Special Interest Tourism - matching customers to products

The International Travel College of New Zealand 1
Special Interest Tourism
Unit #13 – Learning Outcome 2
How special interest tourism
matches customers, products and
services

Market Segmentation
“Market segmentation is a marketing strategy that
involves dividing a broad target market into subsets of
consumers who have common needs, and then
designing and implementing strategies to target their
needs and desires using media channels and other
touch-points that best allow to reach them.
Market segments allow companies to create product
differentiation strategies to target them.”
Wikipedia

Strengths Weaknesses
characteristics of the business
or project that give it an
advantage over others
characteristics that place the
business or project at a
disadvantage relative to others
Opportunities Threats
elements that the business
or project could exploit to
its advantage
elements in the
environment that could
cause trouble for the
business or project
SWOT Analysis as a Marketing Tool

Characteristics of Segmentation Strategies
• Geographic: region of the world, country, area of country, suburb, post
code, type of house, climate type
• Demographic: age group, gender, education, family life cycle, ethnic group,
socio-economic classification
• Psychographic: lifestyle, personality type (introvert, extrovert) independent,
gregarious
• Usership: non-user, current user, past user, potential user, loyalty type,
heavy user, medium user, light user
• Kind of purchase: special occasion (honeymoon, anniversary etc), annual
holiday trip, business travel, method of purchase (agent, direct, online)
• Attitude: Towards product area, towards brand, towards usership and use
situations
• Benefits sought: Status, convenience, luxury, economy etc

Market Segmentation Checklist
Is the segment measureable?
Is the segment accessible?
Is the segment substantial?
Is the segment sustainable?
Is the segment actionable?
Is the segment defendable?

Positioning
What is your position in the
market?

Position in the Market
• A tourism business needs to identify where it sits
in the market place eg upmarket, downmarket,
cheap and cheerful, luxurious and exclusive,
trendy and fashionable
• Position is achieved through modifying the
perception of the consumer
• ‘Positioning is not what you do to a product.
Positioning is what you do to the mind of the
prospect’ (Ries and Trout)

Positioning (Ries and Trout)
• Positioning is something (perception) that happens in the minds of the target
market.
• It is the aggregate perception the market has of a particular company,
product or service in relation to their perceptions of the competitors in the
same category.
• It will happen whether or not a company's management is proactive,
reactive or passive about the on-going process of evolving a position.
• But a company can positively influence the perceptions through enlightened
strategic actions.
• In marketing, positioning has come to mean 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. It is the 'relative
competitive comparison' their product occupies in a given market as
perceived by the target market.
• Re-positioning involves changing the identity of a product, relative to
the identity of competing products, in the collective minds of the target
market.
• De-positioning involves attempting to change the identity of competing
products, relative to the identity of your own product, in the collective
minds of the target market.

Positioning Process for a PRODUCT
• Defining the market in which the product or brand will compete (who the
relevant buyers are)
• Identifying the attributes (also called dimensions) that define the product
'space'
• Collecting information from a sample of customers about their perceptions
of each product on the relevant attributes
• Determine each product's share of mind
• Determine each product's current location in the product space
• Determine the target market's preferred combination of attributes
(referred to as an ideal vector)
• Examine the fit between:
– The position of your product
– The position of the ideal vector
• Position.

Positioning Process for a SERVICE
• Services don't have the physical attributes of products - that is, we
can't feel them or touch them or show nice product pictures.
(intangible)
• So you need to ask first your customers and then yourself, what
value do clients get from my services? How are they better off
from doing business with me? Also ask: is there a characteristic
that makes my services different?
• Write out the value customers derive and the attributes your
services offer to create the first draft of your positioning.
• Test it on people who don't really know what you do or what
you sell, watch their facial expressions and listen for their response.
• When they want to know more because you've piqued their
interest and started a conversation, you'll know you're on the right
track.

