Market Segmentation of Thomas Cook - Essay Example

?CONTENTS Overview 2 Tourism Life Cycle Model 3 Consumer behavior of the Tourism Industry 3 Changing role of technology and the Changes in tourism niche marketing 4 Impact of changing market niche on Thomas Cook over the years 5 Market segmentation of Thomas Cook 6 Position of Thomas Cook in the global tourism/hospitality market 7 Favorability of Thomas Cook’s Market Position 8 Price strategy and Yield Management as Competitive Strategy 9 Networking relationships for Thomas Cook in relation to other Competitors 10 Proposed new techniques and innovations 10 Conclusion 11 THOMAS COOK Overview The tourism industry is one of the most financially profitable ventures as it generates ?97billion each year in England’s economy alone (Visit England, 2012). But it is worth noting that the level of profitability that a tourism company would experience does not come by accident or as a fluke (Colucci, 1998). It takes so much work that is guided by the use and inclusion of strategic marketing principles to attain such heights of profitability. Another important fact that can also guarantee or assure players in the industry of the tourism of accrued profitability is the ability to be dynamic and adjust one’s business towards the changing global economic climate (Engelmann, 1997). It has been noted that the global economic climate hardly experience a stable condition be it in terms of customer behavior, the flow of cash, competitive advantage, niche marketing, and the application of business models (Gosling, 1996). For players in the tourism industry therefore, the best way to benefit from the market is to ensure that they are able to adjust their strategies according to the dictates of the market. There have also been tourism strategists who have also made use of models that suggest that players can be innovative enough to determine marketing and business ideas that customers would appreciate and buy into. In such direction, the customer or market does not determine what the industry wants but the industry decides what the customer would want. In this report, Thomas Cook is used as a case study to understand how changes in tourism have impacted on the development of the business over the years and how the company can position its self to take advantage of available strategies to consolidate its position on the global tourism market. Tourism Life Cycle Model of Thomas Cook Group The tourism life cycle model identifies six (6) main stages with any tourism or hospitality outfit in terms of levels of growth. Generally, the model holds it that tourism resorts start from very low beginnings and progress steadily until they have attained stagnation (Cummings, 2010.). Of the six stages of phases are the exploration, involvement, development, consolidation, stagnation, and decline or rejuvenation stages (Jamieson, 2000). The exploration and involvement stages are generally pre-establishment stages where people identify their localities to determine the form of tourism or hospitality model that would work best for them. In the case of Thomas Cook, such a stage could be linked to when Mr. Thomas Cook first involved himself in an excursion in which he took 540 temperance campaigners to Loughborough from Leicester Campbell Street. This sparked his interest to start his own company. Commonly the development and consolidation stages are those stages when the established business begins to see significant growth and this is the stage that Thomas Cook could be said to be currently. Stagnation and decline stages are perhaps stages that Thomas Cook would want to avoid as it is commonly associated with reduced income and revenue (Evans, 2002). Consumer behavior of the Tourism Industry The tourism industry is one with a highly predictable, and yet unstable consumer behavior (UNEP, 2003). Understanding the consumer behavior of the industry is important in designing strategies that can meet consumers at the point of their needs. Commonly, the company targets specific market segments after carrying out market research so as to align the type of consumer behavior exhibited by consumers to the characteristics of services and products available from the company. In this end, intangibility, perishability and inseperability are associated with services whiles more tangible, often stored and standardized characteristics are associated with goods. Therefore, a customer’s behavior would be predicted whether the customer is looking for a specific service or good. For most modern companies, some of the most critical factors that determines consumer behavior include the season or doing business, availability of money in the system, occupational demographics, social status of customers, as well as the corporate social responsibility used by the company. But in the case of Thomas Cook, a specialized strategy used is to associate specific cultural backgrounds of customers to the type of service rendered to them (Coleman, 1999, p. 232) Generally, holidays and festive seasons are periods that the services of the company are most patronized (Evans, 1998). This is simply because tourism is seen by many as a part time leisure that is best undertaken when there are virtually no official duties to perform. Knowing this, the company is in a position to strategizing its publicity and advertisements at times when major holidays and vacations are drawing close. For example, Baker (2012) quotes Marketing director Michael Johnson, who says that “We will up weight things like city breaks but it’s not a quick fix.” Changing role of technology in Thomas Cook and its changing tourism niche marketing The tourism industry has experienced a number of significant changes over the years. Interestingly, these are changes that cannot be ignored by any member of the tourism or hospitality fraternity, including Thomas Cook. Two of these major changes are in the areas of change in role of technology and changes in tourism niche marketing. There is a rapid changing role of technology such that technology now decides almost every other line of process that takes place in the tourism management. For example in 2008, Thomas Cook Group launched a technology drive to stir all tourism management issues (Fox, 2008) At first, when