Online market segmentation


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This presentation discusses the topic of online market segmentation in tourism. Focus is on the effects of ICTs on market segmentation.

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Online market segmentation

  1. 1. Online market segmentation in tourism Juho Pesonen, Ph.D. (Econ.) Head of research, University of Eastern Finland, Centre for Tourism Studies
  2. 2. Lecture structure 1. Introduction to market segmentation in online context • • 2. Goals for market segmentation • • 3. 4. Definitions Basic concepts Managerial perspective Academic perspective Market segmentation in the Internet Summary Juho Pesonen 10.1.2014 2
  3. 3. Introduction Juho Pesonen 10.1.2014 3
  4. 4. Market segmentation •Dividing customers into homogenous groups that differ from each other as much as possible. •Customers are typically divided into segments based on what they do or want or who they are: – Behavioural segmentation bases – Socio-demographic segmentation bases – Psychographic segmentation bases •A priori and a posteriori approaches. – A priori (common sense): segment structure is known beforehand: nationality, age, gender, occupation. – A posteriori (data driven): activities, interests, opinions, travel motivations. • Segments are based on data analysis! Juho Pesonen 10.1.2014 4
  5. 5. Market segmentation is one of the cornerstones of marketing. Juho Pesonen 10.1.2014 5
  6. 6. Online marketing •Use of ICTs to communicate company value proposition to customers. •ICTs have revolutionized the tourism industry (Buhalis & Law, 2008) – Travellers are increasingly using technology before, during and after their trips. •Use of technologies define the competitiveness of tourism organizations and destinations (Buhalis & Law, 2008). •Companies can target their customer very efficiently if they just know who their customers are. Juho Pesonen 10.1.2014 6
  7. 7. Online market segmentation •Marketing Mix: Product, Price, Place and Promotion (4Ps, McCarthy, 1960) – Later developments such as SIVA, 7Ps, 4Cs, 7Cs •Internet has changed the way 4Ps are used in marketing strategy. – Product is more and more technology enhanced. – Price is more flexible than ever. – Place is online and everywhere. •Internet consists of a wide variety of different places. – Promotion is not company dependant any more. Juho Pesonen 10.1.2014 7
  8. 8. Segmentation, targeting and positioning (STP) Juho Pesonen 10.1.2014 8
  9. 9. Segmentation, targeting and positioning (STP) •Internet has also changed the STP process – New segmentation bases (e.g. Internet use) and means (Google Analytics). – New targeting possibilities (e.g. online advertising, social media, pay-per-click, online travel agencies). – New possibilities for positioning products and services (e.g. utilized social media channels, YouTube videos, differentiation of Marketing Mix elements) – STP process is not static but changes continuously. Juho Pesonen 10.1.2014 9
  10. 10. Goals for market segmentation Esityksen nimi / Tekijä 10.1.2014 10
  11. 11. Why to do market segmentation? •Almost impossible to target whole populations with one product. •Two schools of thought in market segmentation research (Dhalla & Mahatoo, 1976). – Behaviourally oriented school •Consumer behaviour in focus. •To understand consumers better. – Managerially oriented school •Benefits for companies. •How the differences among segments can be used to increase the productivity of firm’s marketing programs? Juho Pesonen 10.1.2014 11
  12. 12. Why to do market segmentation? • Two theories behind market segmentation (Möller, 2006): 1. 2. • Markets are heterogeneous Companies can optimize their Marketing Mix based on these differences. Market segmentation enables creation of competitive advantage: – Identifying strategic opportunities and niches. – Allocation of marketing budget. – Adjustment of product to the market need. – Finding markets with low competition. – Generating customer satisfaction through identified needs. Juho Pesonen 10.1.2014 12
  13. 13. Managerial perspective •Basically two different uses for market segmentation: 1. Examining whole market space. • Identifying segments and niches where competitive advantage can be gained. • All the potential customers are segmented. 2. Examining current customers. • Identifying customers with different expectations. • Serving customers better. • Current and/or previous customers are segmented. • Companies need information on how to target different customers! Juho Pesonen 10.1.2014 13
  14. 14. Academic perspective •Academic market segmentation research has focused on: – Developing and testing new market segmentation bases. – Testing existing market segmentation bases in different contexts. – Developing market segmentation methodology. – Discussing the role of market segmentation in business strategy. Juho Pesonen 10.1.2014 14
  15. 15. Market segmentation in the Internet Esityksen nimi / Tekijä 10.1.2014 15
  16. 16. Internet has changed and will change market segmentation - Role of emotions in ’likenomy’ - What kind of message will create most engagement? - What are the keywords members of a particular segment use when searching for travel products? - What kind of picture to use in Facebook / banner advertising? - It is about collecting and utilizing data! Juho Pesonen 10.1.2014 16
  17. 17. Role of market segmentation in online marketing strategy - Internet enables unbelievable efficient targeting strategies for companies that know who to target and where -> finding market segments best suitable for the business strategy. - Understanding what customer segment want and value makes it possible for companies to advertise efficiently on Facebook, Google AdWords and even design websites. Juho Pesonen 10.1.2014 17
  18. 18. Market segmentation in practice - Traditionally market segmentation has been often survey based with relatively little behavior based segmentation. - ICTs make it possible to collect and store more behavioral data than ever before -> surveys will become obsolete or very seldom used. - Mobile site customization based on location. Juho Pesonen 10.1.2014 18
  19. 19. Practical examples - - New possibilities for dynamic packaging when information systems develop: activities, entertainment, transportation etc. (For example - - Activity based segmentation. - Nationality based segmentation. - - Destination segmentation. Juho Pesonen 10.1.2014 19
  20. 20. Recommendation systems - Tell me who you are and I tell you where to go (Gretzel et al., 2004). - Next step: automation based on actual behavior. - & - Mobile recommendation system. - How companies can deal with this? - Pricing, quality, hotel amenities. Juho Pesonen 10.1.2014 20
  21. 21. Summary Esityksen nimi / Tekijä 10.1.2014 21
  22. 22. Summary - ICTs have changed market segmentation, targeting and positioning in unpresedented ways. - Especially managerial potential of market segmentation is not fully utilized. - Role of market segmentation and ways to do will continue to change: - Utilization of personal profiles. - Intelligent software agents. - Big data. Juho Pesonen 10.1.2014 22
  23. 23. References •See Pesonen (2013) http://epublications.ue Esityksen nimi / Tekijä 10.1.2014 23
  24. 24. Questions, comments? Thank you!