The 4 C’s of Positioning:
• Clarity: Positioning is about communicating a message to the
consumer so as to spatially place the tourism service offered
in their mind. A clear message. With no confusion.
• Credibility: Message has to be believable. You have to
deliver what you say you will.
• Consistency: The message has to be consistent and not
mixed with other messages.
• Competitiveness: Decide how you are going to compete…
how are you going to position your company relative to that of
the competition. (are you friendlier, bigger, smaller, offer
better value, have better service, more up to date, more
experienced, safer etc) Ensure that whatever competitive
position you choose is relevant to the customer. They have to
care about the fact that you are bigger, friendlier, cheaper etc.

Marketing Strategies
Marketing is the process of communicating
the value of a product or service to customers
for the purpose of selling the product or
service. It is a critical business function for
attracting customers.

The Marketing Mix…
• The marketing mix is a business tool used in
marketing when determining a product or brand's
offering, and is often synonymous with the four Ps:
price, product, promotion, and place.
• In service marketing the four Ps have been
expanded to the eight Ps to address the different
nature of services.

The Marketing Mix in Tourism
1. Product: an item that satisfies what a consumer needs or wants.
2. Place: any way that the customer can obtain a product.
Price: the amount a customer pays for the product.
3. Promotion: any vehicle you employ for getting people to know more about
your product
4. People: the employees of the organization with whom customers come
into contact.
5. Packaging: the integration into one package of the components of the
tourism product
6. Programming: strategies designed to increase customer spending (add-
ons)
7. Partnership: when two or more businesses co-operate together on some
aspect of their business operations
8. Partnership: when two or more businesses co-operate together on some
aspect of their business operations

Developing a Marketing Mix Strategy:
• Fundamental starting point for the creation of a successful marketing mix
strategy is to ensure the target market is clearly defined.
• Target market is not part of the marketing mix, but its role in dictating the
different ways the mix is used makes it a critical starting point.
• The target market is the focus for ALL marketing mix activity.
• Marketers must bear in mind that the market for a product is made up of
actual and potential consumers.
• This total available group of consumers should be analysed and a decision
made as to segments or subgroups to be targeted.
• Segments are identified as part of the marketing planning process (using
SWOT etc)
• Understanding consumer motivation must be considered in developing any
marketing plan

Tourism Consumer Behaviour
• “Customers are looking for the right
product to solve their problem of satisfying
a need.”

Maslow’s Hierarchy of Needs:

Physiological Needs
• The physiological needs are shown at the top of the
hierarchy because they tend to have the highest strength
until they are somewhat satisfied.
• These are the basic human needs to sustain life itself-
food, clothing, shelter.
• Until these basic needs are satisfied to the degree
needed for the sufficient operation of the body, the
majority of a persons activity will probably be at this
level, and the others will provide little motivation.

Safety, or Security Needs
• Once physiological needs become gratified, the safety,
or security, needs become predominant
• These needs are essentially the need to be free of the
fear of physical danger and deprivation of the basic
physiological needs.
• In other words, this is a need for self-preservation.
• In addition to the here and now, there is a concern for
the future.
• Will people be able to maintain their property and/or job
so they can provide food and shelter tomorrow and the
next day? If an individual's safety or security is in danger,
other things seem unimportant.

Social or Belonging/Love
• Once physiological and safety needs are fairly
well satisfied, social or affiliation will emerge as
dominant in the need structure.
• Since people are social beings, they have a
need to belong and to be accepted by various
groups.
• When social needs become dominant, a person
will strive for meaningful relations with others.

Esteem Needs
• After individuals begin to satisfy their need to belong, they generally
want to be more than just a member of their group. They then feel
the need for esteem- both self-esteem and recognition from others
• Most people have a need for a high evaluation of themselves that is
firmly based in reality- recognition and respect from others.
• Satisfaction of these esteem needs produces feelings of self-
confidence, prestige, power, and control. People begin to feel that
they are useful and have some effect on their environment.
• Recognition is not always obtained through mature or adaptive
behaviour. It is sometimes achieved by disruptive and irresponsible
actions.

