This presentation discusses the topic of online market segmentation in tourism. Focus is on the effects of ICTs on market segmentation.

1. Online market segmentation in
tourism
Juho Pesonen, Ph.D. (Econ.)
Head of research, University of Eastern Finland, Centre for Tourism Studies
juho.pesonen@uef.fi

2. Lecture structure
1.
Introduction to market segmentation in
online context
•
•
2.
Goals for market segmentation
•
•
3.
4.
Definitions
Basic concepts
Managerial perspective
Academic perspective
Market segmentation in the Internet
Summary
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3. Introduction
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4. Market segmentation
•Dividing customers into homogenous groups that
differ from each other as much as possible.
•Customers are typically divided into segments based
on what they do or want or who they are:
– Behavioural segmentation bases
– Socio-demographic segmentation bases
– Psychographic segmentation bases
•A priori and a posteriori approaches.
– A priori (common sense): segment structure is known
beforehand: nationality, age, gender, occupation.
– A posteriori (data driven): activities, interests, opinions, travel
motivations.
• Segments are based on data analysis!
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5. Market segmentation is one of the
cornerstones of marketing.
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6. Online marketing
•Use of ICTs to communicate company value
proposition to customers.
•ICTs have revolutionized the tourism industry (Buhalis
& Law, 2008)
– Travellers are increasingly using technology before,
during and after their trips.
•Use of technologies define the competitiveness of
tourism organizations and destinations (Buhalis &
Law, 2008).
•Companies can target their customer very efficiently if
they just know who their customers are.
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7. Online market segmentation
•Marketing Mix: Product, Price, Place and
Promotion (4Ps, McCarthy, 1960)
– Later developments such as SIVA, 7Ps, 4Cs, 7Cs
•Internet has changed the way 4Ps are used in
marketing strategy.
– Product is more and more technology enhanced.
– Price is more flexible than ever.
– Place is online and everywhere.
•Internet consists of a wide variety of different places.
– Promotion is not company dependant any more.
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8. Segmentation, targeting and
positioning (STP)
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9. Segmentation, targeting and
positioning (STP)
•Internet has also changed the STP process
– New segmentation bases (e.g. Internet use) and
means (Google Analytics).
– New targeting possibilities (e.g. online advertising,
social media, pay-per-click, online travel agencies).
– New possibilities for positioning products and
services (e.g. utilized social media channels,
YouTube videos, differentiation of Marketing Mix
elements)
– STP process is not static but changes continuously.
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10. Goals for market segmentation
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11. Why to do market segmentation?
•Almost impossible to target whole populations
with one product.
•Two schools of thought in market
segmentation research (Dhalla & Mahatoo,
1976).
– Behaviourally oriented school
•Consumer behaviour in focus.
•To understand consumers better.
– Managerially oriented school
•Benefits for companies.
•How the differences among segments can be used to
increase the productivity of firm’s marketing programs?
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12. Why to do market segmentation?
• Two theories behind market segmentation (Möller, 2006):
1.
2.
•
Markets are heterogeneous
Companies can optimize their Marketing Mix based on these
differences.
Market segmentation enables creation of competitive
advantage:
–
Identifying strategic opportunities and niches.
–
Allocation of marketing budget.
–
Adjustment of product to the market need.
–
Finding markets with low competition.
–
Generating customer satisfaction through identified needs.
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13. Managerial perspective
•Basically two different uses for market segmentation:
1. Examining whole market space.
• Identifying segments and niches where competitive
advantage can be gained.
• All the potential customers are segmented.
2. Examining current customers.
• Identifying customers with different expectations.
• Serving customers better.
• Current and/or previous customers are segmented.
• Companies need information on how to target
different customers!
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14. Academic perspective
•Academic market segmentation research has focused
on:
– Developing and testing new market segmentation
bases.
– Testing existing market segmentation bases in
different contexts.
– Developing market segmentation methodology.
– Discussing the role of market segmentation in
business strategy.
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15. Market segmentation in the Internet
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16. Internet has changed and will change market
segmentation
- Role of emotions in ’likenomy’
- What kind of message will create most
engagement?
- What are the keywords members of a particular
segment use when searching for travel
products?
- What kind of picture to use in Facebook /
banner advertising?
- It is about collecting and utilizing data!
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17. Role of market segmentation in online
marketing strategy
- Internet enables unbelievable efficient targeting
strategies for companies that know who to
target and where -> finding market segments
best suitable for the business strategy.
- Understanding what customer segment want
and value makes it possible for companies to
advertise efficiently on Facebook, Google
AdWords and even design websites.
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18. Market segmentation in practice
- Traditionally market segmentation has been
often survey based with relatively little
behavior based segmentation.
- ICTs make it possible to collect and store more
behavioral data than ever before -> surveys will
become obsolete or very seldom used.
- Mobile site customization based on location.
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19. Practical examples
- http://www.ebookers.com/
- New possibilities for dynamic packaging when
information systems develop:
activities, entertainment, transportation etc. (For
example amazon.co.uk)
- http://www.visitbritain.com/en/EN/
- Activity based segmentation.
- Nationality based segmentation.
- http://www.lomarengas.fi/en
- Destination segmentation.
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20. Recommendation systems
- Tell me who you are and I tell you where to go
(Gretzel et al., 2004).
- Next step: automation based on actual behavior.
- www.tripadvisor.com & www.hotels.com
- Mobile recommendation system.
- How companies can deal with this?
- Pricing, quality, hotel amenities.
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21. Summary
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22. Summary
- ICTs have changed market
segmentation, targeting and positioning in
unpresedented ways.
- Especially managerial potential of market
segmentation is not fully utilized.
- Role of market segmentation and ways to do
will continue to change:
- Utilization of personal profiles.
- Intelligent software agents.
- Big data.
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23. References
•See Pesonen (2013)
http://epublications.ue
f.fi/pub/urn_isbn_978952-61-1283-1/
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24. Questions, comments?
Thank you!
www.uef.fi