MODULE 1

THE TOURISM MARKETING AND MARKET SEGMENTATION

LESSON 2: The Tourist Market and Segmentation

At the end of this lesson, the students should be able to:

1. Define what a market is;
2. State the three steps to target marketing;
3. Identify the characteristics of a good market segment;
4. Discuss market coverage strategies and positioning; and
5. Distinguish the new and emerging markets in the Philippines.

Week 3

Market segmentation, targeting, and positioning are key terms useful in any marketing process.
Identifying one’s market segments will help in identifying the market’s needs and wants. How their needs
should be met and how to communicate such to benefit them is covered in this lesson. Market
coverage strategies and identifying one’s unique selling proposition and competitive advantage will
greatly contribute to a successful marketing plan.
 The Korean market is the Philippine’s top market, representing more than 25% of foreign
visitors. Have you ever wondered why they choose the Philippines? Let’s say you were a foreigner
from North America visiting the Philippines for the first time. List down at least 10 things you like about
the country.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Read and analyze the following short case study!

Marketing Nuggets: Why Koreans Tour and Stay in the Philippines

In an interview made by the Philippine Star with Philippine Ambassador to Korea Luis T. Cruz,
he cited reasons why Koreans remain as the top source of foreign tourists in the country. Koreans love
our holiday and leisure attractions which complement their main reason for travel, that is, to learn
English. Korean males come to the Philippines over the weekend to play golf, women come for
shopping, spa, and entertainment activities. In a Gallup Poll targeting the Korean market, interestingly,
Koreans enjoy our seafood as well.
Philippines and Korea have very strong bilateral relations. The Philippines supported Korea
during World War II and in their post-war restoration. Hence, government relations between the two
countries have been strong since the 1950’s.
On the space provided, what activities should the Philippines develop in order to keep on attracting
this markets segment?

DEFINITION OF A MARKET
A market is a set of actual and potential buyers of a product. These buyers share a particular need or
want that can be satisfied through exchange relationships (Kotler et al. 2010)
The tourism product is NOT for all. The tourism industry aims to target a specific set of individuals. It is for
a particular set of buyers, a niche market.
3 Steps to target marketing:
(1) Market segmentation
(2) Market targeting
(3) Market positioning
MARKET SEGMENTATION
Market segmentation is dividing the market into district groups who might require separate products
and/or marketing mixes (Kotler et al. 2010)
A market segment is a subgroup of the total consumer market who share similar characteristics and
needs relevant to the purchase of a product, service, or experience (Hsu 2008).
Each segment is profiled based on its characteristics.

Characteristic of a Market Segment

Lumsdon (1997) identified six characteristics of a segment, as follows:

1. Identifiable. The people who comprise the segment can be located and identified such that
targeting them would be easy.
2. Cohesive. The consumers should be part of a whole whose specific qualities are common to all.
3. Measurable. The marketer should be able to estimate the size and potential spending of the
members of the market segment.
4. Accessible. The members of the segment should be accessed by marketing efforts and
promotional activities to be conducted. If they are difficult to reach, efforts to reach out to the
specific segment might be futile.
5. Substantial. Segments should be large in order to be substantial. If the segment is small, it
should have a high spending capability to make a significant impact on the business’ bottom
line.
6. Actionable. The company has enough resources and commitment to enable effective
penetration of the identified segment to ensure effective positioning.
Table 2.1 Variables to Segment Consumer Markets
Geographic Demographic
nations age
states life cycle
regions gender
countries income
cities occupation
neighborhoods education
barangays towns religion race

Psychographic Behavioral
social class special occasions
lifestyle benefits sought
personality usage rate
user status
loyalty status
buyer readiness

Geographic Segmentation – divides the market into different geographic units such as nations, states,
regions, countries, cities, neighborhoods, barangays, towns, etc.

In the 2nd Philippine Travel Exchange, the Department of Tourism conducted workshops on how the
travel trade sector can tap the emerging source markets for Philippine Tourism. Countries such as
Korea, USA, and Japan remain strong markets while showing the potential of new markets such as
Russia, India, and Australia.

Demographic Segmentation – refers to segmenting the market based on variables such as age, life
cycle, gender, income occupation, education, religion, and race.

The major developed markets of Europe, America, Japan, and Australia are experiencing an ageing
population while India and China are comparatively you markets (Cooper 2006). These regions would
want to avail of significantly different products. The former would possibly like more leisure and
shopping while the latter would prefer more adventurous destinations with nightlife.
Psychographic Segmentation – divides consumers based on different psychographic profiles such as
social class, lifestyle, and personality characteristics.

In the Philippines, we categorize socio-economic classes through the ABCDE categories, with Class A
being the most affluent.
New forms of tourism such as adventure tourism, cultural tourism, and ecotourism are types of tourism
which the market has created. These are types of tourism which match the likes of the younger
generations.

Behavioral Segmentation – refers to dividing groups based on their knowledge, attitude, use of or
response to a product or service.

 Special occasions – Mother’s Day, Valentine’s Day, honeymoon, anniversary, or birthday.

 Benefits the buyers seek – quality, ambiance, menu variety, and price

 User status – refers to markets segmented based on usage of product such as first-time users,
regular users, non-users, potential users, etc.

 Usage status – on the other hand, refers to frequency of use categorized as light, medium,
and heavy users.

 Loyalty status – refers to the degree by which customers are loyal to the brand

 Buyer readiness – pertains to the different stage buyers become ready to purchase the product.

