MARKET SEGMENTATION AND TARGET MARKET SELECTION
TECHNICAL NOTES:MARKET SEGMENTATION AND TARGET MARKET
SELECTION
SUMMARY
The determinants of tourism demand: i.e. economic,
technological, political, regulatory, demographic; the
globalisation vs localisation continuum; socio-environmental
awareness; living & working environments; safety of travel;
marketing.
The most appropriate methods of analysis & forecasting for
tourism marketing plan preparation. Why is forecasting necessary in
tourism planning:
tourism product is perishable
people are inseparable from the production-consumption
process
customer satisfaction depends on complementary services
sensitivity to natural & man-made disasters
large, long lead-time investments needed
Qualitative vs. quantitative methods: Different tourism entities
with different needs in respect of analysis & forecasting
related to type, level of detail, and time scale
Market and marketing research, different consumer behavioural
models and motivational patterns
Market segmentation criteria: (discrete, measurable, viable,
appropriate) and the range of market segmentation variables
relevant to tourism analysis (purpose of travel; buyer
needs/motivations/benefits sought; buyer characteristics;
demographic, geographic or economic characteristics;
lifestyle-psychographic characteristics; geo-demographic
characteristics; price
The value of different market segments in achieving optimal
benefits for the destination: focusing on the 3 Es experience,
entertainment, education using examples such as
geotourism/ecotourism, adventure/sports, culture, short breaks.
Emergent markets eg China. Importance of domestic tourism.
LECTURE NOTES
The process of developing marketing strategy and plans to
realise the objectives a destination has for the tourism sector
requires a great deal of research and analysis. Not only is it
necessary to understand prevailing perceptions of the destination
and the techniques by which these can be influenced, it is also
vital that trends in the tourist consumers travel expectations,
desires, values and behaviour are measured and monitored. The
importance of both market research and motivational, attitudinal
and behavioural marketing research is high. This enables tourist
consumer groups to be identified by common characteristics and
targeted through packages of communications. The growing
sophistication of electronic data bases greatly facilitates this
process leading to the ultimate market segment the individual!
TOURISMS DETERMINANTS AND INFLUENCES
Tourisms scale and shape is determined by a range of factors.
Some continue to exert an influence decade after decade, albeit in
different manifestations; others have an effect for a limited
period only.
The continuing influences - the foundations for tourism -
include economic, technological, political and demographic
factors.
Economic
Post war economic recovery in the industrialised countries led
to rising personal incomes and free time availability - the
fundamentals to engage in tourism which are money and time. There
will be the regular fluctuations in economic performance - some
periods of strong growth, some of low growth/recession but overall
we work on the basis of average 2 to 3% annual growth. If we take
it that each 1% growth in GDP produces 2 to 2.5 % rise in
discretionary travel spending, then an average annual 2.5% rise in
global GDP will result in a two-and-a-half-fold growth in leisure
tourism spending by 2020. This is only a guideline but nonetheless
a useful indicator of the frame of possibility.
Looking at the recent past and present situation in the key
tourist generating regions we can see the two of the most recent
disturbances were the collapse in the late 1990s of the Asian
financial markets and currencies, and the terrorist attacks of
September 11 2001. The former devastated populations accustomed to
high rates of economic growth, while the latter created huge
uncertainty in virtually all aspects of life, including the
economy. The Asian financial and economic crisis of the late 1990s
had a devastating effect in the short term and even now the
recovery in consumer confidence in that region particularly in
Japan - is lagging behind overall economic recovery in Asian
countries as it was a balance sheet collapse and many consumers are
still trying to get their personal and household finances in
balance again before they indulge in a major resumption of
spending. This is a particular problem among the older age groups,
accustomed to strong economic growth and for whom the collapse was
a rude shock. The Asahi Evening News of 24 October 2000
encapsulates the problem in its headline Fear of future deters
seniors from opening their wallets, the article stating that the
nations ability to stimulate consumption depends on whether
businesses - including of course leisure and tourism businesses -
can persuade these seniors to spend more - more, that is, of the
54% held by the over 60s of the countrys 1,300 trillion yen.
The relevance of these developments to travel and tourism are
readily apparent. The growth in the Japanese market which had
expanded in response to its Governments initiation in the late
1980s of the Eight Million Programme the aim of which was to
encourage more Japanese people to travel overseas in order to
reduce the countrys trade surplus to almost 17 million outbound
departures by the end of the 1990s suddenly stopped, with one of
the main motors for growth the elderly being the worst affected by
the economic problems which continued through into 2003/4.
The escalation of oil prices as a consequence of the Iraq war is
still moving through the system and impacting on travel (through
air fuel surcharges) and travel intentions in 2005. The uncertainty
arising from this and continuing concerns about terrorism has
affected global economies in recent years with countries like
Germany teetering on recession and all other major economies
recording lower growth rates than in recent years. The tourism
planner ignores these factors at his peril there is no point in
developing and marketing tourism for consumers who cannot afford to
travel!!
Nonetheless, certain fundamental truths remain. People will
continue to attach a growing importance to discretionary travel and
tourism in their choices in spending their personal discretionary
disposable income. Future growth in tourism will be fuelled through
the underlying strength of the Asian regions economy and its
potential for outbound tourism remains. The old tigers will
recover; and the new tigers are emerging rapidly (led by China and
India).
China outbound travel tripled between 2000 and 2004 to 30mn
(albeit the bulk of visits are to the semi autonomous regions of
Hong Kong and Macau), with 50 countries around the world plus the
whole of the European Union (except the UK, Ireland and Denmark)
now having been granted approved destination status by the Chinese
Government. Indians generated between 4.5 and 4.6mn overseas trips
in 2003, compared to 4mn in 2001. Significantly in respect of
future growth the real per capita income of the urban Chinese is
forecast to rise from US$1,037 in 2003 to US$1,758 by 2013, three
times higher than in India (ie 2003 - US$512 and 2013 -
US$647).
KEY READING South Pacific Tourism within a Regional Perspective.
Peter Semone, PATA. Paper given at the Tourism Investment
Conference: Creating Partnerships. Fiji. February 2005. Full set of
conference papers:
www.profitpacific.com/site_en/partnership_meeting/papers_speeches.php.
Technology
Technological progress has already contributed enormously to the
growth of travel and tourism through the application of the jet
aircraft to commercial air transport, and the development of
electronic technology via computerised reservations systems.
Development in information technology systems is so rapid that
anything reported one month is outdated the next. These
increasingly sophisticated successive generations of systems are
providing instant and interactive access to tourism product
offerings. The growth of the usage of the web to research and book
travel is rapid. Figures released by the Association of British
Travel Agents (ABTA) to coincide with its November 2004 annual
convention showed that 15% of British holidaymakers book their
package holidays online, up from 6% in just two years and a
fivefold rise over 2000 (see
www.abtamembers.org/research/morisummary.pdf).
Mintel research (2005 British Lifestyle) shows that the number
of overseas holidays booked online has increased by 60% in the past
6 years as against a zero change in bookings via travel agents.
That said, the travel agent will remain a favoured medium for
booking at least some of the publics travel requirements
(particularly among electronic-resistant older market segments -
the over 60s will make up 30% of the British population by 2020).
Travel agents still offer choice and reassurance and those which
embrace electronic technology and marry this to personal service
will survive and prosper. Nonetheless the advances and applications
of electronic technology in travel and tourism product design and
distribution will be a major influence in coming years. More
consumers will use online systems in their own homes or in holiday
superstores to test and design their individual holidays.
