Market Research, Market Segmentation, and Methods of Segmenting Markets
Market Segmentation Benefits and Drawbacks
Benefits: -making the most out of marketing dollars: done on a budget -clearly defining and understanding the needs and wants of potential customers: determined after market research, needed to clearly identify the target market. -developing effective positioning: positioning means the development of a service and marketing mix, consisting of the 8 Ps, for the purpose of appealing to customers within target markets. -choosing with precision: Selecting the right promotional vehicles and techniques -gives organizations an accurate factual foundation from which to proceed - is not worthwhile unless it communicates important information about customer preferences. Drawbacks Segmentation can be difficult and misleading, and skill and experience are required. The market segment in which businesses are interested might be poorly researched, and they might have trouble predicting and measuring consumer behavior. Also, the target market might be hard to identify. Here are the four main limitations: -It's more expensive: Market segmentation is more expensive than using non-segmented approaches. -It's difficult to determine the best characteristics. There are many, many segments into which customers can be divided. -It's difficult to know how fine or broad to segment: Having too few segments isn't going to keep from wasting resources, and going too far can become counterproductive and also be can be wasteful, it can limit the viability of the business. -There's a tendency to appeal to non-viable segments: Some groups may not be viable because no amount of advertising can reach them. -some consumers can be misinterpreted or market research can lack information. -can be market saturation: once a market no longer generates new demand, whether because of competition, decreased need, or other variables, it's said to be saturated, new brand may not have a base segmentation -it's the job of the organization and the purpose of the market segmentation to determine the best customer for a service or product and then target that group through marketing. This should be done regardless of competition.
THE PROCESS OF MARKET RESEARCH
Conducting market research is a process, meaning there are steps that should be taken in a certain sequence. Here are the four steps: Define the problem. Develop a research plan. Collect the data. Create the report. -The first step to market research is to define the problem: it's determining how the product or service fits into the marketplace, setting objectives and determining how success will be measured -The second step is to develop a research plan: enables marketers to decide what information they must have in order to make good marketing decisions -The third step is the actual collection of data: ensure only data needed to make the marketing decisions is being used. There are two sources of data: primary data and secondary data -Secondary: produced from outside sources or within the business, easier to gather, must fill needs -Primary: original data, done after secondary, surveys, specific info, more expensive -The fourth is creating the final report: document details research findings, provides analysis, and makes recommendations Primary vs. Secondary Quantitative data is numerical, or data based on numbers Qualitative is more descriptive and is not something that can be counted or represented numerically. There are four research methods that can be conducted for both types of data. -For quantitative data, experiments, mechanical observation, surveys, and simulations can all be used. -For qualitative data, focus groups, individual in-depth interviews, human observations, and case studies can be used.
SEGMENTATION CHARACTERISTICS
In single-stage segmentation: only one of the segmentation characteristics is used. Two-stage segmentation approach: First one segmentation characteristic is applied, and then another is used to narrow down the target market. Multi-stage segmentation: After a primary segmentation is selected, one or two additional characteristics are mixed into the plan. If you are wondering which one is the "best" approach, there is no exact answer, using a two-stage or multi-stage approach is the best because it enables an organization to define its target market more precisely. No single factor, however, contributes to success more than choosing the first or primary segmentation characteristic. Individual Segmentation Characteristics: These characteristics include - geographic, demographic, psychographic and behavioristic. In the hospitality and tourism industry, the most common segmentation characteristic is geographic, most existing advertising is already segmented by geography (geographic segmentation is especially important for international companies, or companies that brand themselves globally because it allows advertisement to be changed depending on location) Demographic and socio-economic segmentation: makes use of population statistics to divide markets (DEMOGRAPHICS) Caution: Demographic segmentation is seductive. Relying on this strategy alone leaves a company vulnerable to more creative competitors. Psychographic segmentation: become popular in the hospitality and tourism industry, collects and analyzes psychological profiles of customers and distinctive modes of living or lifestyle based on psychological measures (activities in which people participate, their interests, and their beliefs and opinions). this type of segmentation that really allows an organization to begin to develop brand loyalty.
MARKET RESEARCH AND REQUIREMENTS
Market Research: uncovers the essential information that allows the marker a link to the consumer (information that identifies and defines marketing opportunities and challenges, allowing for the evaluation and refinement of marketing strategies), measures marketing performance, improves understanding of marketing, specifies the information required to address these issues, designs the method for collecting information, and manages and implements the data collection process, coordinates data collection, analyzes the results, and communicates the results and what they mean to managers, MAIN GOAL: help the organization make sound marketing decisions, made by solid research. ADVANTAGES: Five reasons for doing research include customers, competitors, confidence, credibility, and change: market research provides information about its customers, knowledge regarding competitors, insight into a company's own identity, brands, and processes, as well as comparative strengths and weaknesses, fosters an organization's confidence, important for companies to stay on top of things (best way is to conduct market research) DISADVANTAGES: timing, cost, reliability, competitive intelligence, and management decisions, research can take a good deal of time and money, a company may also feel that if they do research, they'll undoubtedly have to leak some information about a new product or service and their competitors may use that information to its advantage, marketing managers may not understand the value of good research Intuition is inherently unreliable, especially when compared with the hard data provided by research. Because marketing decisions in travel and hospitality involve human beings at every turn, the best marketing decisions combine research, intuition, and judgment. Key Requirements: utility, timeliness, cost-effectiveness, accuracy, and reliability. An organization should determine what information it must know and then only collect data that falls within those parameters. Timeliness is important for information to be current and up-to-date. Market research can be reliable market research informs decisions that may be worth millions or even billions of dollars, to spend the money on research, the amount of money gained in return must be greater. In addition, the qualities of being both accurate and reliable are related, market research is considered reliable when the results are repeatable.
