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Chapter 3 Selecting target markets.

OBJECTIVES

When you have completed this chapter, you should be able to:

* Explain why markets are segmented.

* Know the four characteristics that determine the viability of a market segment.

* List the variables that may be used in demographic segmenting.

* Explain how marketers use geographic, psychographic, and behavioristic segmenting.

* Give reasons why companies do market research.

* Explain how people conduct market research.

The travel market includes the grandmother who travels two hours by bus to visit her grandchildren, the businessperson who flies across the country to attend a sales convention, and the young couple honeymooning in the Bahamas. Men, women, children, and teenagers; college students, singles, newlyweds, and senior citizens all makeup the enormous and diverse market of travelers. Marketing professionals have the challenge of dividing this huge market into smaller groups based on the common characteristics that people share.

WHY TRAVEL MARKETS NEED TO BE SEGMENTED

The travel market as a whole is too large to reach efficiently and too diverse to communicate with in any single way, so marketing professionals break it up into smaller, more manageable parts. They develop travel products for specific groups of people who have things in common that can influence the travel decisions.

The process by which the total market is divided into groups of potential customers with shared characteristics is known as market segmentation, and the groups themselves are called market segments.

Breaking the total market into segments allows marketers to focus their efforts on particular types of buyers. When marketers aim their products and pro motional messages toward one or several of these groups, they refer to the process as target marketing. The segments they are focusing on are referred to as target markets.

Technically, each person could be considered a separate target market, defined by unique characteristics and special needs. It's not practical or economically wise, however, to think of the travel market as millions of unique individuals. The market segmentation process addresses this issue by grouping people who share common characteristics and are, therefore, likely to have similar needs or desires. Once marketing professionals target a particular segment, they develop and promote their product or service in a way that appeals most to that group of people, based on their shared characteristics.

Consider, for example, two couples planning a trip to California. One couple is in their thirties. Both husband and wife have high-paying professional jobs. He's a sales manager for a pharmaceutical company. She's a computer software engineer. They have no children. The second couple, a retired printer and his wife, live on a modest fixed income.

If your rental car company marketed luxury and high-priced sports cars, you would identify the younger couple as more likely to rent an expensive sports car than the retired couple. This is an example of how to use market segmentation to focus your marketing efforts on reaching young professionals with high incomes rather than retirees with fixed incomes.

Characteristics of a Market Segment

If one person is too small a market segment and the entire travel market is too large a market segment, what constitutes a meaningful segment? To test whether a market segment is viable, marketers ask four questions:

1. Does the segment or group respond similarly to marketing messages? Put another way, is the segment defined narrowly enough to act or respond as a group in a similar way?

An amusement park could define its market segment as everyone under age thirty living within fifty miles. However, a twenty-five-year-old and a thirteen-year-old most likely would not respond to the same marketing message in the same way. That segment is, therefore, too broad to be meaningful or useful.

2. Is the segment sufficiently different from other segments? That is, is it defined in a way that includes only the people who share important characteristics and would respond to marketing messages in a similar way?

If the amusement park aimed its message only at children aged ten, its segment would be too small. Children aged eight through ten probably belong in the same segment, since they would likely respond similarly to that marketing message.

3. Can the segment be reached effectively by communications media such as newspaper, magazine, television, and radio?

An important aspect of segmenting is communicating a marketing message to groups with special shared characteristics. Just as an archery target is of no use without a bow and arrow, a target market isn't viable if there are no means to reach it efficiently and cost-effectively through marketing communication.

4. Is the revenue potential of the segment sufficient to merit investing the financial and marketing resources necessary to capture it? In other words, will the financial return be good enough to achieve marketing objectives?

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For example, because tent campers who are serious backpackers tend to bring most of their specialized provisions with them, they may not be a viable segment for most commercial campgrounds. They simply don't spend enough money to generate sufficient profit.

Segmenting makes it more likely that marketers will communicate efficiently and effectively with groups identified as having outstanding potential for purchasing a particular product or service. If that requires too much expense in relation to potential sales, the market segment is not worth pursuing.

METHODS OF SEGMENTING TRAVEL MARKETS

Marketing professionals have a variety of ways to segment markets (see Figure 3-1). No single way is right or wrong, and the various techniques are often used in combination. Generally, four broad methods are used to segment markets:

* Demographic.

* Geographic.

* Psychographic.

* Behavioristic.

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Demographic Segmenting

Demography is the statistical study of populations. Demographic segmenting groups people on the basis of objective criteria or measurable personal characteristics; age, income, occupation, family size/life cycle, and education are among the most widely used demographic segmenting variables.

Age. Marketing professionals know that people of different ages generally have different needs for comfort, economy, excitement, safety, and so on. Age usually has a major influence on buying behaviors.

Marketing professionals try to identify age groups that have similar buying habits. Age categories they commonly use are:

* Under 6 (preschoolers).

* 6 to 11 (children).

* 12 to 19 (teenagers).

* 20 to 34 (young adults).

* 35 to 49 (middle-aged adults).

* 50 to 64 (mature adults).

* 65 and older (senior citizens).

As people age, their priorities change. For example, a young adult backpacking through Europe in the summer is more interested in economy than luxury. On the other hand, a mature adult traveling through Europe may be looking for comfort and convenience in accommodations rather than low cost.

Income. How much people spend on travel is generally related to how much they earn. A young couple earning barely enough to pay for necessities such as rent and food is not likely to spend hundreds of dollars on a cruise to Bermuda. Generally, the more money a family earns, the more it can spend on travel.

