MARKET SEGMENTATION AND TARGET MARKET SELECTION

TECHNICAL NOTES:MARKET SEGMENTATION AND TARGET MARKET SELECTION

SUMMARY

The determinants of tourism demand: i.e. economic, technological, political, regulatory, demographic; the globalisation vs localisation continuum; socio-environmental awareness; living & working environments; safety of travel; marketing.

The most appropriate methods of analysis & forecasting for tourism marketing plan preparation. Why is forecasting necessary in tourism planning:

tourism product is perishable

people are inseparable from the production-consumption process

customer satisfaction depends on complementary services

sensitivity to natural & man-made disasters

large, long lead-time investments needed

Qualitative vs. quantitative methods: Different tourism entities with different needs in respect of analysis & forecasting related to type, level of detail, and time scale

Market and marketing research, different consumer behavioural models and motivational patterns

Market segmentation criteria: (discrete, measurable, viable, appropriate) and the range of market segmentation variables relevant to tourism analysis (purpose of travel; buyer needs/motivations/benefits sought; buyer characteristics; demographic, geographic or economic characteristics; lifestyle-psychographic characteristics; geo-demographic characteristics; price

The value of different market segments in achieving optimal benefits for the destination: focusing on the 3 Es experience, entertainment, education using examples such as geotourism/ecotourism, adventure/sports, culture, short breaks. Emergent markets eg China. Importance of domestic tourism.

LECTURE NOTES

The process of developing marketing strategy and plans to realise the objectives a destination has for the tourism sector requires a great deal of research and analysis. Not only is it necessary to understand prevailing perceptions of the destination and the techniques by which these can be influenced, it is also vital that trends in the tourist consumers travel expectations, desires, values and behaviour are measured and monitored. The importance of both market research and motivational, attitudinal and behavioural marketing research is high. This enables tourist consumer groups to be identified by common characteristics and targeted through packages of communications. The growing sophistication of electronic data bases greatly facilitates this process leading to the ultimate market segment the individual!

TOURISMS DETERMINANTS AND INFLUENCES

Tourisms scale and shape is determined by a range of factors. Some continue to exert an influence decade after decade, albeit in different manifestations; others have an effect for a limited period only.

The continuing influences - the foundations for tourism - include economic, technological, political and demographic factors.

Economic

Post war economic recovery in the industrialised countries led to rising personal incomes and free time availability - the fundamentals to engage in tourism which are money and time. There will be the regular fluctuations in economic performance - some periods of strong growth, some of low growth/recession but overall we work on the basis of average 2 to 3% annual growth. If we take it that each 1% growth in GDP produces 2 to 2.5 % rise in discretionary travel spending, then an average annual 2.5% rise in global GDP will result in a two-and-a-half-fold growth in leisure tourism spending by 2020. This is only a guideline but nonetheless a useful indicator of the frame of possibility.

Looking at the recent past and present situation in the key tourist generating regions we can see the two of the most recent disturbances were the collapse in the late 1990s of the Asian financial markets and currencies, and the terrorist attacks of September 11 2001. The former devastated populations accustomed to high rates of economic growth, while the latter created huge uncertainty in virtually all aspects of life, including the economy. The Asian financial and economic crisis of the late 1990s had a devastating effect in the short term and even now the recovery in consumer confidence in that region particularly in Japan - is lagging behind overall economic recovery in Asian countries as it was a balance sheet collapse and many consumers are still trying to get their personal and household finances in balance again before they indulge in a major resumption of spending. This is a particular problem among the older age groups, accustomed to strong economic growth and for whom the collapse was a rude shock. The Asahi Evening News of 24 October 2000 encapsulates the problem in its headline Fear of future deters seniors from opening their wallets, the article stating that the nations ability to stimulate consumption depends on whether businesses - including of course leisure and tourism businesses - can persuade these seniors to spend more - more, that is, of the 54% held by the over 60s of the countrys 1,300 trillion yen.

The relevance of these developments to travel and tourism are readily apparent. The growth in the Japanese market which had expanded in response to its Governments initiation in the late 1980s of the Eight Million Programme the aim of which was to encourage more Japanese people to travel overseas in order to reduce the countrys trade surplus to almost 17 million outbound departures by the end of the 1990s suddenly stopped, with one of the main motors for growth the elderly being the worst affected by the economic problems which continued through into 2003/4.