Aircraft development is another key technological influence on
tourism. The new Airbus A380 is capable of carrying from 500+
passengers (in a multi class set up) up to 850 passengers in a
single class configuration and will commence service in summer
2006; while Boeings 787 Dreamliner, due to be launched in 2008,
will have fewer seats at 250 but will offer faster flights
travelling longer distances non-stop. Though Airbus is already
developing its competitor aircraft to the 7E7 in the A350 which it
hopes to have in service by the end of the present decade, the A380
and B787 developments reflect differing views on the growth of air
travel demand will it be for bulk travel to hubs and smaller planes
to the ultimate destination (such as the A380 will provide) or for
direct travel to the destination as Boeing believes. The new
aircraft will be more economic to operate, Boeing claiming 20% fuel
efficiency for the B787.
Political
In the past this played a key role as national controls on
travel through visas were progressively eased as tourism was
recognised as an economic sector to be encouraged. This process
continued into the 1990s with the breaking down of the Iron Curtain
and the removal of the apartheid system in South Africa; and the
first part of the C21 has seen the Chinese opening up outbound
travel for its populations. Though there will undoubtedly be
hiccups in the process, the signs are for less and less formal
requirements in travelling from country to country. Though the
change to treating all intra-EU country travel as domestic sends
horror shocks through the trend forecaster (and will throw WTOs
figures into chaos), such a development is inevitable. Passports
may ultimately be replaced by technology-driven systems of personal
check based on hand geometry or retina inspection.
Demographic
The ageing of the population of industrialised countries is
already a well-established demographic trend. It will continue and
pick up in pace. Associated with this trend is the contracting
workforce in those countries. There will be less young people to
feed into the system. In response to this there will be more
south-north migration, something which is already taking place
though it is a matter for particularly delicate handling by
governments to avoid possible racial conflict arising from the
perception of the some of the host population that immigrants are
taking our jobs. The implications of these two developments are
that there will be increased travel by older market segments -
though there is a counter viewpoint that the shortfall in young
people entering the workforce will lead to the raising of
retirement age and less freedom among older populations to engage
in leisure pursuits - and also increased VFR travel between the
north and the south by the large volumes of migrants in
industrialised countries.
Another demographic factor is the further erosion of the
traditional western household through rising divorce rates and
later marriage and families. The implications of this for tourism
is that there are more different types of households/household
segments for the travel and tourism industry to cater for. Apart
from the gay segment and singles, we now have the single parent
(with child/children) with their own particular requirements from
travel and tourism service suppliers.
Globalisation
The growing power of international economic and market forces
and the consequent decline in the ability of individual states to
control their economies and of the private corporation in limited
geographic spheres of operation to dominate domestic markets - the
process of globalisation. The impact on tourism is increased power
in the hands of a small number of global travel and tourism
networks achieving their globalisation not only through vertical
and horizontal integration but through diagonal integration,
economies of both scale and scope, and their huge investment in
electronic databases and marketing. The pan-European travel group
Touristik Union International (TUI), for example, has 80 tour
operators, 3,700 travel agencies, 7 airlines, 56,000 employees and
18mn customers; and recorded sales and operating profits of
Euros18bn and Euros490mn respectively in 2004.
Localisation
Populations are responding - and not just in developing
countries - to this globalisation of economies, markets, systems
and cultures by looking to their own identities. In developing
countries the conflict between identity and modernity is
intensifying. More groups defined on ethnicity, religion and social
structure will demand to be recognised and treated as important
with their own special rights. Tourism is centre stage. There are
two consequences: the increased questioning of the form and scale
of tourism development and marketing in these societies whether at
country, county, province, town or village level; but, on the
upside, this local level resistance and introverted response to
globalisation provides opportunities and focus for the development
of tourist experiences related to the cultural and natural
resources of these subsets of society.
The travel and tourism sectors are mirroring the global/local
polarisation process in their systems and structures. There are few
fully global networks - though it might take many to exert a
stranglehold on world markets. These mega-groups cater for a large
volume of tourist movements, accommodation, mainstream or mass
tourism; at the other end of the scale are niche operators offering
special products and services, experiences to individuals and
collections of tourists with eclectic tastes. So, if we look at the
UK tour-operating sector there are four companies which account for
55% of the market and a further 1,440 fully bonded operators who
make up the remainder of the 21mn inclusive tours sold.
Research by organisations like the Stanford Research Institute
and Angus Reid, reported by the WTO in its Tourism 2020 Vision
reports (1999a), consistently find that between 10 and 15% of
discretionary travellers want the unusual - these are the
alternative or new tourists, and demand growth from these groups is
outpacing that of mainstream segments. These tourists, typically
highly educated, mature, affluent, well travelled, environmentally
aware and sensitive to the social and cultural traditions, systems
and mores of the destinations they visit, are responding to the
demands of local groups to be heard, recognised and valued.
Of course, the divide is not as simple as suggested.
Multinational and transnational corporations do not only cater for
the mass beach resort market with the niche market operators
focusing on the educated traveller. Much tourism demand is now
characterised by customisation based on the use of electronic
technology. You can now go into a holiday hypermarket or superstore
and access the sort of audio-visual presentation which puts the lie
to the adage that you cannot test drive a holiday while you can
utilise flatscreen technology to print out tailor-made brochures.
The airline or tour operator is able through the available
technology to develop what appears to be, and in many instances is,
a bespoke product or service. In other words, thinking global,
acting local.
Socio-environmental awareness
Having had a growing impact in the 1980s up to the Rio Earth
Summit of 1992, environmental issues went off the boil until the
build up to the Millennium when much media attention was devoted to
mans treatment of the planet in the past thousand years. Consumer
awareness was also increased by NGO campaigns and media reporting
on environmental issues like the smog which enveloped much of SE
Asia in late 1997, global warming, ozone layer depletion, rain
forest destruction, dwindling water supplies (resulting in the
proportion of the worlds population living under stress conditions
rising from a quarter to two thirds by 2025), and by the
displacement of populations through development projects, whether
by dams or tourism projects - it does not matter.
This build up of consumers socio environmental awareness of
tourism development is leading to increased scrutiny on the part of
the public in destination decision-making and a growing requirement
for new tourism developments to be sustainable and fair to the
destination. Research in the UK by Tearfund finds that the
awareness and concern of British holidaymakers towards the
destinations they visit if increasing. Its 2002 report Worlds
Apart: a Call to Responsible Global Tourism found that between 2000
and 2002 the proportion of British stating they would be more
likely to book a holiday with a company with a written code to
guarantee good working conditions, protect the environment and
support local charities in the tourist destination had risen from
45 to 52% while almost two-thirds wanted to know how to support
local the local economy, preserve the environment and behave
responsibly when they go on holiday.
The three burning questions are: do the publics actions match
its avowed intentions - will consumers walk the talk? will the
conversion rate between intention and action grow in the way
Tearfund indicates or remain limited to a minority? and will the
private sector embrace and support sustainable socio environmental
practices, or only do what they have to? The signs are modestly
positive through trade actions like the Tour Operators Initiative
and most recently the widespread media coverage which led directly
to the greater sensitisation of the western consumer about the
importance and impact of tourism on the regions affected by the
December 26 2004 tsunami.
Living and working environments
We are now realising that rather than being a liberator and
freeing up our time the computer and electronic technology acts
both to isolate us from each other, reducing direct human contact,
and ties us to our work - there is no good excuse not to be in
constant contact with the office!! Our urban lifestyles, traffic
congestion etc - in both the industrialised and developing worlds -
leads to the increased felt need to engage in discretionary tourism
to escape and/or to indulge. As the WTOs Tourism 2020 Vision
Executive Summary states: It will become possible to live ones life
without exposure to other people with automated service the norm
and full access to, and exchange of, information on everything
possible from ones own home...In consequence, people will crave the
human touch: and tourism will be a principal means through which
they seek to achieve this (WTO 1999a).