Self-Actualization Needs
• Once esteem needs begin to be adequately satisfied, the self-actualization needs become more
important.
• Self actualization is the need to maximize one's potential, whatever it may be.
• As Maslow expressed it, "What a man can be, he must be."
• Thus, self-actualization is the desire to become what one is capable of becoming.
• Individuals satisfy this need in different ways. In one person it may be expressed in the desire to be
an ideal mother; in another it may be expressed in managing an organization; in another it may be
expressed athletically; in still another by playing the piano.
• In combat, a soldier may put his life on the line and rush a machine-gun nest in an attempt to destroy
it, knowing full well that his chances for survival are low. He is not doing it for affiliation or
recognition, but rather for what he thinks is important. In this case, you may consider the soldier to
have self-actualized; to be maximizing the potential of what is important to him at that time.
• The way self-actualization is expressed can change over the life cycle. For example, a self-
actualized athlete may eventually look for other areas in which to maximize potential as his or her
physical attributes change over time or as his or her horizons broaden.
• In addition, the hierarchy does not necessarily follow the pattern described by Maslow. It was not his
intent to say that this hierarchy applies universally. Maslow felt this was a typical pattern that
operates most of the time. He realized, however, that there were numerous exceptions to this
general tendency.
• For example, the Indian leader, Mahatma Gandhi, frequently sacrificed his physiological and safety
needs for the satisfaction of other needs when India was striving for independence from Great
Britain.
• In his historic fasts, Gandhi went weeks without nourishment to protest governmental injustices. He
was operating at the self-actualization level while some of his other needs were unsatisfied.

Hierarchy of Needs as it relates to Tourism
• People who are functioning at the lowest level of the needs hierarchy are not
generally involved in tourism
• Evidence for the need for safety and security is often seen in the fact that some
travellers prefer to travel in groups or escorted tours rather than travel alone.
• The need for safety and security also affects travellers choice of destination in that
destinations which are perceived to be politically unstable or unsafe will not be visited
(eg Iraq, Afghanistan, and currently Egypt)
• People often travel in groups in order to satisfy their social needs, the need to belong,
to feel wanted. Tour operators who specialise in youth or ‘golden age’ products
appeal directly to this need, as do packages catering to the singles market.
• Travel is still perceived to be one of society’s primary status symbols, and status or
esteem needs are often satisfied by travel to a destination or resort that is newly
popular or fashionable. With increasing use of social media this trend is likely to
continue (great example of TripAdvisor and ‘pinning’ places you have visited, sharing
on facebook etc)
• Whilst quantity of holidays continues to be popular, the quality of the experience is an
upward trend, meeting self-actualization needs through the experience of going
somewhere others don’t/getting away from it all/doing something new and different.
• People who function at the self-actualization level have moved past the need to
socialise or impress.

The Marketing Mix cont…
The effectiveness of planning the marketing
mix depends as much on the ability to select
the right target market as on the skill in
devising a product offer which will generate
high levels of satisfaction and will meet the
customers’ needs.

“Product”
• It is this element to which all the other elements relate but without which it
would be inaccessible or have little meaning. ‘People do not buy products,
they buy the expectation of benefits. It is the benefits that are the product.’
(Levitt: 1969). The fact that a product exists is therefore only part of the
story.
• What product is offered by Telecom or Vodafone? It is certainly much more
than the cables and telephones which they provide. It is communication,
invoking reassurance, happiness, excitement, sadness, satisfaction.
• Likewise a hotel is much more than a place to sleep and eat. For different
people it could be a surrogate home while away on business, a haven of
refuge at the end of a long journey, or a prison for a tourist caught up in a
war zone. It may be a place to relax, to work, to entertain or be entertained,
to meet people or just to lie around in the sun.
• For tourism operators to decide what business they are in, or what their
products are, is one of the key issues of marketing. To decide this,
information is needed from customers – achieve through market research.

