CHAPTER 2

THE TOURISM

MARKET

and

SEGMENTATION

At the end of the chapter, the students should be able to:

1. Define what a market is;

2. State the three steps to target marketing;
3. Identify the characteristics of a good market segment;
4. Discuss market coverage strategies and positioning; and
5. Distinguish the new and emerging markets in the Philippines.
Introduction:

Market segmentation, targeting, and positioning are key terms useful in any marketing process.
Identifying one’s market segments will help in identifying the market’s needs and wants. How
their needs should be met and how to communicate such to benefit them is covered in this
chapter. Market coverage strategies and identifying one’s unique selling proposition and
competitive advantage will greatly contribute to a successful marketing plan.

Definition of a Market

A market is a set of actual and potential buyers of a product. These buyers share particular need
or want that can be satisfied through exchange relationships (Kotler et al. 2010). The meaning of
the term market has evolved over the years.

To marketing professionals, a market is all actual and potential buyers of a product or service
(Kotler et al. 2010).

The tourism product is not for all. The tourism industry aims to target a specific set of individuals.
It is for a particular set of buyers, a niche market.

There are three steps to target marketing:

1. Market Segmentation
2. Market Targeting
3. Market Positioning

Market Segmentation

A market is comprised of varied profiles and characteristics that can be further segregated.
Imagine the market as an entire pizza that can be divided into several pieces or an orange fruit
with several segments. Each slice or segment has different characteristics from the others. These
segments differ in their wants or desires, socio-economic status, age, travel behavior, etc.
Market Segmentation is dividing the market into distinct groups who might require separate
products and /or marketing mixes (Kotler et al. 2010).
A market segment is a subgroup of the total consumer market who share similar characteristics
and needs relevant to the purchase of a product, service, or experience (Hus 2008).
Each segment is profiled based on its characteristics.
Characteristics of a Market Segment
1. Identifiable
2. Cohesive
3. Measurable
4. Accessible
5. Substantial
6. Actionable

1. Identifiable. The people who comprise the segment can be located and identified such
that targeting them would be easy.
2. Cohesive. The consumers should be part of a whole whose specific qualities are common
to all.
3. Measurable. The marketer should be able to estimate the size and potential spending of
the members of the market segment.
4. Accessible. The members of the segment should be accessed by marketing efforts and
promotional activities to be conducted. If they are difficult to reach, efforts to reach out
to the specific segment might be futile.
5. Substantial. Segments should be large in order to be substantial. If the segment is small,
it should have a high spending capability to make a significant impact on the business’
bottom line.
6. Actionable. The company has enough resources and commitment to enable effective
penetration of the identified segment to ensure effective positioning.

Variables for Segmentation

Geographic Demographic

Nations Cities Age Race

States Towns Life Cycle Religion
Regions Barangay Gender Education
Countries Neighborhood Income Occupation

Psychographic Behavioral

Social Class Special Occasions User Status

Lifestyle Benefits Sought Loyalty Status
Personality Usage Rate Buyer Readiness
Variables for Segmentation
Geographic
Geographic segmentation divides the market into different geographic units such as nations,
states, regions, countries, cities, neighborhoods, barangays, towns, etc. Some companies make a
decision to strengthen a foothold on a certain geographic region, concentrating their resources
in ensuring deep penetration of a specific geographic location.
Demographic
Demographic segmentation refers to segmenting the market based on variables such as age, life
cycle, gender, income, occupation, education, religion, and race. It is a good idea to segment the
market based on demographic variables because consumers would have similar likes and possible
consumption patterns and behavior. Some popular ways tourism marketers segment the market
using demographic variables are through age and life cycle, gender, and income.
Psychographic
Psychographic segmentation divides consumers based on different psychographic profiles such
as social class, lifestyle, and personality characteristics. Different social classes will have different
tastes and preferences on what they buy. In the Philippines, we categorize socio-economic
classes through the ABCDE categories, with class A being the most affluent.
Behavioral
Behavioral segmentation refers to dividing groups based on their knowledge, attitude, use of
response to a product or service. Kotler identify behavioral variables to include:
1. special occasion segmentation
2. benefits sought
3. user status
4. user rate
5. loyal status, and
6. buyer readiness.

Special Occasion Segmentation involves purchase made based on occasions such as Mother’s
Day, Valentine’s Day, Anniversary and birthdays.
Benefits Sought, buyers may also be grouped according to benefits they seek such as quality,
ambiance, menu variety, and price.
User status refers to market segmented based on usage of product such as first time users,
regular users, non-users, potential users, etc.,
Usage rate, on the other hand, refers to frequency of use categorized as light, medium and heavy
users.
Loyalty Status refers to the degree by which customers are loyal to the brand. Some buyers just
go for the cheapest or most convenient while others stick to a brand unconditionally.
Buyer readiness pertains to the different stages buyers become ready to purchase a product.
These stages range from being aware, slightly aware, want to buy, and intend to buy.