The escalation of oil prices as a consequence of the Iraq war is still moving through the system and impacting on travel (through air fuel surcharges) and travel intentions in 2005. The uncertainty arising from this and continuing concerns about terrorism has affected global economies in recent years with countries like Germany teetering on recession and all other major economies recording lower growth rates than in recent years. The tourism planner ignores these factors at his peril there is no point in developing and marketing tourism for consumers who cannot afford to travel!!

Nonetheless, certain fundamental truths remain. People will continue to attach a growing importance to discretionary travel and tourism in their choices in spending their personal discretionary disposable income. Future growth in tourism will be fuelled through the underlying strength of the Asian regions economy and its potential for outbound tourism remains. The old tigers will recover; and the new tigers are emerging rapidly (led by China and India).

China outbound travel tripled between 2000 and 2004 to 30mn (albeit the bulk of visits are to the semi autonomous regions of Hong Kong and Macau), with 50 countries around the world plus the whole of the European Union (except the UK, Ireland and Denmark) now having been granted approved destination status by the Chinese Government. Indians generated between 4.5 and 4.6mn overseas trips in 2003, compared to 4mn in 2001. Significantly in respect of future growth the real per capita income of the urban Chinese is forecast to rise from US$1,037 in 2003 to US$1,758 by 2013, three times higher than in India (ie 2003 - US$512 and 2013 - US$647).

KEY READING South Pacific Tourism within a Regional Perspective. Peter Semone, PATA. Paper given at the Tourism Investment Conference: Creating Partnerships. Fiji. February 2005. Full set of conference papers: www.profitpacific.com/site_en/partnership_meeting/papers_speeches.php.

Technology

Technological progress has already contributed enormously to the growth of travel and tourism through the application of the jet aircraft to commercial air transport, and the development of electronic technology via computerised reservations systems. Development in information technology systems is so rapid that anything reported one month is outdated the next. These increasingly sophisticated successive generations of systems are providing instant and interactive access to tourism product offerings. The growth of the usage of the web to research and book travel is rapid. Figures released by the Association of British Travel Agents (ABTA) to coincide with its November 2004 annual convention showed that 15% of British holidaymakers book their package holidays online, up from 6% in just two years and a fivefold rise over 2000 (see www.abtamembers.org/research/morisummary.pdf).

Mintel research (2005 British Lifestyle) shows that the number of overseas holidays booked online has increased by 60% in the past 6 years as against a zero change in bookings via travel agents. That said, the travel agent will remain a favoured medium for booking at least some of the publics travel requirements (particularly among electronic-resistant older market segments - the over 60s will make up 30% of the British population by 2020). Travel agents still offer choice and reassurance and those which embrace electronic technology and marry this to personal service will survive and prosper. Nonetheless the advances and applications of electronic technology in travel and tourism product design and distribution will be a major influence in coming years. More consumers will use online systems in their own homes or in holiday superstores to test and design their individual holidays.

Aircraft development is another key technological influence on tourism. The new Airbus A380 is capable of carrying from 500+ passengers (in a multi class set up) up to 850 passengers in a single class configuration and will commence service in summer 2006; while Boeings 787 Dreamliner, due to be launched in 2008, will have fewer seats at 250 but will offer faster flights travelling longer distances non-stop. Though Airbus is already developing its competitor aircraft to the 7E7 in the A350 which it hopes to have in service by the end of the present decade, the A380 and B787 developments reflect differing views on the growth of air travel demand will it be for bulk travel to hubs and smaller planes to the ultimate destination (such as the A380 will provide) or for direct travel to the destination as Boeing believes. The new aircraft will be more economic to operate, Boeing claiming 20% fuel efficiency for the B787.

Political

In the past this played a key role as national controls on travel through visas were progressively eased as tourism was recognised as an economic sector to be encouraged. This process continued into the 1990s with the breaking down of the Iron Curtain and the removal of the apartheid system in South Africa; and the first part of the C21 has seen the Chinese opening up outbound travel for its populations. Though there will undoubtedly be hiccups in the process, the signs are for less and less formal requirements in travelling from country to country. Though the change to treating all intra-EU country travel as domestic sends horror shocks through the trend forecaster (and will throw WTOs figures into chaos), such a development is inevitable. Passports may ultimately be replaced by technology-driven systems of personal check based on hand geometry or retina inspection.