Income is usually grouped into ranges, for example:

* Under $30,000.

* $30,000 to $44,999.

* $45,000 to $54,999.

* $55,000 to $74,999.

* $75,000 to $99,999.

* Over $100,000.

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Since people who make more money can afford to travel more, upper-income segments are the focus of many travel marketers, especially those who promote expensive products. But lower-income segments can be excellent travel target markets as well. Budget motels are a good example of a travel product designed to appeal specifically to a lower-income target market. Their promotional messages, which usually emphasize economy rates, are aimed at individuals and families looking for an inexpensive yet comfortable place to stay.

An important measure of a country's wealth is gross domestic product (GDP), which measures a country's total economic output. Those countries with a higher GDP are usually designated as tourist-generating countries (see Figure 3-2).

Occupation. Although often related to income, occupation is a separate segmentation variable. Typical occupational categories include professional, manager, proprietor, clerical, sales, retired, student, and home-maker.

Often, for marketing purposes, even smaller occupational segments are created. For example, doctors, lawyers, and college professors are just three of the many subcategories of the larger professional segment.

Occupational segmenting gives marketers insights into income, education, and interests. It is also used to tailor specialized travel products for specific occupational groups. A tour operator, for example, may package a literary tour of Great Britain for a target market of high school English teachers.

Family Stage/Life Cycle. This method of segmenting a market incorporates age and marital status with the number and ages of children. For example, consider these possible segments: young and single; young and married with no children; young and married with preschool children; middle-aged and married with teenage children; middle-aged and divorced with teenage children.

There are many possible family stage/life cycle segments, each with its special travel needs and constraints. When families with small children travel, they may need the option of a crib or cot in their hotel room. They want to dine in restaurants where menus for children are available. These needs are very different from those of a couple on their honeymoon or a retired couple traveling without children.

Education. Generally, the more education people have, the more likely they are to travel. Education, therefore, is also useful as a market segmenting factor.

Educational categories are typically broken down by the highest level of education achieved:

* Grade school or less.

* Some high school.

* Completed high school.

* Some college.

* Completed college.

* Some graduate school.

* Completed graduate school.

Educational levels can be associated with certain types of travel as well. For example, destinations with major cultural attractions or events may choose to target a relatively well-educated market segment. College alumni associations often market seminars in exciting, and historic destinations to its members.

Other Demographic Variables. The travel market, like all markets, can be segmented demographically in other ways, too. Among the additional demographic factors marketers can use to isolate groups of people are gender, religion, race, ethnic background, nationality, and social class. Each can be used to identify groups of prospective travelers in ways that can be useful in certain applications. For example, the special needs of female business travelers are a focus of certain travel marketers. Ethnic background and nationality are segmentation variables that companies may use to package and promote tours to a "home country" of birth, and for reunions or ethnic festivals.

How Marketers Use Demographic Segmenting.

Dividing the travel market into demographic groups makes sense for travel marketers. Groups of roughly the same age, for example, have certain things in common. So do people of similar income and people with similar jobs or educational backgrounds.

Within any one of these groups, there is still a great deal of variety, of course. No two people of the same age, for example, are exactly alike otherwise. But what is important from a marketing perspective is that these groups of people have more in common with each other than with the population as a whole and that, as a result, their travel preferences and buying tendencies are likely to have certain similarities.

Travel marketers often segment a market by combining more than one demographic factor in order to refine and focus their target market further (see Figure 3-3). For example, a cruise line may target not just the segment over sixty years of age, or just the middle-income segment, but instead focus on potential customers who are both over sixty and of middle income. The cruise line would then intentionally try to heighten its appeal to this particular market segment, which is more specifically defined by two separate demographic variables.

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Theoretically, the number of segmentation variables that can be combined to define a target market has no limit. Practically speaking, however, if too many factors are used to segment a market, the segment eventually becomes too narrowly defined, and thus too small, to be meaningful or useful. The goal of segmentation is to use enough variables so that the specific target market is clearly defined and remains large enough to be worth pursuing.

The concurrent use of different segmentation variables isn't limited to those that are demographic, however. Travel marketers also use demographic market segmentation in combination with the three other major methods: geographic, psychographic, and behavioristic.

Geographic Segmenting

Geography is an important tool for segmenting markets. Where people live has a tremendous influence on their buying patterns, especially in regard to travel, which is, after all, movement from one geographic location to another. Consequently, marketing professionals often target groups in particular regions of the country, climates, or types of environment (e.g., urban or rural). Whether people want to travel to the mountains or the beach, to New York City or Yellowstone National Park, the location of the destination in relation to the geography of their home plays a major role in their travel decisions.

Travel marketers use geographic segmenting in a variety of ways. A resort in the country may use it to target urbanites in its own region of the country. A warm-weather destination often targets potential travelers from geographic areas with cold winters. An airline might focus on a particular region of the country when developing new routes.

Take, for example, similar casino hotels in Atlantic City, New Jersey, and Las Vegas, Nevada. Although they offer travelers the same primary activities--gambling, entertainment, and recreation--their different locations lead them to target different geographic markets.

Atlantic City is on the Atlantic coast, in a temperate climate, within easy traveling distance of the millions of people living within the urban sprawl from Boston to Washington, D.C. Las Vegas, on the other hand, is located in the hot, sunny, and dry Nevada desert, more than two hundred miles from any other major urban area.