The nature of employment is changing. The World Tourism
Organizations Business Council study Changes in Leisure Time coined
the phrase time poor but money rich (WTO 1999b) to describe the
process. The pressure on free time comes from changes in patterns
of work allied to the evolution of the computer for business
applications. Gone are the days of jobs for life, a development
which has been particularly difficult for the Japanese, with their
strong sense of corporate loyalty, to accept. Contract employment
will become increasingly common. This creates the need for people
in all occupations/professions to keep in touch with the
marketplace. We will lead a highly pressured life moving one
contract to another. There will be little time to take time off
during a contract and we will need to be in constant contact with
the marketplace for our next contract.
We may, however, take more holidays. There is occurring a switch
from a single, main holiday of one week (in the case of most Asian
markets) or two or more weeks (in the case of European and American
tourists) to two, three or four holidays each of lesser duration
e.g. three to four days for the Asian tourist, and three to ten
days (depending on whether the destination is short or long haul)
for western market tourists.
It is significant to note that the Changes in Leisure Time
studys conclusion was that there are sound grounds for anticipating
that average expenditure per tourist day will show a rise as the
trend towards shorter, multiple holidays grows. It is unlikely that
the aggregate number of days a consumer spends on holidays will
grow but his/her spending, particularly on a per diem basis, will
probably increase (WTO 1999b).
That does not mean, however, that long haul holidays will suffer
from lower rates of growth. Mintels 2005 British Lifestyle report
expects long haul to grow from less than one fifth of all UK
outbound travel to a quarter within 10-15 years. This apparent
paradox will be achieved through the rise of shorter duration long
haul holidays. Already three, four and five night holidays are
being offered from Europe to Hawaii (four nights from just over 700
from the UK), the Caribbean and the Far East see special offers on
www.expedia.com.
Service to experience economy
Futurologists like John Naisbitt and Patricia Aburdene (1990)
contend that the industrialised world is in transition from the
service to the experience economy, with the peaking of the service
economy in such countries already achieved. The focus is switching
to delivering unique experiences that personally engage the
consumer. The very clear implication of this change for tourism is
the need to differentiate tourism product development and
marketing, both by destination and operator.
Marketing
For the very reason that few prospective visitors have first
hand knowledge of destinations vying for their business, the onus
is on the destination to seek to attract the consumer through
informational and persuasive marketing. A major influence will be
the application of highly personalised relationship, or one-to-one,
marketing techniques using electronic technology to readily and
accurately identify micro market segments and niches, and to
communicate with them more effectively. Marketing - both by
destinations and by operators - will increase and become more
focussed and competitive. Over three-out-of-four NTO respondents to
the WTOs Tourism 2020 Vision (1999a) survey believe that their
marketing approach will need to take a more aggressive stance. At
the same time, recognising that - in the developing world at least
- there are insufficient funds for significantly increased
marketing budgets, 90% of NTOs are actively pursuing cooperative
marketing campaigns - both on a regional basis and with the private
sector.
It is noteworthy that many of the factors identified exert their
influence in combination and are going to produce polarisation of
tourist tastes and supply, with the result that there will be two
broad groupings: large scale, mainstream tourism involving the
movement of large volumes to extensively developed destinations:
and, on a smaller scale, individualised tourism. Both are likely to
prosper.
Safety of travel
Tourism will not flourish to destinations in civil turmoil, at
war, or where tourists health or security is perceived to be under
threat from terrorism, health scares, natural disasters etc. This
is the fundamental problem facing Africa, the Middle East and South
Asia in achieving the major growth in tourism which their potential
could support and their economies need. The events sparked off by
the terrorist attacks of September 11 2001 and subsequent
tourist-directed bombings in Bali, Mombasa, Casablanca and Madrid
created and sustained great uncertainty in tourist markets, as did
the SARS and avian flu outbreaks and the unparalleled Indian Ocean
tsunami. Tourists opt for destinations closer-to-home and/or those
perceived to be safer though the evidence from established tourist
destinations like Egypt is that these dips are short-lived and can
be reduced through publicity about measures taken to ensure
tourists safety and advertising that reassures tourists about their
security
RESEARCH AND INFORMATION IN TOURISM MARKETING
The topic of research and analysis in respect of tourism is as
broad and as long as one cares to make it reflecting the fact that
tourism activity takes place in locations where other people live,
involves interaction between different groups of people (expressed
simply as hosts and guests), and creates demands and impacts on all
elements of the society and environment of the host community.
Tourism means very different things to an economist, a social
anthropologist, a specialist in any of the fields related to the
natural environment, a local resident of a tourist area, an airline
executive, a hotelier, a restaurateur and so on.
Just take the concept of tourism demand and think of the
difference in what it means to:
a national tourism office marketing executive whose goal is to
attract the largest volumes of the target segments identified as
providing the maximum benefits to the destination;
a parks manager who has to balance visitor flows (and the
benefits these bring) with maintaining the integrity of the natural
and cultural fabric of the park;
a transport operator whose focus is maximising passenger yield
(ie passenger volume and fares), irrespective of how long they stay
in the destination to which they are being taken;
a hotel operator whose aim is threefold ie volume, rate and
length of stay;
a community through which tourists pass and which has much of
the nuisance factor of tourism without many of the benefits;
and
a community in which tourist activity takes place which has to
balance the economic benefits with possible negative consequences
in respect of their environment and social disruption, cultural
erosion etc.
The common link between all these diverse tourism stakeholders
is that they cannot achieve what they are looking for from tourism,
or establish how tourism might be better managed, without
information to enable them to understand the market its size,
profile, characteristics and trends and how marketing activity can
change the market thus creating the need for knowledge on what
influences and determines tourists attitudes, motivations and
behaviour.
A prerequisite to the development and encouragement of
responsible tourism is a full, well-conceived and
effectively-executed market(ing) research and information system
structured:
to provide understanding of tourist demand,
to quantify and forecast accurately,
to identify trends and changes enabling us to anticipate,
and
to monitor performance both of competitors and ourselves.
The primary reason for the urgency of having a good marketing
information system is the long lead times (and consequent need for
forward planning) for the infrastructure and facilities in tourism
development. Many key elements of tourism supply cannot be swiftly
adjusted in line with changes in demand: there is a rigidity of
supply. Getting it right two, three, five or even - as in the case
of airport development - ten or more years ahead is therefore of
the essence.
The types of information systems internal & external -
needed to provide the requisite knowledge for marketing decision
makers are explored more fully in a later session dealing with
market segmentation and target marketing. One of the key links in
the chain is marketing research in both continuous form and
designed to tackle specific tasks for which the decision-maker
needs a focussed and detailed set of answers to a rapid
timeframe.
KEY READINGChapter 5 Marketing Information Systems and Marketing
Research pp. 153-195 in Kotler, P., Bowen, J. and Makens. J. (2003)
Marketing for Hospitality and Tourism Pearson Education/Prentice
Hall, New Jersey.
Forecasting for short & long term purposes
The purpose of all forecasting is to reduce the risk of
decisions. Where there is some degree of certainty of the outcome
of a particular course of events, the forecasts made are almost an
automatic process: but where there are many variables which are
themselves difficult to predict and which determine the outcome for
a particular decision the difficulty of making, BUT also the need
for, good forecasts increases. Frechtling (2001) makes the case for
tourism being a sector in especial need of reliable forecasts on
the grounds that it is shackled by five constraints on
decision-making:
the tourism product is perishable
people are inseparable from the production-consumption
process
customer satisfaction depends on complementary services
leisure tourism demand is extremely sensitive to natural and
manmade disasters
tourism supply requires large, long lead-time investments in
plant, equipment and infrastructure
The application by tourism managers of forecasts in seeking to
reduce risk varies according to the type of tourism operation.