Demographic

The ageing of the population of industrialised countries is already a well-established demographic trend. It will continue and pick up in pace. Associated with this trend is the contracting workforce in those countries. There will be less young people to feed into the system. In response to this there will be more south-north migration, something which is already taking place though it is a matter for particularly delicate handling by governments to avoid possible racial conflict arising from the perception of the some of the host population that immigrants are taking our jobs. The implications of these two developments are that there will be increased travel by older market segments - though there is a counter viewpoint that the shortfall in young people entering the workforce will lead to the raising of retirement age and less freedom among older populations to engage in leisure pursuits - and also increased VFR travel between the north and the south by the large volumes of migrants in industrialised countries.

Another demographic factor is the further erosion of the traditional western household through rising divorce rates and later marriage and families. The implications of this for tourism is that there are more different types of households/household segments for the travel and tourism industry to cater for. Apart from the gay segment and singles, we now have the single parent (with child/children) with their own particular requirements from travel and tourism service suppliers.

Globalisation

The growing power of international economic and market forces and the consequent decline in the ability of individual states to control their economies and of the private corporation in limited geographic spheres of operation to dominate domestic markets - the process of globalisation. The impact on tourism is increased power in the hands of a small number of global travel and tourism networks achieving their globalisation not only through vertical and horizontal integration but through diagonal integration, economies of both scale and scope, and their huge investment in electronic databases and marketing. The pan-European travel group Touristik Union International (TUI), for example, has 80 tour operators, 3,700 travel agencies, 7 airlines, 56,000 employees and 18mn customers; and recorded sales and operating profits of Euros18bn and Euros490mn respectively in 2004.

Localisation

Populations are responding - and not just in developing countries - to this globalisation of economies, markets, systems and cultures by looking to their own identities. In developing countries the conflict between identity and modernity is intensifying. More groups defined on ethnicity, religion and social structure will demand to be recognised and treated as important with their own special rights. Tourism is centre stage. There are two consequences: the increased questioning of the form and scale of tourism development and marketing in these societies whether at country, county, province, town or village level; but, on the upside, this local level resistance and introverted response to globalisation provides opportunities and focus for the development of tourist experiences related to the cultural and natural resources of these subsets of society.

The travel and tourism sectors are mirroring the global/local polarisation process in their systems and structures. There are few fully global networks - though it might take many to exert a stranglehold on world markets. These mega-groups cater for a large volume of tourist movements, accommodation, mainstream or mass tourism; at the other end of the scale are niche operators offering special products and services, experiences to individuals and collections of tourists with eclectic tastes. So, if we look at the UK tour-operating sector there are four companies which account for 55% of the market and a further 1,440 fully bonded operators who make up the remainder of the 21mn inclusive tours sold.

Research by organisations like the Stanford Research Institute and Angus Reid, reported by the WTO in its Tourism 2020 Vision reports (1999a), consistently find that between 10 and 15% of discretionary travellers want the unusual - these are the alternative or new tourists, and demand growth from these groups is outpacing that of mainstream segments. These tourists, typically highly educated, mature, affluent, well travelled, environmentally aware and sensitive to the social and cultural traditions, systems and mores of the destinations they visit, are responding to the demands of local groups to be heard, recognised and valued.

Of course, the divide is not as simple as suggested. Multinational and transnational corporations do not only cater for the mass beach resort market with the niche market operators focusing on the educated traveller. Much tourism demand is now characterised by customisation based on the use of electronic technology. You can now go into a holiday hypermarket or superstore and access the sort of audio-visual presentation which puts the lie to the adage that you cannot test drive a holiday while you can utilise flatscreen technology to print out tailor-made brochures. The airline or tour operator is able through the available technology to develop what appears to be, and in many instances is, a bespoke product or service. In other words, thinking global, acting local.

Socio-environmental awareness

Having had a growing impact in the 1980s up to the Rio Earth Summit of 1992, environmental issues went off the boil until the build up to the Millennium when much media attention was devoted to mans treatment of the planet in the past thousand years. Consumer awareness was also increased by NGO campaigns and media reporting on environmental issues like the smog which enveloped much of SE Asia in late 1997, global warming, ozone layer depletion, rain forest destruction, dwindling water supplies (resulting in the proportion of the worlds population living under stress conditions rising from a quarter to two thirds by 2025), and by the displacement of populations through development projects, whether by dams or tourism projects - it does not matter.

