a challenging task for Italy to promote itself efficiently, where the delivered weightage on developing its service offering to lure various groups of tourists and suffice their expectations has definitely been credible. Advertising Strategies Applied by Italy Advertising strategies used by destination marketers have originated from the similar advertising tools used by other services or manufacturing sector in the current day context, comprising audio-visual, print and social media amid the mass communication channels. In destination marketing, significance is also provided to the use of word-of-mouth selling, but seldom does a marketer invest in personal selling unlike other service organizations, particularly owing to the vast dimension of the tourism market (Alford, 1998). To promote itself, Italy has also been making use of these advertising tools with a visionary approach to build a sophisticated but persuasive image of the brand destination to the increasingly complex distribution of international tourists. It is worth mentioning in this similar context that Italy has been using destination advertising strategies with the purpose of national profiling to shift the traditional mindset of targeted tourist segments and the investors as well, towards a more innovative, sustainable and equitable industry structure when branding itself as a competitive destination (Fondazione Rosselli, 2008). The foremost challenge presented to Italy, when promoting itself as a preferable tourism destination is the need to change its preconceived portrayal of being a cost intensive host market to a more lenient and affordable tourist destination for its target market segments. Italy was also able to witness a rising demand for short and cheaper trips amid the international target customers, which further fuelled the need to promote itself as a cost convenient tourism destination, further shaping its ideals for destination marketing (Euromonitor, 2013). Accordingly, to promote itself as a diversified host destination in comparison with other rival brands, Italy had to carry intensive advertising approaches, mostly in the form of campaigning and building strategic associations with governmental as well as non-governmental agencies such as the Italian State Tourism Agency, Automobile Club d’ Italia and Club Alpino Italiano among others (Europa, 2010). In addition, Italian National Tourism Observatory (INTO) has been promoting the overall country system when advertising for the tourism offers delivered by the nation, organising national events at varied levels (Nacca & et. al., 2010). Examples of such events can be identified in terms of mega sports events hosted by Italy to promote itself as a destination of choice amid the international tourists. Notably, while promoting the entire country system seems to be a challenge for Italy, promoting these events in the worldwide market segments through various communication channels, empowering the brand with better reach to the target customers. Such advertising systems also generate a better perspective amid target market segments regarding the place-specific tourism resources, rewarding with improved destination awareness and brand image, further sufficing the need to reform national profiling (Sorrentino, 2013). As apparent, there is a need to fragmentise the entire country system into different categories of tourism services to gain efficiency in destination advertising. Another ingredient, which has become quite prominent in destination advertising for Italy is the use of Information and Communication Technology (ICT) systems. Italy has therefore been focused on implementing the Virtual Incoming Agency model in its advertising strategies where the brand is managed efficiently, assisted by a two-way communication framework when channelizing information regarding various types of tours, tailored as per the demand of the targeted customers. From an overall perspective, ICTs, mega event hosting and campaigns at the international level in partnership with various governmental and non-governmental agencies have been used by Italy in promoting itself at such an enormity in the global tourism market (Petti & Passiante, 2006). Conclusions and Recommendations Segmentation and advertising are undeniably complex processes when it comes to destination marketing where