A power point presentation for Strategic Market Segmentation for subject Strategic Marketing for Hospitality and Tourism Industry.

1. Norhasimah Hamim 2013838972
Nurul Farah Izzah Zailani 2013875064
Alfian Thomas 2013834132
Nurain Mohd Jais 2013269312
Norfadila Hamim 2013682628
CHAPTER THREE:
STRATEGIC MARKET
SEGMENTATION

2.  Levels of market segmentation
 Market –driven strategy and segmentation
 Activities and decisions in market segmentation
 Defining the market to be segmented
 Identifying market segments
 Forming market segments
 Finer segmentation strategies
 Selecting the segmentation strategy
Learning Objectives

3.  Segmenting markets is a foundation for superior performance by
understanding buyer‟s needs and wants.
 Market segmentation is the process of identifying and analyzing sub groups
of buyers in a product-market with similar response characteristics (eg:
budget, activities, time consideration & etc).
 Companies should grab opportunities to provide wide ranging products.
 For example: Airlines options to Dhaka, from Malindo Air, Biman
Bangladesh, Regent Airways and MAS. Most of the carriers, offers
different types of fares level and checked – in luggage.
Introduction

4. Levels and Types of Market Segmentation (Exhibit 3.1)
 Link to management vision & strategic intent
of corporate strategy & emphasize products
benefits that different types of buyers seek.
 Example: Ticketing Department:
i) Corporate Clients
ii) Walk In/Phone Call Clients
 Concerned with allocating resources
around segment targets, including
them in marketing plans & aligning
organizational processes around
them.
 Example: Wholesaler Agent‟s
conducting FAM trip.
 Concerned with the marketing program changes
needed to reach segment targets with advertising
& promotions and with distribution systems.
Example: Promoting MATTA Fair through
various of channel distribution.

5.  Market segmentation should be considered early in development of market
–driven strategy.
 Exhibit .2: Segmentation in the Market –Driven Strategy Process.
Market-Driven Strategy and Segmentation

6.  Market segmentation is the process of placing the buyers in a product-
market into subgroups which can be indicated by the amount and
frequency of purchase, loyalty to particular brand and other measures of
responsiveness.
 The opportunity for segmentation occurs when differences in buyers‟
demand (response) functions allow market demand to be divided into
segments, each with different demand function.
 Example: Redang Beach Resort offers 3 types of room categories, which
are superior room, standard room and club deluxe room.
Market Segmentation, Value Opportunities & New Market Space

7.  Market segment also can be refer as market niche which represents a small
portion of the buyers in the total market.
 Segmentation helps company to provide varieties of products or services as
well as able to meet customer satisfaction by providing a value offering that
matches the value proposition.
 Company also may get opportunities to tap into new areas of value and
create a unique space in market. It can be described in the Innovation
Application.
 Example:
 Marriot is partnering with Ian Schroder to create the Edition boutique hotels
aimed at younger, wealthier and more fashionable travelers.
 Starwood has won recognitions for its W chain and is expanding its new Aloft
concept.
Market Segmentation, Value Opportunities & New Market Space

8.  Market targeting consists of evaluating and selecting one or more segments
whose value requirements provide a good match with the organizational
capabilities.
 Positioning strategy is the combination of the actions management takes to
meet the needs and wants of each market target.
 The strategy consists of products and supporting services, distribution,
pricing and promotion components.
 Market segmentation lays the groundwork for market targeting and
positioning strategies which skills and insight used in segmenting the market,
will give a company competitive advantages by identifying buyer groups that
will respond favorably to the firm‟s marketing efforts.
Market Targeting and Strategic Positioning

9. Defining the
market to be
segmented
Identifying
market
segments
Forming
market
segments
Finer
segmentation
strategies
Selecting the
segmentation
strategy
Activities & Decision in Market Segmentation

10. Defining the Market to Be Segmented
Generic
Level
• Basic approaches in strategic marketing that can be adopted by any firms in
any industry to improve competitive performance
• A broad group of product/services that satisfy in general, yet similar need
Product
Type
• Product category that offer specific set of benefit intended to satisfy a
customer’s need & want in a specific way
• Segmentation is shown by the differences in price, quality and features of
the items/services
Product
Variant
• Differences in product/services type may exist
• Segment within a category