A casino in Las Vegas might target markets geographically by focusing first on prospective travelers in major western or midwestern cities who fly or drive into town for a day or two of weekend gambling. It might also focus on a nationwide market of suburban families who often include Las Vegas on the itinerary of a vacation in the western United States.

An Atlantic City casino may choose instead to ignore the nationwide suburban market entirely and to focus its marketing efforts exclusively on the major cities within 250 miles. Within those cities is a huge market of potential customers who can reach Atlantic City easily by either car or motor coach. When advertising to this geographic target market, the casino may target seniors living within a four-hour motor coach ride, or emphasize the attractions of the beach and boardwalk to appeal to urban residents who wish to gamble and escape the heat and humidity of the summer on the same trip.

In both cases, geography plays a significant role in determining whom the casino (destination) chooses as its target--the location of the destination in relation to the geography of potential travelers is the key element. The different geographic characteristics of the two cities dictate that the casinos use geographic market segmentation techniques to target markets that are distinct and best suited to their products.

Psychographic Segmenting

Segmenting markets on the basis of psychographic variables is a relatively recent practice in marketing. Psychographic segmenting is used to group people according to their psychological makeup--their values, attitudes, lifestyles, interests, activities, and personalities. One of the approaches for segmenting markets psychographically uses lifestyle as a way of grouping potential customers.

Lifestyle As a Measure of Values. Two important components of lifestyle are how people spend their time (their activities) and what interests and values they have.

In discussions about lifestyle, words such as "conservative," "liberal," "adventurous," "homebody," and "health nut" are sometimes used. Although no standard terminology exists, researchers from SRI International (formerly Stanford Research Institute) determined and labeled nine values and lifestyles (VALS) categories:

* Survivors--old, very poor.

* Sustainers--on the edge of poverty.

* Belongers--aging, conventional, stable.

* Emulators--youthful, show-off, trying to make it big.

* Achievers-middle-aged and prosperous, self-assured, materialistic.

* I-Am-Me--young, impulsive, individualistic, single, in a transition state.

* Experiential--young, artistic, inner-directed.

* Socially conscious--mature, successful, concerned with the environment.

* Integrated--psychologically mature, understanding, possessing a world perspective.

Of these groups, survivors and sustainers are not viable market segments for the travel industry because they have little money and few reasons to travel. In contrast, the achievers and socially conscious groups have been identified by many marketers as segments that travel frequently for business and pleasure.

Effective Psychographic Segmenting. It is important to understand why marketers have attempted to use psychology to identify market segments. People's personality types and beliefs have a great influence on their buying motivations and behaviors. But it's harder to put your finger on personality traits than it is on cold, hard facts like age. There's also almost no limit to the number of ways to look at psychological traits.

Psychographic segmenting can be a very effective tool, however. It helps travel marketers understand why a travel product appeals especially to certain personality types and how to tailor a message that is likely to appeal specifically to that type's psychology. Breaking the whole travel market up into smaller psychographic target markets can be extremely useful in matching products and services with potential customers.

Skiing is a good example of a travel-related activity that tends to appeal to certain personality types. To some people, skiing seems expensive, cold, and dangerous. To others, it is exhilarating, challenging, and rewarding. Using the VALS categories, one market research firm (National Demographics, Ltd.) has determined that 30 percent of those who ski fall into the Achiever category--people who are prosperous and materialistic. Ski resorts use this information by creating promotional messages that appeal especially to this particular psychographic group.

Behavioristic Segmenting

Marketing professionals rely on a fourth major segmentation technique that makes use of the behaviors of actual and potential customers in relation to a specific product or type of product. Behavioristic segmenting divides the market into groups that share particular buying habits, preferences, or purposes. Weekend travelers, repeat customers, and first-class passengers are examples of target groups defined by their behaviors.

Segmenting by buying behavior is powerful because it is based on what people do rather than who they are, where they live, or what their lifestyle is. A target group of business travelers who are known to stay in hotels five or more times a month is much more promising than a demographically defined target group of all salespeople.

Although it makes a lot of sense for marketers to use behaviors to focus on specific groups, reaching those groups can be more difficult than reaching market segments defined demographically or geographically. It is difficult and expensive, for example, to buy a mailing list of people who travel to Cape Cod every summer. But that doesn't mean that a resort operator in Hyannis can't focus primarily on these annual visitors by developing messages to attract them initially and activities to encourage their repeat business.

Travel markets can be segmented on the basis of several behaviors, including:

* Travel habits and preferences.

* Purpose of travel.

* Benefits sought from travel.

Travel Habits and Preferences. All people have travel habits and preferences, of which they may or may not be aware. Some families, for example, take a week's vacation every summer at the same resort. Other families go to a different place every year--one year to the mountains, another year to the beach, and so on.

Travel marketers use patterns of travel behavior to segment the market and to target groups that share certain travel habits or preferences. A target group may comprise those who share a preference for a certain hotel chain, those who customarily travel over the Memorial Day holiday, or those who always fly first class. Specific habits and preferences offer travel marketers one more clue for focusing on likely prospects.

Habits and preferences are both friends and foes to the travel marketer. If a couple usually takes a winter vacation in California, the hotel, restaurants, car rental company, and other establishments they patronize benefit from their habit. At the same time, their custom of taking California vacations makes it less likely that they will change their pattern and go to Arizona or Florida. Similarly, a person's preference for a particular airline may be strong enough to make it extremely difficult for another airline to convince that customer to change companies.