Technographic – Cooper 92006) suggest that there is a fifth variable for market segmentation which
he calls technographic segment. With the prevalence of the Internet and the World Wide Web, there
is an increasing divide between the users and non-users of technology in searching for travel
information.
 MARKET TARGETING
Market Targeting – is evaluating each segment’s attractiveness and selecting one or more of these
market segments in which to operate one’s business.

Kotler suggests three factors o consider in evaluating which segments should be targeted. These factors
are:
1. Segment size – refers to the current sales volume, growth rate, and high profit margin.
2. Attractiveness – refers to the potential impact of the segment to the company. One that is not
saturated and has few aggressive competitors would be structurally attractive.
3. Company objectives and availability of resources – refers to the main reasons for it decision
making and the available resources the company will use to make its objectives a reality.

MARKET COVERAGE STRATEGIES

Undifferentiated Marketing

 a company ignores market segmentation and goes after the entire market with only one
market offer
 this looks into what the market has in common and is designed to reach a huge number of
buyers
 this market coverage strategy can be used effectively for consumer products mainly
because a lot of buyers would need the same product

Using economies of scale, consumer goods such as shampoo and soap could ignore differentiation
and go for the market with a single product offer. This strategy may not be effective for tourism
products.

Differentiated Marketing

 approach the market by targeting several market segments using separate offers per
segment
 companies may offer several products for different market segments to capture a bigger
chunk of the market

Holiday Inn Galleria Suites and Crowne Plaza share a common management group but Crowne Plaza
is more upscale than Holiday Inn Galleria Suites; thus, giving clients an option of where to stay
depending on what their budget could afford.

Concentrated Marketing

 practiced by companies with limited resources

 it pursues getting a big share of a small market rather than a small share of a large market
 companies are able to allot its resources in making its presence felt in a specific market with
greater impact
 if the segment is well chosen, it may yield high returns for a company
 MARKET POSITIONING
Market positioning – is developing competitive positioning for the product and an appropriate
marketing mix. (Kotler et al. 2010)

3 positioning concepts will help reinforce the idea of market position:

1. Unique selling proposition (USP) – is a term used to identify what makes the product or
service different from other. This USP may occur due to the product’s physical attributes, added
services, personnel, location, or image (Kotler et al. 2010)
2. Competitive advantage – is the product’s advantage over competitors, which is gained by
offering greater value either by offering lower prices or providing more benefits to justify higher
prices.
3. Top of mind – is the highest level of recall that a brand receives. It means that the brand
occupies the top spot in a consumer’s mind. The ultimate top of mind level a brand can reach
is when it becomes synonymous to the generic.
For example:
Xerox is actually a brand of photocopying machine but the way Filipinos use the word is as if it were
the act of photocopying. We would use the term, “pa-xerox” when we actually mean “pa-photocopy”.
Market positioning is a deliberate way of making sure that the product has a high recall in the
consumer’s minds relative to its competitors.

NEW AND EMERGING MARKETS

Cooper et al. (2006), in their article on new and emerging markets, identified the growth of tourism
markets fueled by these factors on the demand side:
1. Economic growth in major source markets
2. Increase in disposable leisure time and a longer life expectancy with a sound health to travel
3. Changes in living conditions especially city dwellers becoming more inclined to engage in
tourism
4. Rising educational levels and increased access to information, stimulating curiosity
5. Increasing international integration of life

Further, Cooper et al see tourism’s supply side growing through:

1. The development of and investment in infrastructure
2. Continuous tourism product development
3. The elimination of legal limitations on and practical obstacles to travel
 TYPES OF MARKET
The Family Market
3 types of decision makers within the family market:

Joint decision-making families – plan trips with the longest

period of time and make use of the widest range of
information sources

Families where the husband makes the decision for the vacation destination is characterized by
spouses with greater age differences. Promotional activities are directed to the male spouse; hence,
it should emphasize outdoor recreation.

Wife-dominant families form the smallest segment of the

family market. Id the wife makes the decision on vacations, it is
characterized by short planning duration and uses the fewest
information sources for planning.
The Senior Market

- Also known as the silver market or third-age tourism

- There was even a campaign known as SKI which encourages the elderly to go on vacations to
Spend Kid’s Inheritance
- The senior market also has limitations and constraints to engage in travel: safety, security, health
issues, availability, costs, family responsibilities, poor information about suitable options
(Moscardo 2006), and previous experience (Lohmann & Danielsson 2001).
- The senior market in the Philippines can be characterized by two: those with retirement
benefits, and those who rely on their children for sustenance.

The Youth Market

There is a growth of travel participation among the youth market that is fueled by several factors,
enumerated by Richards et al. (2006) as follows:
1. Increased participation in higher education
2. Increased travel budgets (parental contribution, savings, and work)
3. Work and travel combinations
4. The rise of low-cost/budget airlines
5. Shorter employment contracts leading to significant gaps in employment
6. The global rise of the internet culture
7. Growth of independent travel guidebooks
The MICE Market and Business Tourism

- The meetings, Incentives, Conferences (Conventions), and Exhibitions (MICE) industry is

extensively and rapidly growing (Ladkin 2006).
- Collectively known as the events industry
- Conference tourism refers to all activities associated with planning, travel to and
participation in conferences and meetings, both domestic and international
- Incentive travel is the most lucrative of the MICE market, it comes in the form of a reward for
employees or business partners; hence, luxury is a natural consequence.

When you eat in a fast food chain restaurant, observe the kinds of people who patronize the products
in the menu. What products do children eat? How about their parents and their grandparents? What
segment of the market do these fast food chains cater to?
Discuss the strengths of the emerging markets for Philippine Tourism covered on this lesson.

Sir Folds