Segmentation in the Holiday Market - Case Study Example

Segmentation in the holiday market Introduction: Market Segmentation The segmentation of market can be considered as the division of the market into defined groups of customers with the needs and main characteristics in the zone of possible identification. The markets usually consist of customers with somewhat similar needs. For example, the markets that exists to meet the needs of eating, drinking, traveling, education, exercise and socialization. Now, there exists a prominent need to further divide the market, so that one can be more precise and specific in approach. When we consider the market of education, we find that the customers differ in their demand and strength on monetary terms to meet the same. The customers may differ in the time, place, level, type and subject of education. The choice for market segmentation breathes several crucial reasons for existence and preference. A segmented market provides a better match of customers’ needs. As we know, customers needs differ, so we believe that a segmented market shall hold the ability to address these differing needs. This results in greater customer satisfaction and resultant increase in sales. The acceptance and application of segmentation can see a significant increase in profits for business. Since every customer can afford a different monetary amount for a commodity, segmentation can help increase the average price. This can add to the profit in business. The better opportunities for growth find their existence in the segmented market. It aids in building sales. It also helps retain more customers or say more variety of customers. A customer’s need may change with the changing time. For example, the customer grows older, forms families, and has children, change jobs, or care for a change in living place. By virtue of marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can maintain customers who might otherwise change their focus to other existent market products. Segmentation of market also helps in the act of targeting marketing communications. It is essential for the growth of any business that its marketing messages reach the prospective customers. However, in the case of a huge size market, there exists a strong risk of missing the important consumers. The expense of communicating the marketing message to the complete market without provision of segmentation is real high. The benefit of segmentation here is to reach the targeted customers more often and at lowers expense. Carefully designed segmentation helps target the market with precision. It enables the smaller companies to stand in competition with the bigger ones. The targeted consumers and the specificity of services provided to them aids in the prosperity of business success. It therefore becomes an essential need to segment the complete market. This aids to meet the objective to target specific segments of a market. Thus, it becomes easier to design and deliver the products and services of interest to the segment under focus. The process of segmentation involves the job of subdivision of the market, the channels or the customers into different groups as per their differing needs, and thereby promote the possibility of addressing the requirements of the customers as precisely as possible. The objective for market segmentation is to identify the most essential need of the consumers. If done with accuracy, market segmentation results in the contribution to the greatest upheaval of the business. The first most essential thing to be established is a category of need. We need to know whether that which we are offering satisfies. The consumers. Depending on whether the needs are to be addressed for a business or an individual consumer, the points that are considered while defining market segments gain difference. The company needs to satisfy the social esteem or pleasure of the individual consumer. The point of pleasure for the consumer is essential. We may consider this in an example; an individual consumer may require the meal to be served in glass utensils, during his air travel to an overseas country. Now, the meal in a metal or plastic utensils may be as good as in glass utensils. But, the point here is not to satisfy the need or the functional requirement but to address the social esteem of the individual. In functional requirement satisfaction, the basic and the essential needs of the consumer are addressed. As an example we may state the need of breakfast cereal. Important Elements – Market Segmentation Product Life Cycle (PLC) Unfortunately, there is no standard universally acceptable definition of PLC. PLC can be considered as the succession of stages of development and decline a successful product is required to pass through. Business Analysis and Valuation (BAV) The BAV tool helps in the analyzing of the company’s financial statements and estimating the company’s intrinsic value. BAV process consists of gathering and assimilating financial statements for a ac company, standardizing them to a common format, making any crucial adjustments to the company’s account, and making assumptions about the future performance of the company. Cross-Cultural Consumer Characterization Young & Rubicam, the experts in the field of market segmentation have designed consumer segmentation specifically with an aim to gain insight into consumer values connections. Their contribution has been abbreviated as 4Cs- Cross-Cultural Consumer Characterization. It is called as Cross-Cultural because its presence breathes in every country. The expression of its presence may differ but the point is that it exists everywhere. It can be said to have consumer characterization because the 4Cs brings each value to life as a characterization of a person that enfolds into an entire subjective reality, a route that is followed in an attempt to make a choice. In addition, the five motivation areas