This build up of consumers socio environmental awareness of tourism development is leading to increased scrutiny on the part of the public in destination decision-making and a growing requirement for new tourism developments to be sustainable and fair to the destination. Research in the UK by Tearfund finds that the awareness and concern of British holidaymakers towards the destinations they visit if increasing. Its 2002 report Worlds Apart: a Call to Responsible Global Tourism found that between 2000 and 2002 the proportion of British stating they would be more likely to book a holiday with a company with a written code to guarantee good working conditions, protect the environment and support local charities in the tourist destination had risen from 45 to 52% while almost two-thirds wanted to know how to support local the local economy, preserve the environment and behave responsibly when they go on holiday.

The three burning questions are: do the publics actions match its avowed intentions - will consumers walk the talk? will the conversion rate between intention and action grow in the way Tearfund indicates or remain limited to a minority? and will the private sector embrace and support sustainable socio environmental practices, or only do what they have to? The signs are modestly positive through trade actions like the Tour Operators Initiative and most recently the widespread media coverage which led directly to the greater sensitisation of the western consumer about the importance and impact of tourism on the regions affected by the December 26 2004 tsunami.

Living and working environments

We are now realising that rather than being a liberator and freeing up our time the computer and electronic technology acts both to isolate us from each other, reducing direct human contact, and ties us to our work - there is no good excuse not to be in constant contact with the office!! Our urban lifestyles, traffic congestion etc - in both the industrialised and developing worlds - leads to the increased felt need to engage in discretionary tourism to escape and/or to indulge. As the WTOs Tourism 2020 Vision Executive Summary states: It will become possible to live ones life without exposure to other people with automated service the norm and full access to, and exchange of, information on everything possible from ones own home...In consequence, people will crave the human touch: and tourism will be a principal means through which they seek to achieve this (WTO 1999a).

The nature of employment is changing. The World Tourism Organizations Business Council study Changes in Leisure Time coined the phrase time poor but money rich (WTO 1999b) to describe the process. The pressure on free time comes from changes in patterns of work allied to the evolution of the computer for business applications. Gone are the days of jobs for life, a development which has been particularly difficult for the Japanese, with their strong sense of corporate loyalty, to accept. Contract employment will become increasingly common. This creates the need for people in all occupations/professions to keep in touch with the marketplace. We will lead a highly pressured life moving one contract to another. There will be little time to take time off during a contract and we will need to be in constant contact with the marketplace for our next contract.

We may, however, take more holidays. There is occurring a switch from a single, main holiday of one week (in the case of most Asian markets) or two or more weeks (in the case of European and American tourists) to two, three or four holidays each of lesser duration e.g. three to four days for the Asian tourist, and three to ten days (depending on whether the destination is short or long haul) for western market tourists.

It is significant to note that the Changes in Leisure Time studys conclusion was that there are sound grounds for anticipating that average expenditure per tourist day will show a rise as the trend towards shorter, multiple holidays grows. It is unlikely that the aggregate number of days a consumer spends on holidays will grow but his/her spending, particularly on a per diem basis, will probably increase (WTO 1999b).

That does not mean, however, that long haul holidays will suffer from lower rates of growth. Mintels 2005 British Lifestyle report expects long haul to grow from less than one fifth of all UK outbound travel to a quarter within 10-15 years. This apparent paradox will be achieved through the rise of shorter duration long haul holidays. Already three, four and five night holidays are being offered from Europe to Hawaii (four nights from just over 700 from the UK), the Caribbean and the Far East see special offers on www.expedia.com.

Service to experience economy

Futurologists like John Naisbitt and Patricia Aburdene (1990) contend that the industrialised world is in transition from the service to the experience economy, with the peaking of the service economy in such countries already achieved. The focus is switching to delivering unique experiences that personally engage the consumer. The very clear implication of this change for tourism is the need to differentiate tourism product development and marketing, both by destination and operator.