Travel marketers look at any number of habits and preferences to divide the market, including season of travel (on- or off-season); method of payment (credit or cash); class of travel (first, business, or economy); and whether the person is traveling in a group or alone. Many companies in the travel industry define one of their primary target markets as heavy users of their product. For example, frequent-flier programs are one way airlines identify regular passengers and build brand loyalty by rewarding them for choosing their airline.

Other airlines, however, may target those who fly infrequently. U.S. Airways offers a special seminar for those who do not use airlines because they are fearful of flying or have had bad experiences in the past. Included in the free program is a discount coupon for a future U.S. Airways ticket. The airline's objective is to expand their market by attracting nonfliers, in addition to competing with other airlines for a larger share of the existing market.

Purpose of Travel. A widely used means of segmenting the travel market behavioristically is by its purpose. Most importantly, travel marketers distinguish between those people who are traveling for business and those who are not.

The business traveler has different needs from those of the nonbusiness traveler. For example, business travelers are likely to be more concerned about convenience than cost. Travel marketers use this distinction when they segment their markets by purpose of travel. When they target the business traveler, for example, they develop and promote their products and services with an emphasis on convenience.

Airlines, car rental companies, and hotels all offer special services to make business travel more convenient. An airline's members-only club in an airport provides a comfortable place to do paperwork, make phone calls, have a cup of coffee, or relax. Since business travelers are concerned about time, car rental companies have developed special express check-in and checkout systems to speed them on their way. And some hotels targeting business travelers offer preordered, in-room breakfasts, in-room telefacsimile (fax) service and computer connections, and a speedy checkout system.

In contrast to business travel, leisure travel may have many purposes. Relaxation and sightseeing, for example, are two different purposes for leisure travel. They dictate significant differences in the travel needs of people who travel for those particular purposes. Travel marketers know, for instance, that the groups that travel to relax and those that travel to see sights have different behavior patterns and expectations.

A resort located in a remote, rural locale may define its target market as travelers who want to relax, for example. These are people who want to go someplace to stay awhile and unwind, far from the bustle of their normal, everyday lives. A motor coach tour operator, on the other hand, may target the sightseeing market by offering guided trips through historic regions of the country, stopping at all of the major historic and cultural landmarks on the way.

Whether it is meeting new people or getting in shape, every purpose of leisure travel potentially offers marketers a means of segmenting the travel market. Many of them routinely use travel purposes as a productive, fundamental way of targeting markets by behavior.

Benefits Sought. Everyone who purchases a product or a service is seeking to benefit in some way from the money spent. A benefit is something that satisfies a need or makes someone feel better. The needs people wish to satisfy and the benefits they seek by traveling offer marketers another type of behavior by which potential travelers can be divided. Take, as an example, first-class, personalized service. Some travelers care about it a great deal and are willing to pay a premium for it. Others don't find it worth the cost, don't perceive any significant benefit to it, or are even made uncomfortable by receiving it.

For the segment that cares about service, travel marketers provide extras, from free champagne on the airplane, to concierge service at the hotel, to chauffeured limousine service. Cost is not a factor to this market; excellent service and value are.

For the segment that derives no benefit from such personalized service, travel marketers try to provide basic products and services at a competitive price. They may also try to provide a special benefit to a different target group as a way of gaining an edge on the competition.

Marketers keep a keen eye on various benefits travel provides and the needs it fulfills. Whether travelers seek entertainment and excitement or recreation and relaxation, the behavior associated with attempting to satisfy their needs divides them into useful market segments.

WHY COMPANIES DO MARKET RESEARCH

When travel professionals make decisions about which market segments to target for their travel products, they don't do it in a vacuum. They investigate the market to gather facts that help them make informed decisions. Acquiring information about the market in this systematic way is called market research.

But target market decisions aren't the only marketing decisions that depend on research. Every stage of the marketing process--from product development to pricing--uses market research to provide the information necessary for good business decisions. And nearly every component of the market--sellers and buyers, products and services, distribution and promotion--can be the focus of systematic market research.

When used intelligently, market research can also reduce business risks. It provides managers with information to avoid costly mistakes. Market research lets them know with certainty what their customers' attitudes and behaviors are, as well as their willingness to pay. It also provides information on the competition and on new developments within their industry.

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Good business decisions carrying fewer risks are one of the keys to running a profitable, growing travel business. To get a better idea of how market research makes this possible, consider its role in providing valuable information about four critical issues for a growing travel-related business: expanding into new geographic areas, recognizing growing markets, identifying lifestyle trends, and attracting more visitors.

Expanding into New Geographic Areas

One of several ways a company can capture new business is to offer its service in an area it has not previously served. For example, an airline's managers might look for new routes to a new destination. After hearing that the Ontario, California, airport may be expanded, they would conduct market research to help decide whether there are target markets in the region that would produce business. The managers would also want to know what kinds of travelers visit the area. To assist with the decision, they would ask such questions as:

* Who are they, in demographic, psychographic, or behavioristic terms?

* How much money do they plan to spend at the area's attractions, such as Disneyland and

Knotts Berry Farm?

* Where do they come from and in what numbers?

* What percentage of the travelers just visit for the day and return home late in the evening?

* How do they currently get to California? Are they driving their own cars, renting cars, or taking motor coach tours?

* Which airline currently receives the most business from visitors to this area?