“Promotion”
• Promotion is about telling people what’s on offer. It is not entirely separate from the
product because what is said and how it is said influences how the product is seen.
• It’s ‘the sizzle not the sausages’ that is sold, or it’s Coke with all the images of sun,
youth, vitality, and world-wide harmony. It’s certainly not ‘carbonated water with
vegetable extracts’.
• Promotion includes advertising but also includes direct mail, public relations, printed
brochures, presence at travel trade shows, and participation in joint marketing
schemes.
• Increasingly its about the internet -with websites an absolute essential for any tourism
businesses, and enhancements such as:
* online booking engines
* comparative pricing systems
* video tours
* face book pages
* search engine optimisation strategies
* Google ad words
* paid facebook ads

“Price”
• Price is the one element in the marketing mix which produces
revenue.
• Most of the others involve cost, which may explain why spending on
marketing is less popular than it might be.
• The price is very important as it determines the company's profit and
hence, survival.
• Adjusting the price has a profound impact on the marketing strategy,
and depending on the price elasticity of the product, often it will
affect the demand and sales as well.
• The marketer should set a price that complements the other
elements of the marketing mix.
• When setting a price, the marketer must be aware of the customer
perceived value for the product.

Market Skimming Pricing
• An approach under which a producer sets a high
price for a new high-end product (such as an
expensive perfume) or a uniquely differentiated
technical product (such as one-of-a-kind software or
a very advanced computer).
• Its objective is to obtain maximum revenue from the
market before substitutes products appear.
• After that is accomplished, the producer can lower
the price drastically to capture the low-end buyers
and to thwart copycat competitors.

Market Penetration Pricing
• A strategy adopted for quickly achieving a high
volume of sales and deep market penetration of a
new product.
• Under this approach, a product is widely promoted
and its introductory price is kept comparatively low.
• This strategy is based on the assumption that the
product does not have an identifiable price-market
segment, it has elasticity of demand (buyers are
price sensitive), the market is large enough to
sustain relatively low profit margins, and the
competitors too will soon lower their prices.

Neutral Pricing
• In a neutral strategy the prices are set by the general
market, with your prices just at your competitors’ prices.
• The major benefit of a neutral pricing strategy is that it
works in all four periods in the lifecycle.
• The major drawback is that your company is not
maximizing its profits by basing price only on the market.
• Since the strategy is based on the market and not on
your product, your company, or the value of either,
you’re also not going to gain market share.
• Essentially, neutral pricing is the safe way to the play the
pricing game.

Factors involved in pricing
• In pricing, the 'reference value' (where the consumer refers to the prices of
competing products) and the 'differential value' (the consumer's view of this
product's attributes versus the attributes of other products) must be taken
into account
• Price is often determined by the cost (the cost of supplying the product,
such as hotel costs, tour bus costs, costs of providing tour guides or drivers,
costs of renting office premises etc) with a ‘margin’ being added to yield a
profit or return on the investment.
• Marketers, however, would recommend using price tactically to help to
achieve the goals of the business, varying the price according to the level of
demand and the willingness of the market to pay the price.
• Marketing is about giving each product or business its own ‘unique selling
proposition’ (differentiation) so that it is different from all competing products
and can command a premium price.
• Price is also an indicator of quality, particularly for the first-time buyer, and
while it remains so, subsequent purchases are much more concerned with
judgement of value for money.

“Place” (distribution channel)
• Place really means distribution of the product, commonly known as ‘distribution
channels.
• The distribution of products and goods from the manufacturer to the consumer usually
involves a range of ‘intermediaries’ along the way, such as wholesalers and retailers.
• With tourism, traditional distribution channels have involved a tour operator
(wholesaler) who packages the individual components of the product together, and a
retailer (travel agent) who physically sell the product to the consumer, take the money,
issue the tickets etc.
• In the 1980’s a new style of tour operator emerged, regarded as ‘direct sell’ operators,
who cut out the retail intermediaries and promoted their products direct to the
consumer.
• Following on from the success of this strategy many tour operators saw the opportunity
to sell direct to the consumer, and with technology developments started opening up
websites to promote their product directly.
• More recently many of these operators have introduced online booking systems for
consumers to book directly, thus eliminating the need for a travel agent intermediary,
saving the tour operator the commissions traditionally paid to agents.
• An event more recent development is the fight back by travel agents, who have
themselves opened up online travel agencies.
• In addition, the launch of Expedia by Microsoft has created a huge online travel
agency, now the largest of its type in the world.