Marketing

For the very reason that few prospective visitors have first hand knowledge of destinations vying for their business, the onus is on the destination to seek to attract the consumer through informational and persuasive marketing. A major influence will be the application of highly personalised relationship, or one-to-one, marketing techniques using electronic technology to readily and accurately identify micro market segments and niches, and to communicate with them more effectively. Marketing - both by destinations and by operators - will increase and become more focussed and competitive. Over three-out-of-four NTO respondents to the WTOs Tourism 2020 Vision (1999a) survey believe that their marketing approach will need to take a more aggressive stance. At the same time, recognising that - in the developing world at least - there are insufficient funds for significantly increased marketing budgets, 90% of NTOs are actively pursuing cooperative marketing campaigns - both on a regional basis and with the private sector.

It is noteworthy that many of the factors identified exert their influence in combination and are going to produce polarisation of tourist tastes and supply, with the result that there will be two broad groupings: large scale, mainstream tourism involving the movement of large volumes to extensively developed destinations: and, on a smaller scale, individualised tourism. Both are likely to prosper.

Safety of travel

Tourism will not flourish to destinations in civil turmoil, at war, or where tourists health or security is perceived to be under threat from terrorism, health scares, natural disasters etc. This is the fundamental problem facing Africa, the Middle East and South Asia in achieving the major growth in tourism which their potential could support and their economies need. The events sparked off by the terrorist attacks of September 11 2001 and subsequent tourist-directed bombings in Bali, Mombasa, Casablanca and Madrid created and sustained great uncertainty in tourist markets, as did the SARS and avian flu outbreaks and the unparalleled Indian Ocean tsunami. Tourists opt for destinations closer-to-home and/or those perceived to be safer though the evidence from established tourist destinations like Egypt is that these dips are short-lived and can be reduced through publicity about measures taken to ensure tourists safety and advertising that reassures tourists about their security

RESEARCH AND INFORMATION IN TOURISM MARKETING

The topic of research and analysis in respect of tourism is as broad and as long as one cares to make it reflecting the fact that tourism activity takes place in locations where other people live, involves interaction between different groups of people (expressed simply as hosts and guests), and creates demands and impacts on all elements of the society and environment of the host community. Tourism means very different things to an economist, a social anthropologist, a specialist in any of the fields related to the natural environment, a local resident of a tourist area, an airline executive, a hotelier, a restaurateur and so on.

Just take the concept of tourism demand and think of the difference in what it means to:

a national tourism office marketing executive whose goal is to attract the largest volumes of the target segments identified as providing the maximum benefits to the destination;

a parks manager who has to balance visitor flows (and the benefits these bring) with maintaining the integrity of the natural and cultural fabric of the park;

a transport operator whose focus is maximising passenger yield (ie passenger volume and fares), irrespective of how long they stay in the destination to which they are being taken;

a hotel operator whose aim is threefold ie volume, rate and length of stay;

a community through which tourists pass and which has much of the nuisance factor of tourism without many of the benefits; and

a community in which tourist activity takes place which has to balance the economic benefits with possible negative consequences in respect of their environment and social disruption, cultural erosion etc.

The common link between all these diverse tourism stakeholders is that they cannot achieve what they are looking for from tourism, or establish how tourism might be better managed, without information to enable them to understand the market its size, profile, characteristics and trends and how marketing activity can change the market thus creating the need for knowledge on what influences and determines tourists attitudes, motivations and behaviour.

A prerequisite to the development and encouragement of responsible tourism is a full, well-conceived and effectively-executed market(ing) research and information system structured:

to provide understanding of tourist demand,

to quantify and forecast accurately,

to identify trends and changes enabling us to anticipate, and

to monitor performance both of competitors and ourselves.

The primary reason for the urgency of having a good marketing information system is the long lead times (and consequent need for forward planning) for the infrastructure and facilities in tourism development. Many key elements of tourism supply cannot be swiftly adjusted in line with changes in demand: there is a rigidity of supply. Getting it right two, three, five or even - as in the case of airport development - ten or more years ahead is therefore of the essence.

The types of information systems internal & external - needed to provide the requisite knowledge for marketing decision makers are explored more fully in a later session dealing with market segmentation and target marketing. One of the key links in the chain is marketing research in both continuous form and designed to tackle specific tasks for which the decision-maker needs a focussed and detailed set of answers to a rapid timeframe.

KEY READINGChapter 5 Marketing Information Systems and Marketing Research pp. 153-195 in Kotler, P., Bowen, J. and Makens. J. (2003) Marketing for Hospitality and Tourism Pearson Education/Prentice Hall, New Jersey.