On the basis of this market research, the airline's managers would have a good idea of who's going to Ontario, California, region and how they get there.

They may discover, for example, that many visitors are from northern California, which could lead them to explore several possible routes for a new air shuttle service to Ontario for people from San Francisco, Sacramento, or San Jose.

Recognizing Growing Markets

Travel marketers look for geographic areas that are growing and able to support more business. A hotel chain, for example, would want to identify places where new hotels will be needed in advance of the actual need. It takes time to plan a hotel, purchase land, and complete construction. If a company waits until the area has already proven itself, land costs may already have gone so high that the hotel may not be able to afford to enter that market at all. That is why it is important to track population growth worldwide (see Figure 3-4).

A hotel catering to business travelers would look for areas of high anticipated corporate growth. It would conduct market research to find answers to such questions as:

* Where are corporations building large, new facilities?

* In what areas are local governments offering tax incentives to attract new businesses?

* Where are the customers and suppliers for rapidly expanding corporations?

Once it has identified some promising areas, its research would become more specific, asking a different set of questions, such as:

* What hotels currently serve the area? How many hotel rooms do they have? What conference facilities are available?

* What are the annual occupancy and average daily rates?

* What convention facilities are available?

& How many new jobs are expected to be created in the area?

* What transportation improvements are planned that could aid growth?

* Are new homes being built to help attract job seekers to the area?

* Have any major companies moved out of the area recently? Are any moving in?

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The preceding example of market research might reveal that the area around Princeton, New Jersey, is booming with corporate growth and is possibly an excellent location for a new hotel for business travelers. Situated in the center of the state with a highly regarded university, equidistant from New York and Philadelphia, Princeton is easily accessible by road and by rail and is attracting many major companies.

To a hotel owner, all this corporate growth means that more business travelers will be needing overnight accommodations. If the results of the market research are encouraging, a hotel company may decide to build a new property in the Princeton market.

Identifying Lifestyle Trends

Market research can help travel companies identify new opportunities, which can then be converted into new business. Consider the importance of such information to the operators of a cruise line. To stay competitive, they have to offer customers a vacation experience that is in tune with their lifestyle, one that offers the features and activities they want this year, not the ones they wanted ten years ago.

To stay current, they conduct market research to determine how lifestyles are changing. Do people have more leisure time for vacations or less? How have their eating habits changed? What kinds of music are they listening to? Are they exercising more or less, and when they do exercise, what are their preferred activities? Are they traveling more or less than last year?

The answers to all these questions and to a host of other lifestyle-related questions are critical to the cruise line operators, who want to optimize the appeal of their travel product.

Say, for example, that the cruises they currently offer average a week to ten days in length, feature gourmet French cuisine with heavy sauces, present big bands in the ship's lounge, and specialize in offering shuffleboard tournaments as exercise. But their market research reveals that lifestyles and preferences have changed. It indicates that people have less time for vacations than they used to and prefer cruises that last three to five days, preferably over a weekend. They also prefer healthful, low-cholesterol meals, jazz, classic rock and roll, and aerobics.

Smart cruise operators use this information to change their offerings. By doing so, they avoid potential financial disaster by staying in touch with the preferences of their market. They also may be staying ahead of their competitors who do not use market research as effectively. They use the information about lifestyle and preference to make good business decisions about changing their products and services. Good market research, then, is one of the keys to continuing profitability for any travel business. Knowing that global tourism is growing and that tourists travel for many reasons, consideration of lifestyle preferences is important to the success of tourism businesses and destinations (see Figure 3-5). Market research can identify specific lifestyle trends that can create new market segments.

Attracting More Visitors

Often a resort, an attraction, or a destination wants to attract more people. For example, a ski resort in the mountains of Colorado might boast beautifully groomed trails and all the amenities a traveler could want. Yet for some reason the area is never that busy. Before developing a plan to attract more visitors, it must conduct market research to learn about the people who are coming to vacation, seeking answers to such questions as:

* How far do visitors travel to reach the resort? From which regions of the country do they come? Do they live in large cities or small towns?

* How do they travel there?

* How many times have they visited the resort in the last five years? If not recently, why have they stopped coming?

* How did they first learn about it?

* Are the visitors predominantly men, women, young couples with children, or older couples?

* In addition to the great skiing, what attracted them to the area? What amenities did they especially enjoy?

The answers to questions like these can be surprising. The market research might determine that most visitors come from the Midwest, specifically around Chicago, because of the reasonable airfare to and from Colorado.

The heated outdoor pool might prove to be a big attraction since people like to relax, go for a swim, and view the slopes from an unusual perspective after a hard day of skiing. The research might also show that the gourmet restaurant with its fine wine list is another plus.

They must also determine why more Chicago skiers are not skiing at their resort and/or why they are choosing another resort (either in Colorado or elsewhere). These skiers may have "retired" from skiing, switched to another activity or prefer the lower cost and higher snow quality in Utah. Regardless of the reasons, it is as important to know why people have not returned to the resort (or never visited) as it is to determine why they have chosen to visit.

As a result of the market research, the ski resort might step up its marketing efforts in Chicago. To attract even more people from that area, it could advertise in regional Chicago magazines and newspapers and begin a public relations effort to get mentioned in travel articles. The resort could also bring more attention to its swimming pool and restaurant in its ads and promotional publications, thereby increasing customer and noncustomer awareness of the resort's offerings.