11. Level of
competition
Product Definition Illustrative
Competitior
Need/Want
Satisfied
Generic Health and beauty
aids
Consumer Product
Companies
Enhancement of
health
Product Type Shaving Equipment Gillette, Remington,
Bic
Shaving
Product Variant Electric Razors Braun, Norelco,
Remington,
Panasonic
Electronic Shaving
EXHIBIT 3.4 Market Segmentation in the Health & Beauty Supplies Market

12. Level of
competition
Service Definition Illustrative
Competitors
Need/Want
Satisfied
Generic Inbound Market Inbound agents Malaysia
destination
Service Type Europe market Synergy Tour,
Diethelm, Destino
Tours
Nature destination
(beach, hill,
highland,
mangrove, sea etc.)
Service Variant Italy Market Synergy Tours Beach Destination
Example in Tourism Industry: Asian Trails (M) Sdn Bhd – DMC company

13. Identifying Market Segments
1. Segmentation variables
2. Characteristic of People & Organization
3. Product Use Situation Segmentation
4. Buyers’ Need & Preferences
5. Purchase Behaviour

14. • Use to divide the product market into
segment involved few variables as below:
– Demographic & Psychographic
– Use Situation
– Needs & preference
– Purchase Behaviour
1. Segmentation variables

15. • Demographic
– Age
– Gender
– Family size or life cycle
– Income
– Occupation
– Education
– Religion
– Race
– Generation
– Nationality
DEMOGRAPHIC & PSYCHOGRAPHIC
• Psychographic
– Social Class
– Lifestyle
– Personality/Attitude

16. • How buyer uses the product?
• Example; purchasing a meal away from home
for the purpose of entertainment
• Domino’s
USE SITUATION

17. • Include attitudes, brand awareness & brand
preference
• Example; people who practice healthy
lifestyle, love to have healthy food for
instance, sandwiches in their daily life
• Subway
NEEDS & PREFERENCE

18. • This variables describe brand-use and
consumption (e.g: size and frequency of
purchase)
• Purchase decision making pattern that is a
complex concepts of needs & desires which
influenced societal role (parents, worker),
social & cultural environment, aspiration
• Example; McDonald
PURCHASE BEHAVIOUR

19. • Consumer Market
– Characteristic of people fall into 2 categories;
1) Geographic & demographic
* Geographic location, useful for segmenting
product-markets
* Demographic information helps to describe
group of buyers,
2) Psychographic (lifestyle & personality)
* To develop market profiles
2. Characteristic of People & Organization

20. • Organizational Market
– Characteristic that help in segmenting business
market; size of the company, stage of industry
development & stage of the value-added system
1)The extent of market concentration
* Number of customers & their relative buying
power
2) The degree of product customization
* Supplier must tailor the product or services to
each organizational buyer
2. Characteristic of People & Organization

21. • Boeing caters to the specific needs of air
carrier purchasing commercial aircraft,
adapting designs to meet customer priorities.
• Nonetheless, the cost for customization are
high and Boeing had to evaluate the
value/cost relationship of its attempt to satisfy
the needs of single airlines segments.
Example; Boeing

22. Field Study Visit Malaysia
destination
Demographic,
geography,
psychographic
Identify source
of market
Market Profile
Tourism
Malaysia – get
tourist arrival
statistic
Analyze with
field study
outcome
Develop market
profile
Market
Concentration
Attend
tradeshow
Invest on
personnel based
on targeted
source of market
Provide rep in
respective
country
Product
Customization
Tailor-made
packages
Prepare itinerary
in their language
Sales Support in
their language
Example; Asian Trails (M) Sdn Bhd – DMC company
Remark: Current practice in developing new market in Asian Trails (M) Sdn Bhd

23. • Market can be segmented based on how the
product is used
• Needs & preferences vary according to
different use situations
• Travel Agent
– Outbound Agent: service domestic traveler who would like
to travel in international country
– Inbound Agent: service international traveler who would
like to visit domestic destination
– MICE Agent: service business traveler with the purpose of
meeting, incentive, convention & exposition
3. Product Use Situation Segmentation