Forecasting for short & long term purposes

The purpose of all forecasting is to reduce the risk of decisions. Where there is some degree of certainty of the outcome of a particular course of events, the forecasts made are almost an automatic process: but where there are many variables which are themselves difficult to predict and which determine the outcome for a particular decision the difficulty of making, BUT also the need for, good forecasts increases. Frechtling (2001) makes the case for tourism being a sector in especial need of reliable forecasts on the grounds that it is shackled by five constraints on decision-making:

the tourism product is perishable

people are inseparable from the production-consumption process

customer satisfaction depends on complementary services

leisure tourism demand is extremely sensitive to natural and manmade disasters

tourism supply requires large, long lead-time investments in plant, equipment and infrastructure

The application by tourism managers of forecasts in seeking to reduce risk varies according to the type of tourism operation. Forecasts can be used to:

set marketing goals, either strategic or for the annual marketing plan

explore potential markets to determine the prospects and methods of successful penetration with their products/services

assess the way in which future events - known or possible might impact on demand so that alternative, contingency plans can be prepared

determine operational requirements

assess project feasibility

predict the economic, socio-cultural, and environmental consequences of visitors

assess the potential impact of regulatory policies, such as tax increases and environmental policy controls

project public revenues from tourism

ensure adequate capacity and infrastructure

The following list adapted from Frechtling (2001) indicates the consequences of poor forecasting in respect of each of these areas:

Uses of demand forecastsConsequences of poor forecasting

Set marketing goalsOver- or under-budgeting for marketing

Explore potential marketsMarketing to wrong segments, ignoring the right ones

Simulate impacts on demandIncorrect marketing mix, poor preparedness for negative events

Determine operational

Excess labour, or customer disquiet requirements

with limited service

Assess feasibility of projectWasted financial resources, difficulty investment

in financing interest payments

Predict economic,

Inflation, unemployment;

socio-cultural and

environmental degradation; socio- environmental impacts

cultural disruption and damage

Assess regulatory changeBusiness losses, unemployment, price inflation

Project public revenue

Budget deficits

Planning adequate capacityTraffic congestion, delays,

and Infrastructure

accidents

The nature of tourism demand poses challenges for the forecaster:

historical data are often lacking

tourism demand can be volatile

tourism demand is sensitive to catastrophic influences

tourism behaviour is complex

there is a wide choice of forecast variables

KEY READING Chapter 1 Introduction pp. 1-18 in Frechtling, D.C. (2001) Practical Tourism Forecasting: methods and strategies. Butterworth Heinemann, Oxford.

Selecting & applying the right forecasting method

There are many different methods of forecasting ranging from the extension of historic time series trends into the future to complex, computer-based models. They fall into two basic categories: quantitative and qualitative.

Quantitative methods divide into two subcategories: extrapolative (or time series) which assume that the key to predicting the future of any variable lies in its past performance ie without consideration of causal relationships; and causal models which mathematically simulate cause and effect relationships, the central objective being to determine the causal variables that affect the forecast variable and the appropriate mathematical expression of this relationship. The constant change in factors determining and influencing tourism (eg aviation, computer reservations and communications) make reliance on past relationships unrealistic, while the large number of variables affecting tourism demand and the way these interplay with each other make causal models hugely complex and subject to being totally flawed if the way in which only a few of the variables interact is wrongly inputted.

Qualitative methods (or judgemental methods) rely on the experts manipulation of past information about the forecast variable. The various qualitative methods include: jury of executive opinion, subjective probability assessment, Delphi method and consumer intentions survey. These methods are used where there is insufficient historical data, the time series available are unreliable, there is a rapidly changing macro environment, major disturbances are expected and the planning horizon is a long term one. The World Tourism Organizations Tourism 2020 Vision series of forecasts (1999a) relied extensively on qualitative methods though, as in many destination tourism forecasts, a combination of methods was employed. The benefits of qualitative methods are that:

they are inexpensive

there is no requirement for a high level of statistical skills, and

in many instances the use of qualitative methods is the only way of producing forecasts.

Against this, there exists:

the possible flawed selection of experts

a danger that experts can confuse forecasts with desires

a predisposition to be anchored in the present

no control on the assertion of the experts own views

Frechtling (2001) demonstrates the process of choosing the most appropriate forecasting method.

