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Chapter 2

Market Segmentation and the

Hospitality Industry

Marketing in the Hospitality Industry

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Outline

• Know the reason why we need to segment markets

• Describe the value of each segmentation for

marketing in the hospitality industry (geographic,

demographic, psychographic, benefit and need, etc.)

• How each can be applied to the hospitality industry

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What is Marketing Segmentation ?

a process of dividing the market into different groups of consumers who have common needs and wants.

Marketing Segmentation

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What is Target Marketing ?

• Target marketing is the process of evaluating each

segment’s attractiveness and selecting one or more of the

market segments.

• Positioning is the process of developing competitive

positioning for the product and an appropriate market mix.

Segments Target Position

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Why need Segmentation?

• Market segmentation not only helps us understand

what people want in a product or service, it also

gives a good idea of the price they are willing to

pay and where they want to be served.

• Segmentation offers an opportunity to make more

effective use of promotional media by identifying

those that can reach the target markets effectively.

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Types of Segmentation

Geographic Segmentation

Demographic Segmentation

Benefit & Need Segmentation

Psychographic Segmentation

Price Segmentation

Combining Segmentation

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Group work

• Discuss with you team members about the segmentation you are going to give a presentation

• For example, demographic segmentation

- Write down keywords on the whitepaper

- Describe what demographic segmentation is

-How valuable it’s going be.

• Time: 20 minutes

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What Is Geographic

Segmentation? The division of a market generally by:

• Region

• Zone

• State

• District

• Metropolitan statistical area

• Postal code zones (zip codes)

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The Value of Establishing

Geographic Market Segments

It enables marketers to focus the following:

• Sales

• Advertising

• Public relations

• Promotional activities

… in the most appropriate areas of the country.

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Regions: Established geographic subdivisions of a country. Natural borders often define

• Example: the western region, the area of the United States west of the Rocky Mts.

Zones: Geographic areas smaller than a region (determined by individual companies)

• Example: the Illinois-Wisconsin zone

Districts: Geographic areas with a concentration of customers; subdivisions of a zone

• Example: Chicago, La Crosse could be districts in an Illinois-Wisconsin zone

Regions, Zones, and Districts

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Feeder Cities

• Principal cities within a region that tend to feed travel to each other.

• Example: Las Vegas, Phoenix, and San Francisco, feed Los Angeles.

City Pairs

• Cities between which a heavy travel pattern exists.

• Examples: Boston and NYC, Shanghai and Pairs

Feeder Cities and City Pairs

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Destination Cities and

Destination Markets Destination Cities: have unique attractions unto themselves that

create demand for travel

Examples:

Orlando, Las Vegas, Acapulco, West Palm Beach, Lake Tahoe,

Atlantic City

Destination Markets: create demand for travel not only with

unique attractions they offer, but also with their many centers

of business and commerce

Examples:

New York City, Los Angeles

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Demographic Segmentation

Demographic segmentation: the categorization of

consumers by like characteristics, such as the following:

Sex

Age

Income

Home ownership

Marital status

Occupation

Education

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Benefit and Need Segmentation

Benefit and need segmentation: the

categorization of consumers on the basis of

the benefits they seek and the needs they

expect to satisfy (and in some cases, the

factors they hope to avoid)

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Benefit and need segmentation

• Customer segments are categories of

customers who use hotels for identical

reasons and have consumption habits that are

mainly similar

(user status: first time user, frequency user,

potential user, occasion when, how, and why

consumer use an operation)

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Psychographic Segmentation

Psychographic segmentation: the

subdivision of a market based on like needs

and psychological motivations of consumer

groups

•Tends to focus trends into key areas such as

•AIO (Activities, interests and opinions)

•QSC( Quality, service and cleanliness)

•VALS (Values and Lifestyles)

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Price Segmentation

Price segmentation identifies groups of

consumers within a market whose purchase of

products or services is within the limits of

certain dollar amounts.

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Combining Segmentation

Techniques & Value

• Each of the segmentation approaches has

its advantages and limitations.

• Price sensitivity is always important

• Good quality at a fair price

• Every demographic, psychographic and

economic indicator points to a VALUE as

a key need that marketing must fulfill in

the future.

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Group Homework submit by email

before Sunday May 16, 5 PM

• Background: one five star hotel in downtown will

open a new Italian restaurant soon.

• Using the different market segmentation:

geographic, demographic benefit and need,

psychographic and combining segmentation to

design a market research form to seeking potential

consumer for the restaurant. (Minimum 15

questions)