Channels of Distribution
• Another term for a channel of distribution is the
‘distribution chain’ where several types of organisations
exist in order to organise the product from manufacturer
to consumer.
• Sometimes organisations within the distribution chain will
merge, consolidate or integrate, either because of a
need to make the distribution simpler and more cost
effective, or through some type of business buy out.

Horizontal integration
• This occurs when two or more similar type of
businesses amalgamate, either through a
merger or takeover. (eg one travel agent buys
out another, or two tour operators merge into
one)
• The main reason is to ensure the extended
geographical spread of outlets to ensure
representation in all regions. This strategy also
helps tourism organisations to strengthen their
buying power, provides economies of scale and
can reduce overheads and costs.

Vertical integration
 The process in which several steps in the production and/or
distribution of a product or service are controlled by a single
company or entity, in order to increase that company's or
entity's power in the marketplace.
 For example airlines may establish their own tour operating
company and start selling packages. Air New Zealand is an
airline but also sells package holidays that they put together in
house, and also own a chain of 15 travel agencies/shops
under the Air New Zealand brand. They also work with a
selection of approved ‘Travel Brokers’ who are experienced
travel agents and operate from their homes around the
country

“Positioning”
• Positioning is a function of all four Ps
together in determining where, in the
market, a product stands in relation to
others.

“Packaging”
• Visitors are seeking experiences more so than specific products and
services when they visit destinations. This requires the seamless provision
of a coordinated range of products and services that collectively offer
particular experiences desired by visitors.
• The definition of packaging is the ‘combining of two or more
facilities/services/attractions as a single unit for sale to visitors to an area.’
• The overall aim of any packaging is to produce an integrated, interesting
product to encourage visitors to increase their stay within the region.
• Working together with other tourism operators to provide packages also
helps you to achieve economies of scale in relation to marketing costs and
provides further opportunities to raise the profile of your tourism business.
• Not only does each individual operator benefit by such arrangements, but
the region in general benefits by greater visitor numbers and increased
expenditure.
• In turn visitors benefit from new, innovative and interesting experiences
reflecting a particular region's attributes.

“People”
• People are crucial in tourism where a pleasant
manner and appearance can turn a disaster into
an acceptable experience, and an acceptable
experience into a memorable one.
• This is marketing at the sharp end and the
importance of people in delivering the tourism
product underlines the need for careful selection
of staff, their proper training and motivation, and
the provision of the right tools and information to
make their jobs easier and more effective.

Summary of the Marketing Mix
• Marketing mix decisions must be geared to achieving the
objectives of the company.
• The objectives of the company are focused on providing a
product or service that meets customer needs
• For an organization to be successful with its marketing mix it
has to develop a differential advantage which will distinguish
the organizations’ product offering from that of the
competition.
• Only when an organization has built an advantage will it find
that customers seek it out.
• The advantage may be based upon quality, image or product
concepts.
• These advantages create higher profits for an organization.

Destination Marketing
“A proactive, strategic, visitor-centered approach to the
economic and cultural development of a location,
which balances and integrates the interests of visitors,
service providers, and the community”
Dr. Karl Albrecht

Destination Marketing key points:
• A destination has an image of place associated with it.
• Promotion of a destination is based on an image selected by the tourism
marketers and communicated to the generating markets (the place the
customers come from)
• Destination Marketing takes place at the regional and local level, and
includes public and private sector organizations.
• Successful destination marketing activities leads to the creation of a ‘brand’
for the area.
• Strategies include theming an area by linking it to a famous personality who
may have lived there, to a TV or film, or an historical era, to a seasonal
‘beauty’ such as autumn or winter, or to an activity such as ski-ing, surfing,
sailing or climbing
• Inclusion of public sector organizations can help with the collection and use
of research data, organization of trade exhibitions and shows,
representation through overseas offices, the production of trade manuals
and brochures, the development of global reservations systems

Areas that have developed a
strong brand image will :
• be able to achieve better margins and higher prices
• differentiate itself more easily from competing
destinations
• provide a sense of added value and so more easily
entice customers to purchase
• be able to build repeat visits and loyalty
• improve the strength of its position as a status area

Special Interest Tourism - matching customers to products

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