Step 1: are objective data available? If not, then only qualitative methods can be employed

IF YES

Step 2: is the forecast horizon more than two years? If not, then extrapolation methods will be best suited.

IF YES

Step 3: are large changes expected in the environment? If not, then extrapolation methods are still likely to be best.

IF YES

Step 4: is there good information available on the relationship between variables? If not, then despite the longer time horizon and many changes anticipated extrapolation methods remain the preferred forecasting option.

IF YES

Step 5: are there many data on causal variables? If not, then regression analysis models are best.

IF YES

Structural causal models are indicated

Information systems to guide continuing needs

Managers have different information needs at different times. These needs can be met in part by an ongoing, continuous flow of information on certain key subjects and through tailormade research studies to investigate a specific issue.

Kotler, Bowen and Makens (2003) define a marketing information system as consisting of people, equipment and procedures to gather, sort, analyse, evaluate and distribute needed, timely, and accurate information to marketing decision makers. The word marketing could equally be replaced by development planning the principles would remain the same. In essence an information system is a collection of tourism statistics organised in such a way as to provide the user with a readily available and accessible source of information relevant to the entity and the decisions to be made. The system first interacts with managers in different functional capacities to assess their information needs. Next, it develops needed information from:

internal records and resources, and through

intelligence gathering activities and

marketing research (on target markets, competitors, marketing channels and both macro- and micro-environmental determinants).

The data is analysed and then distributed to decision makers in the right form and at the right time to help in planning, implementation and control.

1. Internal Records

Any organisation operating in tourism generates a lot of information, much of which is not used productively. The key is to know what data are available internally, which of it can be of use in planning and then ensuring such information flows through the information system to the managers who need it. In determining management information needs, Kotler et al suggest the following list of questions:

what types of decisions do you make regularly?

what types of information do you need to make these decisions?

what types of useful information do you get regularly?

what types of information would you like to get that you are not getting now?

what types of information do you get now that you dont really need?

what information would you want daily? weekly? monthly? yearly?

what topics would you like to be kept informed about?

what databases would be useful to you?

what types of information analysis programmes would you like to have?

what would be the four most helpful improvements that could be made to the present information system?

Examination can then be made of the data collected by the organisation to assess what meets the identified needs of decision-making managers. Taking the example of a hotel: its daily records can include reports on occupancy, the number of guests by party size, the volume of groups in residence, average daily rate, no-shows etc. Reservations records can reveal valuable information on productive travel agents and guide the timing of advertising and sales calls to coincide with the main booking periods. Guest history information collected on registration cards can embrace demographics and other personal details, type of room purchased, cross-purchases, length of stay, specific dates of stay, method of payment method of arrival, membership of frequent guest programmes etc. This information can be analysed to better understand who the customers are and how to communicate most effectively to them a growing need in the age of relationship marketing (also termed direct, or one-to-one, marketing).

2. Marketing Intelligence

Marketing intelligence comprises two types: that which can be generated by the organisations own people through conversation and observation during the course of their activities; and that developed through external sources. Kotler et al present a long list of types of external information relevant to the hotel sectors marketing needs:

Visitor Marketing Information

TYPE OF INFORMATION

Visitor profile

Visitor trends

Visitor spending

Visitor days

Purpose of visit

Recreational facilities used/desired

Lodging used/desired

Food & beverage facilities used/desired

Retail shopping used/desired

EXTERNAL SOURCES

Tourist offices at various levels

Other government departments

Chambers of commerce

Colleges/universities

Public utility companies

Banks and financial institutions

Resorts

Media TV, radio, print

Parks, forests etc administrations

Environmental groups

Museums

Travel and tourism operators associations

Transport operators

Excursion operators

Competitive Information

TYPES OF INFORMATION

Development strategies

Product/service mix

Planned expansion, renovation etc

Product line extensions etc

Customer mix

Pricing strategy

Occupancy rates, discounts

Advertising/promotional thrust

Employee satisfaction levels

New Innovations and Trends

TYPES OF INFORMATION

Technological improvements in products/services

Pricing technology, such as yield management

Technological advances in equipment

EXTERNAL SOURCES FOR BOTH COMPETITIVE AND INNOVATION/TREND INFORMATION

Suppliers/vendors

Consultants

Travel agencies

Tour operators

Transport companies

Competitors publications

Trade publications

Representatives and publications of travel and tourism operators associations

Meetings/conventions

Employees of competitors

3. Marketing Research

The final link in the information system is marketing research though this is can take both a continuous form and be designed to tackle specific tasks for which the decision-maker needs a focussed and detailed set of answers to a rapid timeframe.