24. • Market can be segmented based on needs &
preference that are specific to products and
brands
• Consumer Needs
– Customer attempt to match their needs with the
product/services that satisfy their need
– Example: Asian Trails Travel - French Market
(Marco De Vasco) prefer to stay in boutique hotel
(limited unit, privacy & different concept from
common accommodation)
4. Buyers’ Need & Preferences

26. • Attitudes
– Buyer’s attitude towards brands are important
because experience and research findings indicate
that attitudes influence behavior
– Example: Asian Trails Travel - India Market (SOTC)
• Town area; Entertainment & shopping, cruise
• Normal package – 7 days trip
• KUL – Genting – Penang - SIN
4. Buyers’ Need & Preferences

28. • Perception
– The process by which an individual selects,
organizes and interprets information inputs to
create a meaningful picture of the world
– Example: Asian Trails Travel - UK Market (Kuoni
UK)
• We have to carefully select/recommend our product to
this market particularly
• Do not oversell the product to avoid dissatisfaction
experience throughout the trip
4. Buyers’ Need & Preferences

30. • Consumption Variables useful in segmenting
consumer and business market
• Level of product use may not necessarily
identify the best value opportunities
• Elements in classifying buying decision;
– Their characteristic
– Products to which they apply
– Marketing Strategy implications of each type of
purchase behaviour
5. Purchase Behaviour

31.  Developing new strategies segment
targets – for certain target market
 Developing new strategic segment
target. Targets for some of the biggest
brand.
 E.g : COLGATE
Forming Market Segments

32. Forming Market
Segment
 Requirements for
Segmentation
 Approaches to
Segment
Identification
 Customer Groups
Identification
 Forming
Groups Based
on Response
Differences

33. Requirements For Segmentation
Is it worthwhile to segment a product – market ?
E.g. Gillette – “one for all product” strategy in the razor market.

34.  Response Differences
 Identifiable Segments
 Actionable Segments
 Cost vs. Benefits of
Segmentation
 Stability Over Time
5 requirements to
evaluate potential
segmentation strategy

35. a. Response Differences
How customer response towards the product?
E.g.
Variable (geographic, demographic, psychographic and behavioral) vs. pricing
Income
(affluent, high,
medium & low)
response

36. b. Identifiable Segments
 The differentiating attributes of the
segments must be measureable so that
they can be identified.
 Can create a custom marketing mix
for the specific group.
 More unique products could be
design to fulfill the distinguished
criteria of the segment compared to
segments with many similarities.

37. c. Actionable Segment
 Must be able to do marketing program to promote and attract targeted
market segment and provide services.

38. d. Cost vs. Benefits of Segmentation
 Important to evaluate the benefits of segmentation.
 Should generate more sales and higher margins.

39. e. Stability Over Time
 Must show stability over time and must be consistent.
 Prefer to target consumer segments that are relatively stable in terms of
demographic and psychological factors and needs, and that are likely to grow
larger over time.

40. Product Differentiation Market Segment
 Offer something different from competitor.
 Increase sales by creating a unique selling proposition.
 E.g. Transportation

41. Approaches to Segment Identification
 How to identified segment?
Segment
Identification
Characteristic
Response Profile Differences
Eg : income, family size, demographic
Eg : Frequent of purchase
What type of people purchase
this product?

42. Customer Group Identification
 After the product-market of interest is defined, promising segments may be
identified by using management judgment in combination with analysis of
available information and/or marketing research studies.
 When using the customer group identification approach, it is necessary to
select one or more of the characteristics of people or organizations as the
basis of segmentation.
 Using these variables, segments are formed by:
 Management judgment and experience
 Supporting statistical analyses.
 The objective is to find differences in responsiveness among the customer
groups.