MARKET TARGETING
Market targeting is evaluating each segment’s attractiveness and selecting one or more of these
market segments in which to operate one’s business in (Kotler et al. 2010).
Kotler suggests three factors to consider in evaluating which segments should be targeted.
These factors are.
a. Segment size – refers to the current sales volume, growth rate, and high profit margin.

b. Attractiveness – refers to the potential impact of the segment to the company. One that is
not saturated and has few aggressive competitors would be structurally attractive.

c. Company Objectives and Availability of Resources – refers to the main reasons for its
decision making and the available resources the company will use to make its objectives a
reality.

Three Market Coverage Strategies:

1. Undifferentiated Marketing – a company ignores market segmentation and goes after
the entire market with only one market offer (Kotler et al. 2010).
This looks into what the market has in common and is designed to reach a huge number
of buyers. This market coverage strategy can be used effectively for consumer products
mainly because a lot of buyers would need the same product.
2. Differentiated marketing – approaches the market by targeting several market segments
using separate offers per segment. Companies may offer several products for different
market segments to capture a bigger chunk of the market.
3. Concentrated marketing – is practiced by companies with limited resources. It pursues
getting a big share of a small market rather than a small share of a large market.
Kotler et al. (2010) suggest that the following factors be considered when choosing a market
coverage strategy as follows:
1. Company’s Resources. This refers to how much money and resources the company has
which can be allocated to marketing. If the company has limited resources, it is logical to
use concentrated marketing.

2. Degree of Product Homogeneity. If products are standardized and identical, it is more

advisable to go for undifferentiated or concentrated marketing.

3. Market Homogeneity. If there is a diverse market, differentiated marketing is advisable.

If the market has a lot of similarities, undifferentiated marketing may be used.

4. Competitor’s Strategy. It is important to assess the strategy competitors are using so that
the correct strategy can be implemented to counter their marketing efforts. If
competition is doing undifferentiated marketing, it would be advantageous to do
differentiated or concentrated marketing. If competitors are doing segmentation,
concentrated marketing is a must.

MARKET POSITIONING
Market positioning is developing competitive positioning for the product and an appropriate
marketing mix.

Positioning has everything to do with the deliberate way by which marketers would want to
position their product in the consciousness of its prospective customers.

Its goal is to identify the product’s unique characteristics in a way that will differentiate it in the
marketplace.

These three positioning concepts will help reinforce the idea of market position:

1. Unique selling proposition

Is a term used to identify what makes the product or service different from others? This
unique selling proposition may occur due to the products’ physical attributes, added
services, personnel, location, or image.

2. Competitive Advantage
Is the product’s advantage over competitors, which is gained by offering greater value either
by offering lower prices or providing more benefits to justify higher prices?
3. Top of Mind
Is the highest level of recall that a brand services. It means that the brand occupies the top
spot in a consumers’ mind. The ultimate top of mind level a brand can reach is when it
becomes synonymous to the generic. For example, Xerox is actually a brand of a
photocopying machine but the way Filipinos use the word is as if it were the act of
photocopying. We would use the term, “pa-Xerox” when we actually mean “pa-photocopy”.

Market positioning is a deliberate way of making sure that the product has a high recall in
the consumer’s minds relative to its competitors.

Some positioning strategies include the following:

1. Specific product attributes such as price and special features can be used to position a
product.
2. The product can also be positioned based on its benefits and the needs the product fills.
3. Positioning the product based on certain classes or segments of users (e.g., women or
children as primary users) can also be done.
4. A company can decide to position itself against an existing competitor and present its
edge over said competitor.

NEW AND EMERGING MARKETS

The study of new and emerging markets in tourism is vital in the growth of destinations. In order
to obtain sustainable competitive advantage, the process of new market identification should be
taken seriously.
Tourism markets have evolved in recent years. New customers have begun to travel, while
regular travelers have traveled more often.
Cooper et al. (2006), in their article on new and emerging markets, identified the growth of
tourism markets as fueled by these factors on the demand side:
1. Economic growth in major source markets
2. Increase in disposable leisure time and a longer life expectancy with a sound health to travel
3. Changes in living conditions especially city dwellers becoming more inclined to engage in
tourism
4. Rising educational levels and increased access to information, stimulating curiosity
5. Increasing international integration of life
TYPES OF MARKETS
1. The Family Market
Three types based on the decision-maker:

 joint decision-making families

 husband making the decision
 wife making the decision

1. The Senior Market

 Baby Boomers vs. Silent Generation
 With retirement benefits and children-dependent

2. The Youth Market

Growth of travel participation among the youth market that is fueled by several factors
(Richards 2006):
 increased participation in higher education
 increased travel budgets (parental contribution, savings, and work)
 work and travel combinations
 the rise of low-cost/budget airlines
 shorter employment contracts leading to significant gaps in employment
 the global rise of the Internet culture
 growth of independent travel guidebooks

3. The MICE Market

 Meetings, Incentives, Conferences and Exhibitions (MICE) industry is a conglomeration of
products and services such as transportation, accommodations, food and beverage, banquet
facilities, entertainment and shopping.
 Characterized by high per capita expenditure
 Extended stay