Forecasts can be used to:
set marketing goals, either strategic or for the annual
marketing plan
explore potential markets to determine the prospects and methods
of successful penetration with their products/services
assess the way in which future events - known or possible might
impact on demand so that alternative, contingency plans can be
prepared
determine operational requirements
assess project feasibility
predict the economic, socio-cultural, and environmental
consequences of visitors
assess the potential impact of regulatory policies, such as tax
increases and environmental policy controls
project public revenues from tourism
ensure adequate capacity and infrastructure
The following list adapted from Frechtling (2001) indicates the
consequences of poor forecasting in respect of each of these
areas:
Uses of demand forecastsConsequences of poor forecasting
Set marketing goalsOver- or under-budgeting for marketing
Explore potential marketsMarketing to wrong segments, ignoring
the right ones
Simulate impacts on demandIncorrect marketing mix, poor
preparedness for negative events
Determine operational
Excess labour, or customer disquiet requirements
with limited service
Assess feasibility of projectWasted financial resources,
difficulty investment
in financing interest payments
Predict economic,
Inflation, unemployment;
socio-cultural and
environmental degradation; socio- environmental impacts
cultural disruption and damage
Assess regulatory changeBusiness losses, unemployment, price
inflation
Project public revenue
Budget deficits
Planning adequate capacityTraffic congestion, delays,
and Infrastructure
accidents
The nature of tourism demand poses challenges for the
forecaster:
historical data are often lacking
tourism demand can be volatile
tourism demand is sensitive to catastrophic influences
tourism behaviour is complex
there is a wide choice of forecast variables
KEY READING Chapter 1 Introduction pp. 1-18 in Frechtling, D.C.
(2001) Practical Tourism Forecasting: methods and strategies.
Butterworth Heinemann, Oxford.
Selecting & applying the right forecasting method
There are many different methods of forecasting ranging from the
extension of historic time series trends into the future to
complex, computer-based models. They fall into two basic
categories: quantitative and qualitative.
Quantitative methods divide into two subcategories:
extrapolative (or time series) which assume that the key to
predicting the future of any variable lies in its past performance
ie without consideration of causal relationships; and causal models
which mathematically simulate cause and effect relationships, the
central objective being to determine the causal variables that
affect the forecast variable and the appropriate mathematical
expression of this relationship. The constant change in factors
determining and influencing tourism (eg aviation, computer
reservations and communications) make reliance on past
relationships unrealistic, while the large number of variables
affecting tourism demand and the way these interplay with each
other make causal models hugely complex and subject to being
totally flawed if the way in which only a few of the variables
interact is wrongly inputted.
Qualitative methods (or judgemental methods) rely on the experts
manipulation of past information about the forecast variable. The
various qualitative methods include: jury of executive opinion,
subjective probability assessment, Delphi method and consumer
intentions survey. These methods are used where there is
insufficient historical data, the time series available are
unreliable, there is a rapidly changing macro environment, major
disturbances are expected and the planning horizon is a long term
one. The World Tourism Organizations Tourism 2020 Vision series of
forecasts (1999a) relied extensively on qualitative methods though,
as in many destination tourism forecasts, a combination of methods
was employed. The benefits of qualitative methods are that:
they are inexpensive
there is no requirement for a high level of statistical skills,
and
in many instances the use of qualitative methods is the only way
of producing forecasts.
Against this, there exists:
the possible flawed selection of experts
a danger that experts can confuse forecasts with desires
a predisposition to be anchored in the present
no control on the assertion of the experts own views
Frechtling (2001) demonstrates the process of choosing the most
appropriate forecasting method.
Step 1: are objective data available? If not, then only
qualitative methods can be employed
IF YES
Step 2: is the forecast horizon more than two years? If not,
then extrapolation methods will be best suited.
IF YES
Step 3: are large changes expected in the environment? If not,
then extrapolation methods are still likely to be best.
IF YES
Step 4: is there good information available on the relationship
between variables? If not, then despite the longer time horizon and
many changes anticipated extrapolation methods remain the preferred
forecasting option.
IF YES
Step 5: are there many data on causal variables? If not, then
regression analysis models are best.
IF YES
Structural causal models are indicated
Information systems to guide continuing needs
Managers have different information needs at different times.
These needs can be met in part by an ongoing, continuous flow of
information on certain key subjects and through tailormade research
studies to investigate a specific issue.
Kotler, Bowen and Makens (2003) define a marketing information
system as consisting of people, equipment and procedures to gather,
sort, analyse, evaluate and distribute needed, timely, and accurate
information to marketing decision makers. The word marketing could
equally be replaced by development planning the principles would
remain the same. In essence an information system is a collection
of tourism statistics organised in such a way as to provide the
user with a readily available and accessible source of information
relevant to the entity and the decisions to be made. The system
first interacts with managers in different functional capacities to
assess their information needs. Next, it develops needed
information from:
internal records and resources, and through
intelligence gathering activities and
marketing research (on target markets, competitors, marketing
channels and both macro- and micro-environmental determinants).
The data is analysed and then distributed to decision makers in
the right form and at the right time to help in planning,
implementation and control.
1. Internal Records
Any organisation operating in tourism generates a lot of
information, much of which is not used productively. The key is to
know what data are available internally, which of it can be of use
in planning and then ensuring such information flows through the
information system to the managers who need it. In determining
management information needs, Kotler et al suggest the following
list of questions:
what types of decisions do you make regularly?
what types of information do you need to make these
decisions?
what types of useful information do you get regularly?
what types of information would you like to get that you are not
getting now?
what types of information do you get now that you dont really
need?
what information would you want daily? weekly? monthly?
yearly?
what topics would you like to be kept informed about?
what databases would be useful to you?
what types of information analysis programmes would you like to
have?
what would be the four most helpful improvements that could be
made to the present information system?
Examination can then be made of the data collected by the
organisation to assess what meets the identified needs of
decision-making managers. Taking the example of a hotel: its daily
records can include reports on occupancy, the number of guests by
party size, the volume of groups in residence, average daily rate,
no-shows etc. Reservations records can reveal valuable information
on productive travel agents and guide the timing of advertising and
sales calls to coincide with the main booking periods. Guest
history information collected on registration cards can embrace
demographics and other personal details, type of room purchased,
cross-purchases, length of stay, specific dates of stay, method of
payment method of arrival, membership of frequent guest programmes
etc. This information can be analysed to better understand who the
customers are and how to communicate most effectively to them a
growing need in the age of relationship marketing (also termed
direct, or one-to-one, marketing).
2. Marketing Intelligence
Marketing intelligence comprises two types: that which can be
generated by the organisations own people through conversation and
observation during the course of their activities; and that
developed through external sources. Kotler et al present a long
list of types of external information relevant to the hotel sectors
marketing needs:
Visitor Marketing Information
TYPE OF INFORMATION
Visitor profile
Visitor trends
Visitor spending
Visitor days
Purpose of visit
Recreational facilities used/desired
Lodging used/desired
Food & beverage facilities used/desired
Retail shopping used/desired
EXTERNAL SOURCES
Tourist offices at various levels
Other government departments
Chambers of commerce
Colleges/universities
Public utility companies
Banks and financial institutions
Resorts
Media TV, radio, print
Parks, forests etc administrations
Environmental groups
Museums
Travel and tourism operators associations
Transport operators
Excursion operators
Competitive Information
TYPES OF INFORMATION
Development strategies
Product/service mix
Planned expansion, renovation etc
Product line extensions etc
Customer mix
Pricing strategy
Occupancy rates, discounts
Advertising/promotional thrust
Employee satisfaction levels
New Innovations and Trends
TYPES OF INFORMATION
Technological improvements in products/services
Pricing technology, such as yield management
Technological advances in equipment
EXTERNAL SOURCES FOR BOTH COMPETITIVE AND INNOVATION/TREND
INFORMATION
Suppliers/vendors
Consultants
Travel agencies
Tour operators
Transport companies
Competitors publications
Trade publications
Representatives and publications of travel and tourism operators
associations
Meetings/conventions
Employees of competitors
3. Marketing Research
The final link in the information system is marketing research
though this is can take both a continuous form and be designed to
tackle specific tasks for which the decision-maker needs a focussed
and detailed set of answers to a rapid timeframe.