43. Management Insight &
Available Information
Product Market
Segmentation
Dimension for Hotel
Lodging Services

44. Cross Classification Analysis
HIGH VOLUME
LOW PROFIT
MEDIUM VOLUME
LOW PROFIT
LOW VOLUME
LOW PROFIT
HIGH VOLUME
MEDIUM PROFIT
MEDIUM VOLUME
MEDIUM PROFIT
LOW VOLUME
MEDIUM PROFIT
HIGH VOLUME
HIGH PROFIT
MEDIUM VOLUME
HIGH PROFIT
LOW VOLUME
HIGH PROFIT
R
10,000
P
30
Quality-Quantity Matrix
Profit Percentage
Classification
according to more than
one attribute at the
same time. Revenue(RM)

45. Data Mining for Segmentation
 The process of extracting previous unknown and actionable information
from large and complex database.
 There are two ways of doing this:
 Based on the characteristics of the segments in advance.
 Analyze the data and identify naturally occurring cluster of behavior by
using a software.

46. Forecasting
Tourist
Expenditure
Analyzing
Profiles of
Tourists
Forecasting
Number of
Tourists
Arrivals
 Use of Data Mining in Tourism
Data Mining for Segmentation

47. Segmentation Illustrations
Illustrative Example: Gasoline Buyers
Road
Warriors
Higher-income, middle-aged men, drive
25,000-50,000 miles a year, buy premium with
a credit card, purchase sandwiches and drinks
from the convenience store, will sometimes use
carwash.
16% of
buyers
True
Blues
Men and women with moderate to high
incomes, loyal to a brand and sometimes a
particular station, frequently buy premium, pay
in cash.
16% of
buyers

48. Generation
F3 (Fuel,
Food & Fast)
Upwardly mobile men and women, half under
25 years of age, constantly on the go, drive a lot
snack heavily from the convenience store.
27% of
buyers
Homebodies
Usually housewives who shuttle children around
during the day and use whatever gas station is
based on town or on route of travel.
21% of
buyers
Price
Shoppers
Not loyal to brand or station and rarely buy
premium, frequently on tight budgets.
20% of
buyers
Segmentation Illustrations
Illustrative Example: Gasoline Buyers

49. Segmentation
Illustrations

50. Forming Group Based on Response Differences
 The alternative to selecting customer groups based on descriptive
characteristics is to identify groups of buyers by using response differences
to form the segments.
 An analysis of the customer base identified the following segments:
programmed buyers (limited service needs), relationship buyers,
transaction buyers, and bargain hunters (low price, high service).
 Response difference approaches draw more extensively from buyer
behavior information than the customer group identification methods.

51.  To define a group of people (consumers)
according to the similarity of their answer
to questions about products.
 To identify groupings in which the
similarity within group is high.
Cluster Analysis

52. Characteristics
of people/
organizations
Consumer
Markets
Industrial/
Organizational Markets
Age, gender, income,
family size, lifecycle
stage, geographic
location,
lifestyle
Type of industry, size,
geographic location,
corporate culture, stage of
development, producer/
intermediary
Use situation Occasion, importance of
purchase, prior
experience with product,
user status
Application, purchasing
Procedure (new task,
modified rebuy, straight
rebuy
Buyers’ needs/
preferences
Brand loyalty status, brand
preference, benefits sought,
quality, proneness to make
a deal
Performance requirements,
brand preferences, desired
features, service
requirements
Purchase
behavior
Size of purchase,
frequency of purchase
Volume, frequency
of purchase
Cluster Analysis

53. Select the
product-
market area
Decide which
brands compete in
the product-market
Collect buyers‟
perception
Analyze
data
Prepare a
map of
attributes
Plot consumers ideal
preferences
Evaluate
solution
Interpret the
results to
market-target
Perceptual Map

54. Expensive
Inexpensive
GROUP
II •Brand A
•Brand B
GROUP
V High
Quality
GROUP
III •Brand C
GROUP
IV
GROUP
I
•Brand E
Low
Quality
•Brand D
Illustrative Consumer Perception Map

55. Illustrative Consumer Perception Map

56.  Assessing strengths and weaknesses relative to competing brands along
certain criteria important to the customer.
 Identification of competitive advantage for the brand.
 Identifying market opportunities.
 See how ideal points are moving.
Uses of a Perceptual Map

57. Finer Segmentation Strategies
 A company able to utilize finer
segmentation strategies because of
a combination of factors.
 Highly sophisticated databases for
accessing buyers can be used, and
buyers‟ escalating preferences for
unique products encourage
considerations of increasingly
smaller segments.