that play a role of greatest prominence in advertising are Status, Security, Control, Discovery, and Enlightenment. There are other two, that are targeted commercially but rarely and they are Survival and Escape. It should be noted that the information generated on consumer segmentation as 4Cs was generated by analysis of seven European countries. However, the same holds the strength to find applicability in any other country with the requirement of slight modification. The Product Portfolio, also called as the Product Mix, can be considered as a mix of products, and different versions of each product, which are grouped together as a Product Line. This is the need of the market, because every product is destined to reach the end of its life cycle, therefore it is essential to offer a range of products instead of relying on just one product. In the Product Portfolio of each business, within each product line there exists a range of similar products or sub-lines. A Product Portfolio of a business can be addressed in general terms by identifying the four key dimensions, i.e. width, length, depth, and consistency. Thus, the Product Mix dimension refers to the number of different product lines the Product Mix contains. In the attempt to identify length as a key Product Portfolio dimension, the total number of products in the mix is counted. The depth of a Product Portfolio is the number of versions of a particular product in a product line that are offered to the market. The knowledge and application of Product Portfolio can be essential in achieving market success. Holiday Market Segmentation: An Example For example, we may consider the UK leisure travel industry. It has been estimated that UK consumers take more than 110 million holiday trips each year. Of this, an almost 36 million overseas trips are taken by the consumers each year. This accounts to an amount of 16 billion pounds each year for overseas holidays only. A huge market, with high segmentation and tough competition breathes here. The overseas Holiday market presents segmentation in several ways, and this includes transportation, destination, accommodation, flexibility and customer management, activity, duration, price and quality. In transportation we may consider two important means to travel and they are air travel and self-drive. The self-drive may be a possible option for traveling to the nearby countries like Ireland, Italy, and France. For driving a long way to countries such as Australia, Canada, India, China, Russia, etc, the main choice is that of air travel. However, some may prefer to travel by ship to the countries where this route of travel is feasible. This is a brief sketch of the traveling options that respire with greatest prominence. In an attempt to segment destination we look at the past years options of traveling that held preference by the UK consumers. We find that the most preferred overseas destinations are Spain, North America, Greece, and France. We now bring to knowledge that travel to these destinations holds a prominent need to travel by air. Self-drive breathes as a possible option only for nearby countries like Ireland. Here, we understand by segmentation that a large group of consumers of UK in the holiday market hold their preference for some specific countries for holidays. The accommodation preference during holidays experiences a huge variation. It may be hotel bases, with a wide range of catering preferences. It can also be in apartments, tents, boats, and other categories. The customers may demand flexibility in their holiday tour. They may prefer to choose their accommodation and other requirements as per their desire. They may opt for independence as the chief constituent of their holidays. However, others might go for a pre-planned holiday package. In this case, the accommodation, and all other essential requirements of the customers are almost pre-set. The activities involved during the holidays may include, walking, swimming, skiing, or riding. Sometimes such holidays also hold the provision of imparting essential training of these activities. The duration of most holidays is of 7 to 14 nights. However, the fastest growing segment is of holidays taken for between one and three nights i.e. week and short break holidays. The companies can therefore divert their greater focus on these short duration holidays for greater economic success. The price and quality also act as an essential base for segmentation of the market. The companies may choose to provide a range of product versions. The traveling expense may account for as less as ₤99 pounds to as high as ₤10,000 per passenger. Most of the UK consumers opt for a scheduled flight of the chosen destination. Once, the destination of choice has been reached, the additional choices that are made are of accommodation, activity, flexibility or management. In these areas of choice, the monetary expenditure may greatly vary. Also, addressing the needs as per the finest desire of the individual consumer helps promote the company product. It therefore becomes essential to segment the market of holidays and then focus to meet the individual consumer needs. Conclusion Segmentation of holiday market is essential for an increase in the monetary profit. It not only sets crucial base for competition in the market. But also substantiates the product existence in many ways. The approach of segmentation requires knowledge of different essential components or elements of the existing market. And this includes the PLC, BAV, 4Cs, etc. We believe, to compete real, it is essential to segment the holiday market into its most essential groups of existence. Bibliography Day, G. (1981) The product life cycle: Analysis and applications issues, Journal of Marketing, vol 45, Autumn 1981, pp 60-67. Levitt, T. (1965) Exploit the product life cycle, Harvard Business Review, vol 43, November-December 1965, pp 81-94. Read More