The goals of marketing research applicable to the public sector
as well as to operators are:
to maximise economic contribution/return whether in the form of
jobs, business creation, foreign exchange earnings or direct
contribution to the government purse or as profit and return on
investment for private sector operators;
to ensure the longevity/extension of the destination or product
range;
to match or exceed the offering of competitors a purpose which
again has application in respect of locations (ie a region
comprising more than one country, a country, an area within a
country, or at the individual resort, town or village level) and
for operators in the different sub-sectors that make up the tourism
industry; and
to prevent avoidable disasters in the supply, distribution and
marketing of tourism products and services in other words to ensure
the right products/services at the right price at the right time
using the right forms of distribution and communicating the
product/service offering to the market in the most effective
manner.
The American Marketing Associations definition for marketing
research is a process that identifies and defines marketing
opportunities and problems, monitors and evaluates marketing
actions and performance, and communicates the findings and
implications to management. the marketing research process consists
of four steps:
defining the problem and research objectives
developing the research plan
implementing the research plan, and
interpreting and reporting the findings.
Definition of the research problem is best done through
consultation between the manager (who best understands the problem
or decision to be addressed) and the researcher (who knows how to
obtain the requisite information). A marketing research project can
have one of three types of objective:
exploratory research information to help define the problem and
suggest hypotheses
descriptive research to descried the size, composition and
characteristics of the market
causal research to test hypotheses about cause-and-effect
relationships.
Before launching into a major programme of primary research, it
is always important for the research team to examine the secondary
data available ie information collected for another purpose but
which has relevance to the purpose at hand. Secondary data can be
gleaned from several categories of resources: internal, government
publications, periodicals and books, commercial data and electronic
databases. Such data provide a good starting point for marketing
research and can serve to focus the primary research required.
Observational research methods are employed for most exploratory
research exercises. This involves the gathering of primary data by
observing relevant people, actions and situations; and can yield
information people may be unwilling or unable to provide. However,
this method has its limitations since observation cannot the
feelings, beliefs and attitudes that constitute buyer behaviour
cannot be observed. Observation research is often a preliminary
step to survey research.
Survey research is the approach best suited to gathering
descriptive information. It can be structured or unstructured;
direct or indirect. Its strength is its flexibility, capable of
obtaining many different kinds of information in a wide variety of
marketing situations.
Experimental research is best suited for gathering causal
information. Experiments involve selecting matched groups of
subjects, giving them different treatments, controlling unrelated
factors, and checking the differences in the responses of the
groups.
There are four basic contact methods for conducting marketing
research: mail, telephone, in-person, and email. The strengths and
weakness of these are summarised in a table taken from Kotler et
al.
Attribute
Mail TelephoneIn-personInternet
Flexibility
Poor Good
ExcellentFair
Collectable data
quantity
Good Fair
ExcellentGood
Control of interviewer
effects
Excellent Fair
Poor
Excellent
Control of sampleFair ExcellentFair
Fair
Speed of data
collection
Poor ExcellentGood
Excellent
Response rate
Poor Good
Good
Fair
Cost
Good Fair
Poor
Excellent
If the research problem requires quantitative results, the
optimal means of research are individual or household surveys
conducted by means of street, phone, mail or email interviews; but
where qualitative information is the main need then in-depth focus
group discussions and participant observation are the preferred
means.
Sampling and Questionnaires
In carrying out the research plan, the two key elements are the
sampling plan and the research instrument. Designing the sample
plan calls for four decisions:
who will be surveyed? This is based on what type of information
is needed and who will be most able to provide it.
how many people should be surveyed? If well chosen, samples of
less than 1% of the population can give good reliability.
how should the sample be chosen? There are probability and
non-probability samples, the former comprising random selection
which can be simple (ie of the whole population) or stratified for
mutually exclusive groups of the population. Non-probability
samples can involve selection based on willingness to participate
(or convenience), or can comprise a set number of interviews of
people in each of a number of demographic groups (quota
sample).
when the survey be undertaken? This is especially important for
in-person surveys when the timing should be representative of the
flow of traffic relevant to the surveys purpose.
In collecting primary data, marketing researchers have to select
the most appropriate research instrument:
interview structured using a questionnaire, or unstructured
mechanical devices
structured models, such as a test market
The questionnaire is by far the most common survey instrument.
In preparing a questionnaire, decisions have to be made on what
questions to ask, what form the questions should take, how they
should be worded, the layout, the sequence and the length. A common
failing is to exclude questions that should be asked and to include
those that cannot, will not and need not be answered. For this
reason a questionnaire should be tested before being used on a
large scale.
The objectives of a questionnaire can be summarised as:
to suit the nature of the target population in terms of its
style, wording, sequence etc;
to suit the research methods being employed ie whether it is
being administered through interviewer or interviewee
completion;
to suit the research objectives through ensuring the questions
being posed are central to the purpose of the research;
to collect the right kind of data through focussing on the
information which is essential and cutting out that which is
superfluous;
to aid data analysis through designing the questions in a format
to make it easy for the responses to be inputted into an analytical
framework;
to minimise error and bias through careful wording; and
to encourage accurate and full responses through using a style
which interests the respondent and uses wording which is clear.
A key consideration in designing a questionnaire is whether the
questions should be open-ended or closed. Open-ended questions do
not give a range of potential responses to choose from. They are
used where insights into respondents values and attitudes are
sought but do not lend themselves to ready statistical analysis
since responses can be long and show wide variation. Closed
questions can be of two types: dichotomous where there are only two
choices eg yes or no; and multiple-choice where the respondent
selects from a list of possible answers. Closed questions are
easier to analyses but restrict the ability of the respondent to
explain or elaborate on the answer given. Many questionnaires
combine open-ended and closed questions to overcome this
problem.
As an example of how the wording of questions can harm a
research exercise, consider the following by a tourism office
wanting to discover how to attract more visitors. In a survey of
the population of a target catchment area, it started its
questionnaire with:
Where did you go on holiday last year?
This question might seem a perfectly reasonable starting point
BUT it ignores the fact that a significant proportion of the
population do not take holidays away from home, while others take
several holiday breaks. How are the differences in these two
categories of the population taken into account in this
question?
The correct way to address the question of the level of
holidaytaking and destinations chosen would be for a sequence of
questions as follows:
Did you go on holiday last year?
YES
NO
IF YES
How many holidays did you take last year?
Which place(s) did you visit on holiday last year?
There are two main scaling methods for rating responses from
attitudinal and motivational research: Likert summated ratings and
semantic differential scales.
In the Likert system various statements built up from
preliminary research and piloting are given to respondents who are
asked to indicate their view on a five-or seven-point scale.
Typical would be a scale which asks for responses ranging from
strongly agree at one extreme to strongly disagree at the
other.
Semantic differential scales were developed to measure
differences in the meaning of words or concepts, and are valuable
in developing brand image positioning and advertising. This method
involves a bipolar five-or seven-point rating scale, with each
extreme defined by carefully selected adjectives representing
opposite extremes of feeling. A destination might test how it is
perceived by having a series of scales including safe unsafe,
friendly unfriendly, good value-for-money poor value-for-money.
Collecting and Analysing Statistics
The management of any tourist destination whether a country, a
resort or an individual attraction or facility (eg park, hotel) -
can collect statistics about visitors to aid future planning.