Market Research as a Tool

The major reasons that a company spends time and money conducting market research is to identify market needs, improve product quality, and generate increased business. Research serves as one of several tools that marketing professionals use to make informed business decisions that will ultimately yield more profit.

Through market research, travel companies find answers to questions about the various groups of people that are or are not using their product or service. Based on that information, marketing plans are designed, including the selection of target markets. Research gives marketers confidence that the course of action they are pursuing will produce the results they seek. In the end, the value of market research is often measured by the increase in business and/or the amount of additional profit it produces.

Database Target Marketing

The days of effective tourism mass marketing are waning. Today, effective marketers are using sophisticated databases that combine information from a number of sources to produce profiles of both their current and potential customers. By combining lifestyles, demographics, product preferences, buying habits, and values in a single database, marketers can measure and characterize their existing customer base (and unique expectations) and gain the power to track spending patterns and predict purchasing behavior. This technique of combining information about potential customers from different sources (databases) to create a profile for an existing or potential target market is called database target marketing.

Analyzing these large and complex databases is called "data mining," and is usually conducted by market research companies that specialize in database marketing. An example of a target market that could be identified through this process and located by zip or postal code would be: male engineers over fifty who earn more than $100,000 annually; play golf, tennis, and ski; and who currently have a mortgage on their home. Such a segment would be very important for a four-season resort that was planning to sell condominiums on the golf course or next to the ski slopes and was constructing an indoor tennis center. The fact that this "data mining" process can identify where people who meet these criteria reside in high concentrations (neighborhoods) means that cost-effective advertising, including direct mail promotions, can be used by the resort to reach this segment.

HOW PEOPLE DO MARKET RESEARCH

Whether you realize it or not, you may have participated in market research. If you've ever filled out a form that asked how you enjoyed a meal and whether you thought the service was good, you've been the subject of market research. Many restaurants, hotels, airlines, cruise ships, and other businesses in the travel industry routinely conduct market research through customer surveys and other methods.

The market research process can be divided into four steps:

1. Defining the marketing research problem.

2. Developing and executing the research plan.

3. Producing useful results.

4. Drawing conclusions and making recommendations.

Defining the Marketing Research Problem

The marketing research problem is the focus of market research, which is designed to answer the important questions associated with the problem. Although marketing professionals refer to it as a "problem," this term can be misleading, since it can just as easily be an opportunity, such as the chance to open a hotel on a newly developed island. Whatever the nature of the "problem," it should be clearly stated. It should also be significant enough in financial returns to merit the expense of the market research. It should be specifically defined and not be so broad that it is impossible to use market research to adequately resolve the problem and provide recommendations.

Developing and Executing the Research Plan

Suppose that a resort is concerned that its operating costs are rising too quickly in relation to revenue. It is looking for ways to save money. The managers note that the cost of operating the ice machines on every floor of the resort is quite high. But before making hasty decisions, such as assuming that the machines are unnecessary or that they can get by with fewer machines, the managers decide to undertake market research.

They begin by determining what questions they need to answer, for example:

* Are the resort's costs higher than industry norms?

* Do competing resorts offer ice machines on every floor?

* Are other types of ice machines available? Are they less expensive to purchase? Are they less expensive to maintain?

* Do the guests use the machines? How often?

* Do the guests value them as an amenity the resort offers? If so, how much?

Just as the marketing problem dictates the questions to be asked, the questions are one of the primary factors in determining how the market research will be conducted. There are two basic ways to collect useful information.

The first and most common method uses secondary sources, or information that already exists. Secondary sources include a company's own records, government statistics, and published articles, reports, and studies completed by other companies and organizations. If the managers of the resort consulted a resort trade journal to find out what industry-norm expenses for ice machines were, they would be using a secondary source of data.

But some questions they formulated as a part of their market research plan would require more specific, direct information-gathering techniques. These methods use primary sources, that is, market research in which you collect information that isn't available from secondary sources. If you want to know how frequently guests use the machines or how much they value having them, you must ask them directly.

Much market research employs both secondary and primary sources: often researchers use and review secondary sources when they are deciding how to conduct their primary research. The three basic types of primary market research are observation, experimentation, and survey research. These can be used separately or in combination, depending on the scope and particular requirements of the research.

Observation. If the resort's managers posted a researcher near the ice machine on each floor for a specified period of time to count how many guests used it in a typical day (and when), they would be using a basic observational research technique. Observational techniques are particularly good at determining customer behaviors, but they can't tell you much about their motives, attitudes, or opinions. Resort managers often use this technique by sitting in the lobby and observing the interactions among guests and employees.

Experimentation. On the other hand, suppose the resort's managers decided to remove ice machines on certain floors and carefully monitor the reaction of their guests. The purpose of this research would be to compare the satisfaction level of guests on floors with ice machines with that of guests on floors lacking them. That would be an example of experimentation.

Another example of experimentation is test marketing a new product and monitoring the results before introducing it to the general marketplace. For example, an airline that hasn't traditionally offered first-class service may initiate it only on certain routes at first and then monitor customer reactions. The results would allow them to decide whether or not to introduce first-class service throughout their entire system.

Survey Research. Perhaps the most common of the three market research techniques is survey research. There are a variety of basic surveying methods, but they all do essentially the same thing: identify a group of people (referred to as a sample) who were carefully selected to represent a larger group and ask them a list of questions that were equally carefully selected and worded. This can be done in a directed group discussion known as a focus group, in a face-to-face interview, in a phone interview, or by means of a questionnaire sent through the mail.