Market Segmentation
The first step: evaluate the market segment, marketing segmentation is a process of defining a large homogeneous market and dividing it into clear segments with easily identifiable needs, wants, and/or demand characteristics, the objective is to match exactly the expectations of customers in the target segment with a carefully designed marketing mix -factors contribute to the importance of market segmentation: Increased competition, limited budgets and financial constraints. -In order to use marketing funds effectively, market segmentation analysis should answer the "who, what, where, when and how" of both your marketing efforts and of your intended customers. -No hospitality and travel market can afford to waste resources on a scatter-shot approach, companies must aim carefully at specific target markets. Market Segmentation Analysis -Market segmentation analysis is a two-part process: The first step: sorts the entire market into groups that share common characteristics. The second step: gets rid of all the marketing segments except for those that the organization can best serve, done by the application of a set of segmentation criteria (consist of the specific criteria or techniques where the organization divides markets into subgroups) Reasons for Market Segmentation One advantage of market segmentation is identifying who the customers are for a particular business, including those who interested in buying. NOT EVERYONE IS INTERESTED, this idea can result in poor decisions, bad pricing, and ineffectual marketing. People choose to purchase products or services for three reasons: to satisfy basic needs, to solve problems, to make themselves feel good Asking the who, what, when, where, and how questions is a useful guide in making critical decisions: -who - Which market segments are going to be pursued? -what - What are the customers looking for in our product or service? -how - How can the marketing program be developed to best fit the needs and wants of the customer? -where - Where will the promotion of the product or service take place? -when - When will the product or service be promoted? Marketing to the target market will be most effective if these questions can be answers accurately, market research can be used to help identify the wants and needs of the customers
TRENDS THAT IMPACT MARKET SEGMENTATION
Trends that Impact Market Segmentation The internet and lifestyle changes of consumers has caused trends such as: -demographic trends: organizations are finding it more and more important to market to minorities. Another trend is the idea of time poverty -purpose trip trends: single trip can serve a multitude of purposes and include more than one destination -psychographic trends: The digital revolution, especially the Internet, has spurred a widespread and almost irresistible push toward vast lifestyle diversification -behavioral trends: organizations are realizing they need to market to single people, brand loyalty is decreasing. There are also trends in the supply side, trends in the hospitality and travel industry itself. Normal years no longer exists because of terrorism, natural disaster, disease outbreaks, and other 21st century challenges about which people didn't have to worry only a few years ago. Constant change shifts needs, wants, and tastes of customers is creating a wealth of new markets, new segments, and fresh marketing opportunities, the hospitality and tourism industry has responded by providing a creative and expanding variety of services, facilities, programs, and products, often calibrated to reach specific target markets.
vocab methods
behavioristic segmentation: the division into groups according to their knowledge of, attitude towards, use of or response to a product demographic segmentation: the division of the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality geographic segmentation: the division of the market by nations, states, regions, countries, cities, neighborhoods, or zip codes lifestyle: the way a person lives according to his or her own ability primary segmentation base: the customer's top characteristic in choosing a service psychographics: the science of using psychology and demographics to better understand consumers single-stage segmentation: the division of markets based on one single characteristic SMERF: a market segment for the sales of banqueting rooms and meeting facilities two-stage segmentation: the division of markets into one primary characteristic and then further subdividing into a second characteristic
vocab
databases: an organized collection of data, today typically in digital form external secondary research data: information gathered from an outside organization internal secondary research data: data gathered from within a company's own records and files marketing research: the collection of data that provides orientation, telling an organization where it stands in relation to the past, its customers, its competitors and its goals, enabling marketers to evaluate the current state of their organization primary research data: data collected by the investigator conducting the research qualitative data: data used to describe certain types of information, usually categorical quantitative data: data in which a range of numerical values are used without implying that a particular numerical value refers to a particular distinct category secondary research data: data collected from other sources, either internal or external
Vocab Market Segmentation
market segment: a group of individuals, companies, or families which are chosen for special marketing attention by an organization market segmentation: a process of defining a large homogeneous market and dividing it into clear segments with easily identifiable needs, wants, and/or demand characteristics market segmentation analysis: a process by which the hospitality sector answers the "who, what, where, when and how" of both the marketing efforts and the intended customers positioning: the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization segmentation characteristics: the qualities used to divide a market into sections segmentation criteria: the criteria used to divide markets up into subgroups segmented marketing strategy: the tactic of dividing the market into groups in which are individuals with similar needs and wants for services and products target market: a group of customers toward which the business has decided to aim its marketing efforts and ultimately its merchandise