Visitor flows and patterns can be measured at point of entry (or
registration) or through sample interviews or self-completion
questionnaires. For a hotel, registration is the most effective
source of collecting useful information if the system employed is
sufficiently detailed (without comprising an administrative hassle
for the customer). For an individual facility like a park, the
entry point where the ticket sale takes place is a less effective
way because less information can be collected from the customer as
routine or with justification as compared with a hotel. Sample
surveying is necessary.
The hotel operator has a varied room stock, caters for a range
of different markets and segments, and may have many variations in
the rates charged to each of these. Overall room or bed occupancy
levels may not tell a meaningful story. The operator will normally
set budget targets for each of the hotels customer groups so sales
will need to measure against these targets rather than overall. The
data collected by the hotel from and about its customer groups must
enable those assessments to be made. A typical resort hotel may
divide its customers into the following categories:
DOMESTIC
individual
corporate accounts individual, group; meetings large/small
functions large/small groups separately
INTERNATIONAL
individual business, holiday
tour operators allocations typically by operator and source
country
corporate accounts individual, group; meetings large/small
functions large/small groups separately
By measuring achievement against budget, the hotel management
can assess which markets/segments are performing best and what
changes are needed to next years allocations, rates etc
The decisions on these factors have to take account of the fact
that typically the average room occupancy for business travellers
is 1.25 persons since most business travellers are not accompanied
by their spouses while for holiday travellers it is typically
between 1.5 and 2. This higher level of room density for holiday
than for business travel has to be assessed against the room rates
and the level of non-room spending in the hotel. If the business
guest spends 50% more than the holiday guest, then the lower room
density is more than compensated for.
Take the following example - simplified for the purposes of ease
of illustration - of a hotel which has 50 standard rooms, 40
superior rooms and 10 suites. The figures relate to a given time
period.
Room Type Business Independent Holiday Tour Operator
Occ.;Rate Occ.;Rate
Occ.;Rate
Standard 5/$100 10/$120
20/$75
Superior20/$125 10/$150
10/$100
Suites
7/$200 2/$250
Zero
A straightforward analysis would indicate that the hotel
achieved a room occupancy of 84%. This would mask the fact that the
standard rooms only achieved 70% while the superior rooms were
fully occupied indicating a possible upgrading of the standard
rooms or a lowering of the tariff for them. Then, of course,
decisions would have to made as to the extent a heavier reliance on
tour operator custom might have on the hotels more up-market
business clients who patronise the superior rooms and the
suites.
In planning the hotel stock for a given location, a model can be
used on a Microsoft Excel or Lotus spreadsheet programme taking
account of:
grade of hotel (low, mid, high)
mix of custom (holiday independent, tour operator; business
independent, corporate; other)
average persons per occupied room differentiated by category of
guest
average length of stay important since business guests tend to
have shorter stays than holidaymakers
number of different hotels stayed in during course of visit
important where a destination comprises a circuit that visitors
travel around
average year round occupancy, again possibly differentiated
according to category of guest (eg reflecting the fact that
business travel is likely to be more consistent throughout the year
as compared with holiday travel which will be more seasonal related
to climate etc).
To calculate total room requirements, the total volume of
visitors should be divided by number of establishments stayed in
times average length of stay divided by 365 days to get even spread
over the year divided by average occupants per room adjusted by a
factor to produce a realistic year round occupancy level. Then the
more detailed analysis by type of (or specific) location, grade of
accommodation and type of guest can be conducted.
Interpreting and Reporting Research
In interpreting and reporting research results the researcher
should avoid over-reliance on statistics but focus on those
findings that aid decision-making. Since findings can be
interpreted in different ways, detailed discussion between research
and management personnel should take place to check that the
research was executed properly and to examine the results and
findings through dialogue. The research data should also be made
available to managers for their own analysis. The need is to
eliminate bias in interpretation, and to avoid unquestioning
acceptance of research results. The commissioning manger and the
researcher share responsibility for the research process and the
resulting decisions. Some of the problems areas that can occur
during a research project as identified by Kotler et al are:
making invalid assumptions
lack of qualitative data
failing to look at different segments within a sample
improper use of sophisticated statistical analysis methods
failing to have the research sample representative of the
population
MARKETING RESEARCH THE SUCCESS AND THE PITFALLS
Successful marketing research depends on:
the setting of clear objectives
the selection of an appropriate method of research
limiting the scope of the survey to the collection of valid data
only
undertaking research over a sufficient time scale, with ongoing
surveys likely to yield better results than one-off, snapshot
ones
a thorough but clear and concise briefing to the research
team
the provision of sufficient resources to carry out the research
most efficaciously ie human and financial
a speedy analysis mechanism
ability both within the research team and in the commissioning
body to interpret the results with insight
a user friendly presentation of the results
Matching the research objectives to the methods is central to
successful research
The five key areas of challenge for marketing research which
need to be addressed in order to gain the maximum benefits are:
a greater amount of reliable research into why consumers do what
they do and how they arrive at their purchasing decisions
finding out about non-users of the product/service type in
question eg why do non-tourists stay at home?
identifying real trends from the analysis of the research
data
obtaining greater knowledge about the behaviour of
individuals
increasing marketing research funding
KEY READINGChapter 5 Marketing Information Systems and Marketing
Research pp. 153-195 in Kotler, P., Bowen, J. and Makens. J. (2003)
Marketing for Hospitality and Tourism Pearson Education/Prentice
Hall, New Jersey.
UNDERSTANDING AND MEASURING THE MARKET AND ITS SEGMENTS
Marketing strategy is implemented through a sequential process
of segmentation targeting and positioning by identifying the
different groups within the total market according to specific
characteristics or other variables, isolate those with most
compatibility with the goals of the destination of organisation,
and use marketing and promotional tools to communicate a specific
position to these targeted segments thereby creating an identity
and image in the minds of these targets which will converted into
purchase.
Market segmentation is the process whereby producers organise
their knowledge of customer groups and select for particular
attention those whose needs and wants they are best able to supply
with their products. It is a process of dividing a total market
such as all visitors, or a market sector such as holiday travel,
into subgroups or segments of the total for marketing management
purposes. Its purpose is to facilitate more cost effective
marketing through the design, promotion and delivery of
purpose-designed products, aimed at satisfying the identified needs
of the target groups.
Market segmentation is the necessary first stage in the process
of setting precise marketing objectives and targets, and the basis
for effective planning, budgeting and control of marketing
activities. Apart from national tourism organisations (NTOs), no
individual producer is likely to be concerned with the whole of a
countrys tourist markets, usually being concerned with particular
sub-groups of visitors, or segments, within the total market. A
five-star city hotel will target business guests and the top end of
the discretionary target markets with budget travellers and family
groups unlikely to be prime targets; while self-catering facilities
will be likely to attract these latter groups. NTOs also find it
necessary to segment the total market of potential tourists in
order to carry out targeted marketing campaigns, though their
information services need to cater for all visitors.
The process of segmentation starts with understanding peoples
motivations. Maslow (1954) developed what he terms a hierarchy of
needs. This is relevant to travel and tourism since demand is
largely shaped by mental concepts and felt needs. Maslow sees a
sequence of needs which move from basic needs to sophisticated
desires. The word need is commonly used to cover all these but I
need to eat represents a clearly different need than I need to a
new television. Where does I need a holiday fit into the scale?