mention was made of technology and tourism, all that came to mind was the use of computers in performing basic office roles such as typing and preparation of payment excel forms. Today, there has been an expansion on the importance and need for technology such that technology is used for the all important task of electronic commerce, whereby technology is used in crucial areas of marketing including promotion, publicity, research and development, sales, and delivery (Evans, 2000). Companies that do not include technology in their business roles therefore lack behind in terms of efficiency and effectiveness of delivery of both internal and external roles. Tourism niche marketing has also seen significant changes whereby what previously existed whereby only specific products in terms of hotel accommodation provisions were focused on (Evans, 1998). There is however a new trend of change in that several sectors or areas are given attention at a time. Impact of changing market niche on Thomas Cook over the years Thomas Cook has experienced it own sides of advantages and disadvantages in terms of the impact of the changes that has taken place over the years (Annual Reports and Accounts, 2010). For example in terms of the application and dominance of technology, it would be noted that the company now enjoys a wider coverage of publicity by the use of the new media. Through the use of the new media also, the company is able to get much closer to its customer, still by the use of new media. For example, according to Corporate News (2013), in April 2013, “Thomas Cook Group launches 24/7 rapid response social media listening lab.” E-commerce has also come with added advantage in that the company does not necessarily have to have tangible presence in a locality before business transactions can take place. With the click of a button, it is now possible to have an entire business transaction completed. In terms of niche marketing also, it would be said that it has widened the business scope of Thomas Cook. Today, and as exists with Thomas Cook, there has been so much change in the sense that the scope of business concentration has entirely changed. Flight services, travel consultancy, tour services and accommodation services have all been added to the business dimension of the company, expanding its overall market share. This has however brought the challenge whereby the company now has so many outlets to manage, making it almost impossible to have sufficient time in one area where it could become a market leader (Sprecher and Jamieson, 2000). Market segmentation of Thomas Cook Because of the niche marketing used by Thomas Cook Group, the company is able to have as many market segments that equally yield profitable results as possible. In its 2010 annual report and accounts, the company named leisure travel market, travel agents and tour operations as some of its most outstanding market segment, with ten major markets made up of “UK, Germany, France, the Netherlands, Belgium, the four Nordic countries and Canada” (Thomas Cook Group Plc, 2010). As shown in the figure, it would be noted that these markets contributed a total of 33% of the company’s revenue, which translated into an amount of ?274bn. Thomas Cook Plc Annual Report and Accounts (2010) Experts say that looking into the future Thomas Cook has the potential of expanding its market segment to include even newer scope of customers (Jamieson and Noble, 2000). These new market has been suggested to include new markets in the Australian and African continents where tourism and hospitality are becoming a rapidly growing phenomenon. Once such market segments are pursued, it is hoped that by the year 2014, the market revenue of the company will increase to ?110bn with a yearly growth rate of 2.8% starting from 2009. This rate of growth according to market segmentation is showed in the figure below. Thomas Cook Plc Annual Report and Accounts (2010) Position of Thomas Cook in the global tourism/hospitality market As far as the global tourism or hospitality market is concerned, Thomas Cook Group could be said to be a very strong competitor who have come far since its creation in 2007 after the merger between Thomas Cook AG and MyTravel Group plc but still has so much that it can do in terms of market share. Presently, the revenue of the company is quoted as ?9.491 billion, out of which ?156.1 million is the operating income of the company (Turner and Witt, 2003). With such an income, it has been possible for the company to use a niche marketing that targets several areas in the hospitality or tourism industry including charter passenger airlines, scheduled passenger airlines, hotel accommodation, package holidays, cruise lines, and beach resorts (Sing, 1981). The fact that the company runs on both offline and online basis makes it have a commanding global stance because with only 31,097, the company penetrates almost every continental tourism market. It must however be stressed that the company focuses on five major market divisions, which are North America, UK, Northern Europe, continental Europe, and German Airlines (TISTR, 1997).. Within these markets, The Financial Times (2013) notes that “Thomas Cook does about a third of its business online.” Favorability of Thomas Cook’s Market Position As far as the favorability of the market position of Thomas Cook Group is concerned, the best judgment that can be passed can be passed in relation to other competitors in the industry. Comparatively, Thomas Cook cannot be referred to as a market leader but a market contender. This means that the company still has a number of competitors who have taken the lead, of which the company is chasing in terms of market share, revenue and operating income. TUI Travel PLC, Virgin Atlantic Airlines, British Airways, The Tourism Company, American Express Company and Carlson Wagonlit Travel, Inc are only a few of such international and local competitors. According to the Competitive Landscape Report of Thomas Cook (2013), Most noticeably, these competitors have seen improved success in the midst of changing tourism marketing climate because of the brand equity they have established for themselves over the years. In such a situation, the best form of competitive advantage that can be used