For example, the resort's managers, in order to determine how much guests value having an ice machine on each floor, would have to conduct survey research to find out. They may choose to gather a small group of them around a table for a group interview, or they may design a questionnaire to send out to a representative sample (five hundred) of their two thousand frequent guests. In either case--or in the case of observation or experimentation--their next step is the same: analyzing the responses and information they have gathered through surveys, observation experiments, or interviews, and interpreting the results.

Producing Useful Results

To be effective, market research must be conducted systematically. The particular techniques selected must be appropriate to the questions being asked. The questions themselves must be worded so that they will be clearly understood. The subjects must be chosen carefully, and the size of the sample must be carefully determined statistically and be the right size and composition for the research technique.

In order for the results of the research to have any meaning or predictive value, they must be statistically accurate and scientifically reliable. The data must be tabulated and edited carefully. Once this has been done, a statistician may look at the results to assess the research's reliability. Every element of the research: the data-gathering method, the number and nature of the questions, the quality and rate of the responses, and the size of the subject sample must be done correctly if the results are to be accurate and useful.

On the basis of these and other factors, a statistician can often report a margin of error for each research finding. This provides a scientifically determined measure of confidence (that the results are accurate) with which to interpret the results of the market research. For example, responses to surveys with an error rate of plus or minus 10 percent are not as accurate or useful as those with an error rate of plus or minus 1 percent.

Drawing Conclusions and Making Recommendations

When all the market research is completed, a final report is prepared to summarize the findings, draw conclusions, and make recommendations for actions to be taken in order to solve the original marketing research problem. It is important for this report to concisely and effectively address how the results can resolve the original problem. Management should be prepared to take the actions that the research indicates, even though it may not instinctively agree. The conclusions and recommendations in the report will be accurate if the research has been designed and conducted properly.

Next, a plan of action based on the recommendations in the report must be developed. Strategies should then be designed to meet the objectives of the action plan. After the plan of action has been implemented, its impact on business success should be reviewed to determine how accurate the market research findings and recommendations were. That way, refinements can be made based on actual experience, and more useful information will be available the next time market research is conducted.

Using Market Research

Because its findings must be statistically correct, market research may seem like an exact science. It is not. It is a useful tool for determining attitudes and preferences and predicting behavior of existing and potential customers. It is also useful for estimating how they spend their money.

Circumstances can quickly change, fads may pop up overnight, and people will change their minds. But ongoing market research can serve as a useful guide during changing business environments by providing management with information to help address marketing problems. Marketing professionals use the valuable information from market research in many ways, including product development, market segmentation, and product positioning, the last of which is the focus of the next chapter.

CHAPTER SUMMARY

* Market segmentation divides the total travel market, which is enormous and diverse, into smaller groups of people who are similar because they share common characteristics.

* Marketers use segmentation techniques to focus on particularly promising groups, a process known as target marketing.

* High-potential market segments can become target markets.

* Useful market segments must be composed of individuals who will respond similarly to marketing messages, who share characteristics which differentiate them from other segments, who can be reached effectively by communications media, and who have sufficient revenue potential to make focusing on them worthwhile.

* Demographic segmenting creates groups of potential customers on the basis of age, income, occupation, family stage/life cycle, education, or other measurable characteristics.

* Marketers use geographic segmenting to target customers in particular regions, climates, or types of environment (e.g., rural or urban).

* Psychographic segmenting identifies segments of potential customers on the basis of their personalities, lifestyles, and attitudes.

* Travel habits and preferences, purposes for traveling, and benefits sought from travel are three types of variables used in behavioristic segmenting.

* Database target marketing produces profiles of existing and potential customers.

* Market research gathers information from both secondary and primary sources to ensure good business decisions.

* Market research uses three basic techniques to gather information from primary sources: observation, experimentation, and survey research.

* The four basic steps of the market research process are defining the marketing research problem, developing and executing the research plan, producing useful results and making recommendations, and drawing conclusions.

KEY TERMS

market segmentation

market segments

target marketing

demographic segmenting

geographic segmenting

psychographic segmenting

behavioristic segmenting benefit

market research

database target marketing

sample

margin of error

DISCUSSION QUESTIONS

1 What are the primary advantages market segmentation offers to travel marketers?

2. A motor coach tour operator has identified the market segment of widows over the age of 65 as a promising target market. Applying the four tests of a segment's viability, explain why this is or isn't a viable market segment.

3. Explain the basic relationship between educational levels and the tendency to travel. If you were an advertising manager for an international hotel chain, how would you use this fact in your direct-mail advertising and in your television advertising?

4. What are two major purposes of travel, and how do these purposes affect travelers' needs?

5. Describe a target market for a tennis resort using a VALS category.

6. Give an example of a specific business decision for which market research could reduce the risks. Explain how particular types of information would help do so in this particular case.

7. Imagine you are the marketing manager for an investment group considering building a new attraction in your town. List some questions you would include in a survey questionnaire.

STUDY GUIDE

Selecting Target Markets Name: -- Date: --

Directions: Answer these questions as you read the chapter. You will be able to use these answers to help you review the chapter.