Maslows Hierarchy of Needs
Self-actualisation
(e.g. self-fulfilment etc)
Ego needs
(e.g. self-respect, status)
Social needs
(e.g. affection, love, friendship)
Safety needs
(e.g. security, protection)
Physiological needs
(e.g. food, water, air)
Source: after Maslow (1954)
The countries of industrialised countries have evolved over the
past two centuries from being predominantly needs-driven (that is,
all activity geared to survival) to the strong growth sparked by
the industrial revolution of being outer-directed (that is, geared
to satisfying an employer in return for which a better standard of
living is obtained). With the development of the railways starting
in the middle of the nineteenth century, discretionary travel began
to be possible for those who had spare time and money having
satisfied basic and outer-directed needs. These people could
address their inner-directed needs (that is, activities which they
enjoy and which make them feel better about their lives). As
economies grew, more strata of society used an increasing
proportion of their time and money to satisfying inner-directed
needs and the provision of travel and tourist products (such as
holiday camps from the 1930s, and package tours from the 1950s)
enabled them to do so. Present day society in industrialised
countries divides broadly 40:40:20 between inner-directed,
outer-directed and basic needs.
The translation of needs into motivations and into actionable
market segments depends on detailed, accurate and up-to-date
information on the market. With the development of electronic
databases and other sophisticated means of generating consumer
information, this has become increasingly possible during the last
few decades.
Criteria for actionable market segments
There are four main criteria to be applied to any segment if it
is to be usable in marketing. Each segment has to be:
Discrete
Measurable
Viable
Appropriate
Discrete means it must be possible to separately identify, or
ring fence, the segment according to specific characteristics or
variables like those listed later in this Unit.
Measurable means that the characteristics distinguishing the
sub-groups must be measurable by means of available
market/marketing research data, or via new such data as can be
obtained within available budgets. Segments that cannot be measured
accurately or in sufficient detail cannot be properly targeted. If
targeting is not sufficiently precise, the effectiveness of
marketing activities cannot be evaluated with any degree of
accuracy.
Viable means for a market segment to be viable the revenue it
generates over the long run must exceed the full cost of the
marketing mix (ie product, promotion, place and price) to achieve
such revenue by a margin in line with the organisations objectives.
Viability, therefore, is a function of the costs of designing
products for the target customers, promoting to such groups, and
ensuring they can find convenient access to the products, at prices
they find attractive.
Appropriate means it is essential that segments to be supplied
are mutually compatible and contribute to the image or position in
the market adopted by a producer. An economy car with a Rolls Royce
label would be inappropriate, while destinations that have the aim
of establishing an upmarket quality image worry about the impact of
attracting backpackers or budget tourists.
Other criteria can be added to this core list.
Defendable means that unless a producer has distinct market
advantages in supplying, or catering for, the identified segment
which make it immune to the marketing activities of competitors it
is not likely to warrant targeting.
Stable means that segments that exhibit volatile demand patterns
or have short product life cycles are not attractive to the
marketer.
Market segmentation methods
There are many ways of segmenting markets, the only limit being
the needs of the producer and the availability of market/marketing
research information. These methods are not mutually exclusive but
overlap and are complementary, enabling the marketer to build up a
detailed view of the market and its needs. Many travel and tourism
suppliers use three (or more) of the main seven methods of:
Purpose of travel
Buyer needs, motivations and benefits sought
Buyer or user characteristics
Demographic, economic and geographic characteristics
Psychographic characteristic
Geo-demographic characteristics
Price
Details and examples of these variables are included in the
recommended reading from Middleton and Clarke (2001).
READ Chapter 7 Market Segmentation for Travel and Tourism
Markets pp. 34-51 in Middleton, V.T.C. and Clarke, J. (2001)
Marketing in Travel and Tourism, Butterworth Heinemann.
Lifestyle Segmentation - Psychographics
There is growing emphasis among tourism marketers at trying to
understand an individuals mental attitudes and psychological
make-up through lifestyle segmentation. Stanley Plog pioneered what
he called psychographic segmentation over three decades ago, and
has updated his analysis constantly over the period see paper
(2002) and book listed in the references to this unit.
Psychographic analysis is relevant in travel and tourism where
destinations and products are perceived as mental concepts prior to
purchase. If common values among groups of consumers translate into
purchasing patterns, these can be targeted through marketing. Some
individuals are predisposed to seek adventure, enjoy risks and
active holidays; while others are risk-avoiders, choosing passive
and unstressful trips. These segments cut across the traditional
objective dimensions of demographic segmentation like age, gender,
income and life-cycle. Age and income do not determine whether an
individual prefers to stay by the hotel pool-side or trek through
the bush, though clearly these physical dimensions set the
boundaries of choice. By way of example, research undertaken by the
author in Mauritius found adjacent guests in a luxury resort hotel
to be British tourists one a merchant banker from an affluent
suburb of London, the other a plumber from a primarily working
class town in Essex. Conventional segmentation methods would not
have identified the latter as a possible buyer for this type of
product.
The measurement of consumer attitudes and values lifestyle is
possible through computer programmes that identify and measure the
extent and strength of correlations between these factors and
consumers travel and tourism purchasing behaviour. Such measurement
can be further refined by probing attitudes towards, and
perceptions of, individual destinations (and their attractions) and
companies (and their products). This type of research supports the
technique of product positioning.
Understanding the lifestyle of target customers has advantages
when formulating new products or creating messages designed to
motivate people. Lifestyle segmentation reflects an understanding
of individuals needs, benefits sought, and motivations. It requires
a significant market/marketing research spend. One of the earliest
commercial developers of lifestyle segmentation in travel and
tourism was Club Mediterranee which designed and presented (through
their promotional campaigns) their villages at individuals with, or
who aspired to, a clearly-defined, pleasure-oriented
life-style.
Psychographic research divides the population between
psychocentric (inward looking) and allocentric (outward looking)
extremes. The shape of the psychographic breakdown of any
population is bell-shaped, with most individuals exhibiting a
combination of psycho and allo characteristics - that is,
mid-centric. Destinations can be placed along the continuum between
the extremes. Their placement varies according to source market
being researched and changes over time. For example, Hawaii Waikiki
is near psychocentric for the bulk of the US market but still
mid-centric for most Europeans. Asian destinations like Thailand
have moved over the past two decades from being
allocentric/near-allocentric for Europeans to
near-allocentric/mid-centric.
The travel and tourism characteristics of extreme psycho and
allo-centric individuals can be illustrated as follows:
Psychocentric
Prefer the familiar in travel destinations
Like commonplace activities at places visited
Prefer sun and fun spots, with a focus on relaxation
Low activity level
Prefer destinations they can drive to (giving a sense of being
in control)
Prefer developed tourist areas, with a range of hotels, family
type restaurants and tourist shops
Prefer familiar atmosphere - manifested through international
fast-food, familiar entertainment with minimal interest in exposure
to the people or culture of the place visited
Customer for full tour packaging, with heavy advanced scheduling
of activities
Allocentric
Prefer non-touristy areas
Enjoy the sense of discovery and delight in new experiences,
visiting places before others
Prefer novel and different destinations
High activity level
Prefer flying to destinations
Tour accommodations should include adequate-to-good hotels and
food, but not modern or chain hotels, and few tourist-type
attractions
Enjoy meeting the people of the destination and gaining access
to their customs and culture
Tour arrangements should include the basics but allow for
considerable freedom and flexibility
Lifestyle Segmentation - Geotourism
The National Geographic Society broadly classifies tourism
into
three destination styles:
touring
rest and recreation, and
entertainment.
The touring style depends on both the human and physical
character of a place. It is typified by, but not limited to, the
early stages of tourism development before it becomes
industrialised. Typical activities include sightseeing, history,
hiking, photography, and eating local cuisine. The tourism style is
characterised by diffuse impacts and support for small business.
The key characteristic of this destination style is that it
requires protection of nature and heritage and needs architecture,
landscapes, cuisine, etc., distinctive of the locale. Its based on
the particular features of a place that differentiate it from
elsewhere. Typically, therefore, it is not just, for example, a
beautiful lagoon but the way the local people in relate to this
aspect of the environment. There are lots of lagoons -
differentiation in large part comes from the elements of local
economy, culture, and heritage of human occupation.
