Online market segmentation

Online market segmentation in tourismJuho Pesonen, Ph.D. (Econ.)

Head of research,

University of Eastern Finland, Centre for Tourism Studies

[email protected]

https://www.google.fi/maps/preview

Lecture structure

08.04.2023Juho Pesonen 2

1. Introduction to market segmentation in online context• Definitions• Basic concepts

2. Goals for market segmentation• Managerial perspective• Academic perspective

3. Market segmentation in the Internet4. Summary


Introduction

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!


Market segmentation is one of the cornerstones of marketing.


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.


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.


Segmentation, targeting and positioning (STP)


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.


Goals for market

segmentation

08.04.2023Esityksen nimi / Tekijä 10

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?


Why to do market segmentation?• Two theories behind market segmentation (Möller, 2006):

1. Markets are heterogeneous

2. 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.


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!


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.


Market segmentation in the

Internet


- 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!


Internet has changed and will change market segmentation

- 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.


Role of market segmentation in online marketing strategy

- 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.


Market segmentation in practice

- http://www.ebookers.com/- New possibilities for dynamic packaging

when information systems develop: activities, entertainment, transportation etc. (For example amazon.co.uk)

- http://www.visitbritain.com/en/EN/- Activity based segmentation.- Nationality based segmentation.

- http://www.lomarengas.fi/en- Destination segmentation.


Practical examples

http://www.ebookers.com/

http://www.visitbritain.com/en/EN/

http://www.lomarengas.fi/en

- Tell me who you are and I tell you where to go (Gretzel et al., 2004). - Next step: automation based on actual

behavior.

- www.tripadvisor.com & www.hotels.com- Mobile recommendation system.- How companies can deal with this?

- Pricing, quality, hotel amenities.


Recommendation systems

http://www.tripadvisor.com/

http://www.hotels.com/

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.


Summary

References

•See Pesonen (2013) http://epublications.uef.fi/pub/urn_isbn_978-952-61-1283-1/


http://epublications.uef.fi/pub/urn_isbn_978-952-61-1283-1/




Questions, comments?Thank you!

www.uef.fi

Online market segmentation

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