segregating the homogenous features at smaller groups and heterogeneous attributes at a larger scale is near to impossible. Visibly, in the case of Italy, segmentation as well as advertising has been a crucial challenge where the brand has been emphasising its service options to segregate the target market along with fragmentising its country system to promote each dimension of its tourism market through effective advertising. The specific use of these tools has likewise been concentrated on refurbishing the national profile of Italy, portraying itself as a suitable destination for every type of customer segment. However, it is owing to the same initiative that Italy has to bear particular weaknesses when segmenting and advertising for itself as a branded tourism destination. For instance, Italy practices through an extremely fragmented promotional system abroad, which limits clarity of the message delivered by the brand to its multiple segments of tourists. In addition, the involvement of a hybrid governance system, often results in apparently different advertising messages, distorting the chances of developing a clear view amid the target market segments (Angeloni, 2013). To limit these weaknesses in its overall promotional system through segmentation and advertising, Italy should be focused on rescheduling its governance system to a more specific orientation of the Virtual Incoming Agency model. It is also suggestible that Italy should aim at segmenting its target market in a simpler manner, which will allow better control on its promotional strategies. Emphasising more detailed market profiling will be mandatory in this context for Italy, which can be conducted through a rigorous research. In this context too, Italy must ensure a well-structured governance system to obtain accurate information and further utilize those for market segmentation and advertising. Innovation can be deemed as another suggestible best practice for Italy, which can aid it with a differentiated position in the global tourism market. Developing new tourist centres, attractions and tour facilities for almost every segment can herewith assure repeat visits at a larger volume and hence, suffice its promotional objectives to increase customer base. Focusing on better interactivity with the targeted tourist market may also prove as a best practice for Italy, to promote itself as a destination. This can be done through more active participation in the internet media (to reach global tourists), keeping a simultaneous and critical check on the Key Performance Indicators (KIPs) of the country system (Alexa, 2009; Harrill, 2003). References Alford, P., 1998. Positioning the Destination Product-Can Regional Tourist Boards Learn from Private Sector Practice? Journal of Travel & Tourism Marketing, Vol. 7, No. 2, pp. 53-68. Alexa, L., 2009. Urban Marketing and Its Impact over the Competition Between Cities. “Alexandru Ioan Cuza” University of Iasi. Angeloni, S., 2013. The Strategic Plan for Tourism Development in Italy. Economia. Seria Management, Vol. 16, Iss. 1, pp. 107-120. Ashley, C. & et. al., 2007. The Role of Tourism Sector in Expanding Economic Opportunity. Economic Opportunity Series, pp. 1-50. Babalola, A. & et. al., 2011. Tourism Cluster in Italy: Microeconomics of Competitiveness Final Report. Harvard Business School. [Online] Available at: http://www.isc.hbs.edu/pdf/Student_Projects/Italy_Tourism_2011.pdf [Accessed May 02, 2014]. Dahlman, C., 2007. Technology, Globalization, and International Competitiveness: Challenges for Developing Countries. Industrial Development for the 21st Century, pp. 29-83. Dunn, D., 1995. Advertising and Promotion. The University of Arizona, pp. 1-6. Dolnicar, S., 2008. Market Segmentation in Tourism. University of Wollongong, pp. 1-21. Euromonitor, 2013. Travel and Tourism in Italy. Country Report. [Online] Available at: http://www.euromonitor.com/travel-and-tourism-in-italy/report [Accessed May 02, 2014]. Europa, 2010. Italy Report On Tourism 2011. Annual Reports. [Online] Available at: http://ec.europa.eu/enterprise/sectors/tourism/files/annual_reports/2010/it_2010_en.pdf [Accessed May 02, 2014]. Fondazione Rosselli, 2008. Promoting and Communicating Italian Style around the World. Destinazioneitalia 2020. [Online] Available at: http://www.destinazioneitalia2020.it/User/01_promozione_eng.pdf [Accessed May 02, 2014]. Fuller, D. & et. al., 2005. Market Segmentation Approaches: Do They Benefit Destination Marketers? Center for Enterprise Development and Research Occasional Paper, No. 4, pp. 2-23. Giannopoulos, A. A. & et. al., 2011. “Desti–Nation Branding”: What For? From The Notions Of Tourism And Nation Branding To An Integrated Framework. Cultural Diplomacy, pp. 1-11. Harrill, R., 2003. Guide to Best Practices in Tourism and Destination Management. Tourism and Regional Assistance Centres (TRACS). Hartl, A., 2002. Developing Marketing Strategies for Tourism Destinations in Peripheral Areas of Europe: The Case of Bornholm. Centre for Regional and Tourism. Hoyle, L. H., 2002. How to Successfully Promote Events, Festivals, Conventions, and Expositions. John Wiley & Sons, Inc. Hunt, S. D. & Arnett, D. B., 2004. Market Segmentation Strategy, Competitive Advantage, and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory. Australasian Marketing Journal, Vol. 12, No. 1, pp. 7-25. Invitalia, 2011. Investment Opportunities. Tourism. [Online] Available at: http://ukrexport.gov.ua/i/imgsupload/file/1432Tourism_english_.pdf [Accessed May 02, 2014]. Marino, E. D., 2010. The Strategic Dimension of Destination Image: An Analysis of the French Riviera Image from the Italian Tourists Perceptions. University of Naples. Manente, M., 2007. Destination Management and Economic Background: Defining and Monitoring Local Tourist Destinations. Central Paper, Session 4: Tourism Destination Management. McWilliams, E. G. & Crompton, J. L., 1997. An Expanded Framework for Measuring the Effectiveness of Destination Advertising. Tourism Management, Vol. 18, No. 3, pp. 127-137. Molina, A. & et. al., 2010. Tourism Marketing Information and Destination Image Management. African Journal of Business Management, Vol. 4, No. 5, pp. 722-728. Mulec, I., 2010. Promotion as a Tool in Sustaining the Destination Marketing Activities. Turizam, Vol. 14, Iss. 1, pp. 13-21. Muratha, C., 2013. Methods Used By the Kenya Tourist Board in Marketing Adventure Tourism in Mount Kenya Region. Tampere University of Applied Sciences. Nacca, A. & et. al., 2010. The Italian National Tourism Observatory: Governance and Statistical Issues: Regional Example: Umbria’s Observatory. Italian National Tourism Observatory (INTO), pp. 1-15. OECD, 2011. OECD Studies on Tourism: Italy: Review of Issues and Policies. OECD Publishing. [Online] Available at: http://dx.doi.org/10.1787/9789264114258-en [Accessed May 02, 2014]. Petti, C. & Passiante, G., 2006. Getting the Benefits of ICTs in Tourism Destinations: Models, Strategies and Tools. University Of Salento, pp. 1-7. Park, S. & et. al., 2013. Assessing Advertising in a Hierarchical Decision Model. Annals of Tourism Research, Vol. 40, No. 1, pp. 260 - 282. Peeples, S. A., 2012. A Niche Trend in the Tourism Market: Wine Tourism in Italy. School of Hospitality & Tourism Management. Pike, S., 2002. Destination Image Analysis: A Review of 142 Papers from 1973-2000. Tourism Management, Vol. 23, No. 5, pp. 541-549. Pike, S., 2008. Destination Marketing: An Integrated Marketing Communication Approach. Routledge. Sorrentino, A., 2013. The Role of Mega Sport Events in Destination Marketing Strategies: An Integrated Approach between Demand and Supply-Side Perspectives. 22th EDAMBA Summer School. Tkaczynski, A., 2009. Destination Segmentation: A Recommended Two-Step Approach. University of Southern Queensland, pp. 1-118. Turner, R., 2013. World Travel & Tourism. Economic impact 2013 Italy. [Online] Available at: http://www.wttc.org/site_media/uploads/downloads/italy2013_1.pdf [Accessed May 02, 2014]. Tynan, A. C. & Drayton, J., 1987. Market Segmentation. Journal of Marketing Management, Vol. 2, No. 3, pp. 301-335. Williams, P., 2008. Segmenting the Tourism Market. Tourism Insight. [Online] Available at: http://www.insights.org.uk/articleitem.aspx?title=Segmenting+the+Tourism+Market [Accessed May 02, 2014]. Appendix Figure 1: Annual average price index for selected tourism products, 2000-2009 Source: (OECD, 2011) Figure 2: Framework of the tourism opportunities of the Italian system Source: (Invitalia, 2011) Figure 3: Government of the tourism sector and those involved in marketing Source: (Fondazione Rosselli, 2008) Figure 4: The virtual incoming agency model Source: (Petti & Passiante, 2006) Read More