58. Logic of
Finer
Segments
Customized Offerings
Feasible because of extensive information flow, and
comprehensive databases, computerized manufacturing
systems, integrated value chains.
Example: In Bubu Long Beach Resort, the services and
products are customized for their market (international).
Diverse Customer Base
The requirements of an increasingly diverse customer base
for many products are apparent.
Example: Bubu Villa Long Beach in Perhentian Island built
to cater higher-end international market that focus to a more
personalized service.
Close Customer Relationships
By identifying customer value opportunities and developing
cost-effective customized offerings, relationships can be
profitable and effective in creating competitive barriers.
Example: Personalized service during arrival at Shangri-La
Rasa Ria, from checking in until room transfer.

59. Microsegmentation
• Seeks to identify narrowly defined segments using one or more of the
segmentation variables.
• Example: Pink Coach for Ladies by KTM (Komuter) which emerge for
the women travellers and users.
Mass Customization
• Providing customized products at prices not much higher than mass-
produced items is feasible using mass customization concepts and
methods.
• Example: Malindo Air offering in-flight entertainment for its passengers
with a selection of movies, games and music.
Variety-Seeking Strategy
• Intended to offer buyers opportunities to vary their choices in contrast to
making unique choices – with alternatives, buyers may increase their total
purchases of a brand.
• Example: Accor Group of Hotels which offer varying level of
accommodation such Ibis Style and Ibis Budget.
Finer Segmentation Strategies

60. Finer Segmentation Issues:
 How much variety should be offered to buyers?
 Will too much variety have negative effects on buyers?
 Is it possible to increase buyers‟ desire for variety, creating a
competitive advantage?
 What processes should be used to learn about customer
preferences?

61. Deciding how to segment:
 The choice of a segmentation method depends on:
 The maturity of market
 The competitive structure
 The organization‟s experience in the market
 It is important to maximize the available knowledge about the
product-market.
 An essential step is analyzing the existing customer base to identify
group of buyers with different response behavior.
Selecting the Segmentation Strategy

62. Customer Analysis
Competitor Analysis
Positioning Analysis
Estimating Segment Attractiveness
Strategic Analysis of Market
 Each market segment of interest needs to be studied to determine its
potential attractiveness as a market target
 Major areas of analysis are:

63. Strategic Analysis of Market
Customer Analysis
• The objective is to find descriptive
characteristics that are highly correlated to
the variables used to form the segment
• Example; Kuoni UK, has been requesting
their clients/ potential clients to fill up a
survey/ feedback form to gather up
information on them.
Competitor Analysis
• Considers the set of key competitors
currently active in the market in which
the segment is located plus any potential
segment entrants
• Example; During Matta Fair, some
company do have a representative that
will explore and enquire on the other
company products and services. In YSL
Travel and Tour, they do enquiries calls

64. Strategic Analysis of Market
Positioning Analysis
• Involves some preliminary choices about
positioning strategy
• Should meet the needs and requirements
of the targeted buyers at a cost that yields
a profitable margin for the organization
Estimating Segment
Attractiveness
• The financial and market attractiveness
of each segment needs to be evaluated
• As information availability growth, the
evaluation also has the potential of
identifying unattractive market segments
• Example; In YSL Travel and Tour, they
always ask their clients to give feedback
on the packages that they purchased.

65. Segment „Fit‟
and
Implementation
 One important aspect of evaluating
segment attractiveness are:
 How well the segments match
company capabilities,
 Ability to implement marketing
strategies around those segments
 Building effective marketing strategy
around market segmentation mandates
an emphasis on actionability as well as
technique and analysis.

66.  Because buyers differ in their preferences for
products, finding out what these preferences
are and grouping buyers with similar needs is
an essential part of business and marketing
strategy development.
 Segment analysis and evaluation consider the
strengths and limitations of each segments as a
potential market target for the organization.
Summary

67. Q&A and Discussion Session