b y Thomas Cook Group are a set of strategies that are customer focused. This is because such strategies will have the possibility of winning unto the company, existing customers of competing companies (Unger and Unger, 1999). All in all, the position of Thomas Cook Group is one that needs to be improved towards a match of competition posed by key competitors. Price strategy and Yield Management as Competitive Strategy It has already been reiterated that in order for Thomas Cook Group to overtake its key competitors and become a market leader, it needs to introduce customer oriented competitive advantages (Netherlands Development Organisation, 2002). To this end, price strategy and yield management are identified as two of such important competitive strategies that can be used as competitive strategies in winning the limited and more or less customers for the tourism and hospitality industry in which the company operates. In terms of yield management, the company sells out its perishable commodities to high class customers who can purchase at higher prices. In this case, the perishable commodity is identified to be the airline seats of the company (UNESCO, 1996). There could be two ways in going about this with the first one being the company identifying specialized customer who may want to buy expensive tickets in order to receive high quality service and those who would want reduced prices in order to receive generally standardized services. But looking at the fact that most competitors already offer premium services that target well to do customers who buy tickets at expensive prices, the company must go in for customers who would prefer cheaper prices of tickets. Most of these people would be first time passengers, whose interest to fly should be rekindled by the kind of publicity that the company puts out to the customers about the company’s packages (National Tourism Authority of Lao PDR, 2003). Though yield management and price strategy may bring about price discrimination, the overall impact of the strategy should be what the attention and focus of the company should be (Netherlands Development Organisation, 2002). Networking relationships for Thomas Cook in relation to other Competitors In terms of network relationships, it is suggested that Thomas Cook Group shifts from merely having and using networking into a period or an era where it will focus on building relationships. This is because between the two, new models of business strategies have suggested that the two may be similar but yield different results and impacts (The Guardian, 2013). For instance whereas networking helps in finding as many potential partners who have the same or similar business focus and direction, it actually takes a business relationship to get these partners coming together to pull resources towards a direction that brings about consented growth (Jamieson et al, 2000). Relationship marketing that is backed by face-to-face networking is therefore suggested for the company because of the numerous benefits that comes with it. For instance relationship marketing assures the company of long term orientation where sales are seen as the beginning and not an end to the process. What is more, relationship marketing is characterized with focus on retention and repeat sales as against other forms of networking such as transaction marketing, which looks at achieving a single sale. In a tourism marketing climate where the need for multinational investment is seen as a necessity for growth, it is only through strong and consented relationship building that such deals of multinational investment can be acquired for the company. Proposed new techniques and innovations The customer continues to act as a very important entity in any modern day industry as the role of the customer continues to be identified as the major lifeline to companies’ earnings (Phongphicit, 1999). Without the customer, the company may only be acting as a lifeless entity without any support of financial functioning because it is the business that the customer conducts with the company that determines how much the company makes in terms of revenue. To this end, it is strongly regarded that Thomas Cook Group devices its new technique and innovation around a system that builds and ensures improved customer satisfaction. In light of this, the proposed new technique and innovation is a customer identification system that identifies each single customer of the company as an independent stakeholder whose needs are clearly outlined. With this system, the era where customers of Thomas Cook Group were treated as a collected entity of people who were all supplied with the same kind and strategy of service will be over. A new era that comes with the provision of customized service backed with an understanding of the business behavior will take off for the benefit of the company. Conclusion The tourism and hospitality industries could be said to be some of the most promising industries to venture in the current economic climate of the world. Generally, the study has showed that the industry is never a stable one but subject to period changes in terms of patronage as its rate of patronage easily synchronizes with the global economic trend (Rattanavong et al, 2000). In the midst of all these changes, Thomas Cook Group has continued to hold its place as a very competitive market force in the industry. Today, the company has the advantage of evolving technology to its credit to empower its marketing and sales strategy. After 160 years of operation, Thomas Cook Group also has its own history in terms of its place in global hospitality as a competitive advantage, established on the basis of brand equity (Thomas Cook Press Release, 2001). All of these notwithstanding however, the company remains slightly behind some of its key competitors both locally and internationally. With the numerous recommendations that have come up in the course of this paper in terms of ways of taking advantage of prevailing marketing segmentation and strategies, it will be concluded that should Thomas Cook Group continue to see its customers as a key part of its stakeholder base, the company will be in a better position to benefiting from them. 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