Chapter Thirteen Differentiation, Segmentation and Target Marketing

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 2 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Differentiation Distinguishing your product or service from the competition in ways that are both identifiable and meaningful for the customer The customer should perceive a greater value

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 3 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Differentiation Differentiation is effective when: It cannot be easily copied It appeals to a particular need or want It creates an image or impression that goes beyond the specific difference itself

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 4 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Exhibit 13-2; Ritz-Carlton tangibilizing the intangible

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 5 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Differentiation Differentiation as a marketing tool Helps create awareness and trial by the customer Sometimes product differentiation is the only thing a firm can do It is much easier to do in the foodservice environment, even within hotels

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 6 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Differentiation Differentiation -- of anything Can be product, message or brand specific Difficult to achieve in hospitality because of the variety of services offered Separates product classes and products within the same class Provides an opportunity to strengthen competitive strategy Is the basis for positioning strategy

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 7 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Market Segmentation Market segmentation: Is a complimentary strategy to differentiation Is dividing a market into meaningful groups who have similar wants and needs (market segments) Starts with the customer

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 8 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Market Segmentation Which comes first: differentiation or segmentation? Both happen in combination at different times Both are part of the marketing concept First know how people differ Then segment them accordingly Develop products that meet their specific wants and needs Creating these two strategies are major reason to study consumer behavior

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 9 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Market Segmentation The process: Step one: Needs and wants of the marketplace Step two: Projecting wants and needs into potential markets Step three: Matching the market and capabilities Step four: Segmenting the market Step five: Selecting target markets from identified segments

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 10 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Segmenting Variables Various ways in which a market can be divided, or segmented, into meaningful groups of buyers Geographic Demographic Psychographic Usage Benefit Price

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 11 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Geographic Segmentation Most widely used in restaurant and hotel industry These segments then become easier to reach Direct mail Media Data and information on demographics Metropolitan statistical areas (MSAs) Defining large metropolitan areas in terms of supposed economic boundaries Designated market area (DMA)

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 12 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Demographic Segmentation Widely used because easy to measure and classify Does not necessarily distinguish wants and needs Demographic lines are now blurred Useful demographics Age Family life cycle stage

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 13 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Psychographic Segmentation Based on activities, interests, and opinions (AIO), self-concepts and lifestyle behaviors Lifestyle patterns combines demographics with the way people live, think and behave in their everyday lives and correlate them into homogeneous categories A rich area for marketing effectiveness for the hospitality industry PRIZM and VALS

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 14 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Exhibit 13-6; VALS framework

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 15 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Usage Segmentation Umbrella term that covers a wide range of categories Purpose Frequency Monetary value Recency RFM Timing Nature of the purchase Where they go Purchase occasion Heavy, medium or light

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 16 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Benefit Segmentation May be the most basic and most predictable of all segments Benefits are very related to need satisfaction Benefits Comfort Prestige Low price Recognition Attention Romance Quiet Safety

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 17 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Price Segmentation A form of benefit segmentation, only more visible and more tangible Price segments within a product class Price segments between product classes

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 18 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Segmentation Strategies There will be many segments, some with overlap, and different strategies for each segment The test of a segment is their different behavior Segments change over time Market segmentation has become increasingly critical with competition Segmentation will remain a key competitive strategy within the product class

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 19 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Target Marketing Selecting specific market segments to target and designing the product or service to meet their specific wants or needs More refined segmenting rules apply Strategies: Undifferentiated targeting market strategy Strong targeting strategy Differentiated multi-target marketing

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 20 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Mass Customization The concept that modern technology is bringing us closer to target markets of one Make one product and personalize the product to their specifications Largely due to databases that track customer behavior

© 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 21 Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw Discussion Which comes first: differentiation or segmentation? Why?