THR's opinion
The Basics of Tourism Market Segmentation
Despite the COVID-19 pandemic, millions of people will continue to travel this year, and with the 2020 downturn in travel, competition to attract these visitors has become ever fiercer.
The investment spent by tourism enterprises on capturing share of this interest can be all too easily wasted if not channeled properly. Identifying and managing a portfolio of target segments that meet business objectives has consequently become even more crucial for the tourism industry.
What is tourism market segmentation?
Tourism market segmentation is the tactical instrument for getting a clear picture of the heterogeneity and commonalities among potential tourist groups. Tourism industry customers have different backgrounds, preferences, aspirations, habits, and of course price sensitivities; even the media they are exposed to varies.
Tourism and marketing professionals thusly must practice market segmentation strategies to understand the opportunities for competitive advantage in the marketplace by bringing together consumer groups according to sets of common features.
The travel services provider must have a clear understanding of their actual and potential consumers as well as what motives and incentives will determine their willingness to buy the tourism products on offer.
Why segment the tourism market?
As with any industry, in tourism it is impossible to appeal to everyone with the same message – otherwise the value proposition becomes muddied and ambiguous. Overall, segmentation of the tourism market provides conditions for the creation of competitive tourism products. These conditions are based on demand studies focusing on consumer needs.
It is very difficult to achieve optimal satisfaction of consumer needs without studying demand based on market segmentation; either the product does not sufficiently satisfy the consumer, or the way it is offered does not provide access to those who could buy it.
How to begin your tourism segmentation journey?
In order to determine your market segmentation strategy, you should at minimum be able to answer these five elemental questions:
- Who is your client?
- Where is your client located?
- What is your client interested in?
- How would you introduce your product to that client?
- Why would certain segments be interested or not interested in your products?
What are segmentation criteria?
There are four fundamental criteria for segmentation: geographic, demographic, psychographic and behavioral.
In geographic segmentation, the market is divided according to geographical areas such as regions, cities, states, countries, topography, political boundaries, etc. These criteria are based on the assumption that people from the same place may share features such as lifestyle characteristics and consumption habits.
Despite globalization, according to research by the Boston Consulting Group (BCG), consumer mindsets still differ substantially from one another in most parts of the world, including in markets that are in theory quite similar.
For example, for the purpose of overseas tourism marketing, the Department of Tourism in India has divided the overseas markets into the following “similar” regions: the Americas, Europe, Middle East, Far East and Australasia.
As well, geographical segmentation can be done according to the tourism product. For instance, Indian mountain resorts are promoted not in Switzerland or Andorra but in countries with no mountains, e.g., the Netherlands. For the same reason the desert safaris of Rajasthan are marketed in countries like the UK or Germany (which have no deserts).
Demographic segmentation, on the other hand, separates tourists by their gender, age, life cycle, family structure, ethnicity, or socioeconomic background, among other factors.
An example of marketing segmentation using demographics could be developing tours for young people, aged 18- 25. They would most likely require an inexpensive, lively travel holiday, with a variety of social and entertainment activities, as well as plenty of free time for exploring. Meanwhile, the tourist product for the silver-hair segment could present a well-structured, pre-agreed tourist program, which would provide for all amenities and expected comfort.
The third criterion, psychographic segmentation, more strongly considers the psychological composition of the tourist. Marketing professionals gather information about the target tourists’ lifestyles, personalities, values, and interests, being careful that tourists within the same demographic segment may have vastly different psychographic profiles.
Adventure products like hang gliding in Rio de Janeiro would target adventure seekers, for example, while less adventurous visitors might prefer an all-inclusive resort where they could enjoy a quieter vacation in a safe context near a swimming pool.
Finally, behavioral segmentation distinguishes consumers based on consumption habits such as frequency or brand loyalty. For instance, some tourists would prefer to stay at Four Season Hotels and Resorts regardless of the destination, as they have a very high brand loyalty and it be difficult for them to consider other accommodation alternatives. This segmentation also considers seasonality, as a travel habit of a particular group. For example, European travelers are expected to concentrate their extended trips during summer, since the vacation period is usually longer.
It should be noted that an organization can apply one, two or more variables simultaneously for market segmentation. Market research, trial and error, intuition, experience and knowing one’s capacity and resources become key for selecting the basis for segmentation.
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