The rest and recreation style depends on the physical character
of a place but does not generally depend much on the human
character of a place - human culture or heritage. Activities
coastal resorts, walking round a golf course (rather than in the
bush), downhill skiing (rather than the low tech. cross-country
skiing), water sports, and vacation homes. Associated with it are a
risk of sprawl, environmental impacts, and opportunities for
architecture, landscaping, cuisine, that suit the locale.
The third destination style, National Geographic termed
entertainment, does not depend on the character of a place at all.
This style is typified by theme parks, outlet malls, amusement
parks, convention centres, sports arenas, and casinos.
Entertainment style tourism changes the nature of the locale; it is
high impact, and a high employment generator (although many jobs
are menial). This is mass tourism with high traffic. The critical
lesson that the National Geographic draws from this is that if
development is unchecked and unguided, then the destination style
will drift from touring to rest and recreation and towards
entertainment. This is because the path of development is
determined by a large number of individual commercial decisions
rather than a collective vision and
a plan for tourism.
National Geographic has developed the concept of geotourism to
connote tourism that sustains or enhances the geographical
character of a place - its environment, culture, aesthetics,
heritage,
and the well-being of its residents. Geotourism is therefore
wider
than the (as yet) better known concept of ecotourism as it
includes
both people and their environment. This is reflected in the
range of resources for geotourism:
flora and fauna;
heritage;
scenic places;
traditional architecture;
local crafts;
arts;
cuisine; and
dance.
A striking aspect of the work on geotourism is the results of a
combined study the National Geographic did in 2002 with the Tourism
Industry Association of America. This identified 53 million people
in the US who had traveled in the past three years as candidates
for geotourism those fitting within the geo-savvys, urban
sophisticates and good citizens segment categories identified in
the survey (see Executive Summary on www.tia.org/survey.pdf).
Clearly geotourism-type experiences are already a major driver for
travel, even if most of the travel to date has been domestic in the
US; and equally clearly the values of geotourists are closely
aligned to the tenets of responsible tourism.
IMPORTANCE OF THE DOMESTIC MARKET
A common oversight among destination tourism planning
departments anxious to achieve expansion of their competitive
standing and recognition of their tourism attractions is to
concentrate on international tourist source markets rather than
those closer to hand. In countries with developed economies,
tourism grew based on domestic demand but there are mutual benefits
from having a combined national and international market 70% of
Londons theatre income is derived from British audiences with
foreign visitors contributing the remainder, thereby enabling price
levels to be lower than if totally dependent on local demand.
The recent UNEP workshop on Marketing Sustainable Tourism
Products found that over-ambitious new tourism projects with
limited resources to attract hard-to-reach international tourists
should be deferred in favour of promoting to the domestic market,
and the extension of current products.
South Africa is an example of a country that has recognised both
the need to cater for local tourists and the significant economic
contribution they can make. A South African Tourism report states
hat the domestic tourism market is comparable with the
international tourism market in terms of size and value even with
only a small proportion of the domestic population currently taking
trips for holiday purposes (Domestic Tourism Growth Strategy, 2004
to 2007, p.3).
In 2002/3 the domestic South African market amounted to almost
50mn trips and involved expenditure of Rands47billion, with
considerable potential for sustained growth. The South African
Tourism report, op cit, states the opportunity exists to grow the
domestic market, increase the value of the market and combat issues
of seasonality, geographic spread and limited trip expenditureThis
reduces the exposure of the tourism industry to fluctuations in
international demand, which is extremely sensitive to global,
political and economic issues. In consequence, South African
Tourism has a fully-segmented marketing strategy and plan for the
domestic market seven segments ie young and up-coming, independent
young couples and families, striving families, well-off homely
couples, home-based low income couples, basic needs older families,
and golden active couples.
One-to-One Marketing: the Ultimate Segmentation
Electronic technology facilitates the growth of what is known as
relationship or one-to-one marketing. The essence of this is that
market segmentation becomes so refined that each person is a
separate target. Instead of selling one product at a time to as
many customers as possible, relationship marketing is about selling
as many products and services as possible to one customer using
databases and interactive communication. It involves getting to
know the customer by posing questions of existing and potential
clients, then adapting to the customers needs by making
suggestions, guiding the customer and adding a personal touch. It
creates markets of individual customers with diverse needs and
leads to increased customer retention and business per customer
when all other forces are operating against brand loyalty, as
argued by Olsen (2001) see reading below.
Database profiling tells you:
Who are my best customers?
Where can I find more like them?
What are their common characteristics?
How can I reach and motivate them most effectively?
How can I achieve the greatest return on investment with my
marketing budget?
With changing industry structure and new technology,
destinations themselves, through destination marketing
organisations, and tour operators are encouraging direct business
relationships. Destination marketing systems allow centralisation
of all information, including of customers, onto one central
database, accessible through various channels. Tour and travel
operators are increasingly establishing their own call centres.
The principles of one-to-one marketing are:
Meeting customer needs individually;
Knowing your customers and their value to you the life time
value (LTV) concept that is, the stream of expected future profits,
net of costs, on a customers transactions, discounted at some
appropriate rate back to its net present value. Forecasts are made
based on probabilities, and some account is taken of the added
benefit of referrals of other customers;
Investing in customers with high value LTVs, encouraging medium
value ones to buy other company/destination products, and dropping
those with low LTVs; and
Defining the right strategy aimed at improving the capabilities
needed to turn the business into more of a one-to-one
enterprise.
For a destination, a backpacker will have different needs from
an elderly couple or honeymooners or a family group. The
destination is the same but the offering is varied and is
customised to the individuals needs. In calculating LTV, it is
noteworthy that while the short term value of the honeymooning
couple may be greater than of a backpacker, the latter are often
the opinion formers who will travel repeatedly in future.
Implementing one-to-one marketing entails: customer tracking,
interactive dialogue, customisation of products and processes to
customer needs, and the use of loyalty programmes. It is expensive
requiring the differentiation of customers (not products), the
exploitation of economies of scope (not scale), and a focus on
increasing the share of each customers business (not on market
share).
KEY READING Hospitality and the Tourist of the Future by Olsen,
M. (2001) In Lockwood, A. & Medlik, S. (eds) Tourism and
Hospitality in the 21st Century. Butterworth Heinemann, pp. 206
215.
REFERENCES
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Frechtling, D.C. (2001) Practical Tourism Forecasting: methods
& strategies. Butterworth & Heinemann, Oxford.
Kotler, P., Bowen, J. and Makens, J (2003) Marketing for
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Jersey
Kotler. P., Hamlin, M.A., Rein, I. and Haider, D.H (2002)
Marketing Asian Places: attracting investment, industry, and
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Maslow. A. (1954) Motivation and Personality. Harper & Row,
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National Geographic (2003). Geotourism survey shows millions of
travelers care.
http://news.nationalgeographic.com/news/2003/10/1024_031024_travelsurvey.html.
Olsen, M. D. (2001) Hospitality and the Tourist of the Future in
Lockwood, A. & Medlik, S. (eds) Tourism and Hospitality in the
21st Century. Butterworth Heinemann, Oxford
Plog, S. (2002) The Power of Psychographics & the Concept of
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Plog, S. (2003) Leisure Travel: a Marketing Handbook. Sections
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Semone, P. (2005). South Pacific Tourism within a Regional
Perspective. Paper at Tourism Investment Conference: Creating
Partnerships.
www.profitpacific.com/site_en/partnership_meeting/papers_speeches.php.
South African Tourism (2004) Domestic Tourism Growth Strategy,
2004 to 2007. Department of Environmental Affairs, Pretoria.
http://www.info.gov.za/otherdocs/2004/growthstra.pdf.
Travel Industry Association of America - TIA (2002). The
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(www.tia.org/survey.pdf)
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