1. What is the difference between a market segment and a target market?

2. Why is it important to segment the travel market?

3. Explain how marketers determine whether a market segment is viable.

4. What are demographics?

5. How can income be used to segment a market?

6. How can more than one demographic factor be used to determine a market segment?

7. What is geographic segmenting?

8. What is psychographic segmenting?

9. How does behavioristic segmenting differ from other methods of marketing segmenting?

10. What is the most important distinction travel marketers make about purposes of travel? Why?

11. Identify four critical issues for a growing travel business that can be addressed by market research.

12. How can an understanding of lifestyle trends benefit a travel business?

13. What are the four steps for conducting accurate and useful market research?

14. Describe the three basic types of primary market research.

15. Explain why market research is not an exact science.

Selecting Target Markets

WORKSHEET

Name: -- Date: --

TARGETING THE MARKET

Each of the groups of people listed below belongs to certain market segments. Each is likely to find certain types of travel products and services more useful or appealing than others. Answer the questions about each group.

1. Computer manufacturer sales representatives making sales calls in several cities within one state

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how market research would be useful to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

2. Doctors attending a professional conference

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

3. Grandmothers with young grandchildren

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

4. College seniors on spring break

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

5. Couples who play in mixed doubles tennis tournaments

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

6. Middle-aged opera fans

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you to decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

7. Just-married couples in their twenties

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

8. One-income families with young children and relatives in several states

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

9. Affluent singles with advanced degrees

A. Describe the types of travel products and services that would interest this market segment.

B. Discuss how you would use market research to help you decide how to promote these products and services to this market segment.

C. Choose one specific product or service, and explain how you would promote it to this market segment.

Marketing Impressions

SALES AND SERVICE SEMINARS TRAVEL MASTER SEMINARS

How would you like to sell Jeeps if you had never driven one? It would be pretty difficult, wouldn't you agree? They handle a certain way, the acceleration is not the same as with luxury sedans, and it's hard to describe the above-the-crowd feeling you have in comparison to sports cars. You'd either want to test-drive one to make sure you know the differences, or ask experienced users. Selling and servicing group motor coach tours presents the same challenge.

Most people who sell their destinations or their company's hotels, attractions, and restaurants to the motor coach tour industry are in their twenties and thirties. You see them every year at the American Bus Association Marketplace, the National Tour Association's Tour & Travel Exchange, and at regional travel shows throughout North America. We hear them on the phones when we call for reservations. These young people are bright, enthusiastic, and more than willing to help whenever and wherever they can. On the other hand, the average passenger taking a packaged motor coach tour, according to the National Tourism Foundation's Tour Traveler Index, is sixty-eight years old, female, retired from a white-collar job, and traveling with a spouse or friend. The problem? Most of the time, the sellers and the servers of the motor coach tour passengers don't fit that description, have very little in common with them, and very likely have never "driven the Jeep"--that is, been on a motor coach tour. It makes their jobs that much more difficult and frustrating when they think they're doing a good job, but they're not getting the reaction they think they deserve.

That's the reason Travel Master Seminars was established. The people who sell and serve the tour industry had limited opportunities to go to seminars at national conventions, and in most cases, those seminars just touched the surface. They needed a more in-depth, concentrated curriculum. I grew up on motor coaches: it was my family's business. I sat beside those sixty-eight-year-olds (and sometimes eighty-six-year-olds).

I learned through experience what they thought, what they liked and didn't like, and what they needed. That learning experience lasted for thirty-five years. I now travel the world doing workshops and seminars, teaching people how to "sell the Jeep" without having driven one. It's not a panacea, but it's close.

Travel Master Seminars workshops provide sellers and servers in the motor coach tour industry with an opportunity to concentrate on "thinking like the customer." It's a matter of putting themselves in the driver's seat. Tour operators who sell tours to their customers know what these customers want. Suppliers to those companies must adjust their thinking to provide those services, or they take the chance of losing or never even getting the business. For instance, tour takers like to be part of a group; but just that, a part, an individual, not the whole, not the herd. Most customers don't like to stand in line, but tour takers hate it. Avoiding long waits is why they bought the organized tour in the first place. They want to be treated specially. They don't want to handle their luggage themselves, but they want it to get to their rooms before they do. Unrealistic? Sometimes. Impossible? No. You just have to know how to handle each situation.

People take tours for six basic reasons: convenience, safety, security, companionship, education, and value, not necessarily in that order. Each passenger is different. The nuances of each of those reasons, and how they are delivered to the customer, can be the difference between success and failure, repeat business and "never again." That's why convention and visitors bureaus, state offices of tourism, travel organizations, hotel chains, and other companies find it so valuable to educate their suppliers on how to sell and service the tour industry and how to grow their group tour markets. Travel Master Seminars is proud to be an integral part of that process. We'd like to think we're a virtual ride behind the wheel.
FIGURE 3-5 Tourists travel for many reasons, producing strong global
tourism growth. Source: World Tourism Organization Vision 2020

GLOBAL TOURISM GROWTH

* 1.6 billion
international tourists
(2020)

* Tourists will spend
US$2 trillion (2020)

* Arrivals will grow
4.3% per year

* Spending will grow
6.7% per year

Forecast of
International Tourist
Arrivals (million)

1995       564
2000       692
2010      1,047
2020      1,602

Note: Table made from bar graph.
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Title Annotation:PART ONE Marketing the Travel Product
Publication:Marketing and Selling the Travel Product, 2nd ed.
Geographic Code:1USA
Date:Jan 1, 2000
Words:9681
Previous Article:Chapter 2 Analyzing the travel product.
Next Article:Chapter 4 Positioning the product.
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