The goals of marketing research applicable to the public sector as well as to operators are:

to maximise economic contribution/return whether in the form of jobs, business creation, foreign exchange earnings or direct contribution to the government purse or as profit and return on investment for private sector operators;

to ensure the longevity/extension of the destination or product range;

to match or exceed the offering of competitors a purpose which again has application in respect of locations (ie a region comprising more than one country, a country, an area within a country, or at the individual resort, town or village level) and for operators in the different sub-sectors that make up the tourism industry; and

to prevent avoidable disasters in the supply, distribution and marketing of tourism products and services in other words to ensure the right products/services at the right price at the right time using the right forms of distribution and communicating the product/service offering to the market in the most effective manner.

The American Marketing Associations definition for marketing research is a process that identifies and defines marketing opportunities and problems, monitors and evaluates marketing actions and performance, and communicates the findings and implications to management. the marketing research process consists of four steps:

defining the problem and research objectives

developing the research plan

implementing the research plan, and

interpreting and reporting the findings.

Definition of the research problem is best done through consultation between the manager (who best understands the problem or decision to be addressed) and the researcher (who knows how to obtain the requisite information). A marketing research project can have one of three types of objective:

exploratory research information to help define the problem and suggest hypotheses

descriptive research to descried the size, composition and characteristics of the market

causal research to test hypotheses about cause-and-effect relationships.

Before launching into a major programme of primary research, it is always important for the research team to examine the secondary data available ie information collected for another purpose but which has relevance to the purpose at hand. Secondary data can be gleaned from several categories of resources: internal, government publications, periodicals and books, commercial data and electronic databases. Such data provide a good starting point for marketing research and can serve to focus the primary research required.

Observational research methods are employed for most exploratory research exercises. This involves the gathering of primary data by observing relevant people, actions and situations; and can yield information people may be unwilling or unable to provide. However, this method has its limitations since observation cannot the feelings, beliefs and attitudes that constitute buyer behaviour cannot be observed. Observation research is often a preliminary step to survey research.

Survey research is the approach best suited to gathering descriptive information. It can be structured or unstructured; direct or indirect. Its strength is its flexibility, capable of obtaining many different kinds of information in a wide variety of marketing situations.

Experimental research is best suited for gathering causal information. Experiments involve selecting matched groups of subjects, giving them different treatments, controlling unrelated factors, and checking the differences in the responses of the groups.

There are four basic contact methods for conducting marketing research: mail, telephone, in-person, and email. The strengths and weakness of these are summarised in a table taken from Kotler et al.

Attribute

Mail TelephoneIn-personInternet

Flexibility

Poor Good

ExcellentFair

Collectable data

quantity

Good Fair

ExcellentGood

Control of interviewer

effects

Excellent Fair

Poor

Excellent

Control of sampleFair ExcellentFair

Fair

Speed of data

collection

Poor ExcellentGood

Excellent

Response rate

Poor Good

Good

Fair

Cost

Good Fair

Poor

Excellent

If the research problem requires quantitative results, the optimal means of research are individual or household surveys conducted by means of street, phone, mail or email interviews; but where qualitative information is the main need then in-depth focus group discussions and participant observation are the preferred means.

Sampling and Questionnaires

In carrying out the research plan, the two key elements are the sampling plan and the research instrument. Designing the sample plan calls for four decisions:

who will be surveyed? This is based on what type of information is needed and who will be most able to provide it.

how many people should be surveyed? If well chosen, samples of less than 1% of the population can give good reliability.

how should the sample be chosen? There are probability and non-probability samples, the former comprising random selection which can be simple (ie of the whole population) or stratified for mutually exclusive groups of the population. Non-probability samples can involve selection based on willingness to participate (or convenience), or can comprise a set number of interviews of people in each of a number of demographic groups (quota sample).

when the survey be undertaken? This is especially important for in-person surveys when the timing should be representative of the flow of traffic relevant to the surveys purpose.

In collecting primary data, marketing researchers have to select the most appropriate research instrument:

interview structured using a questionnaire, or unstructured

mechanical devices

structured models, such as a test market

The questionnaire is by far the most common survey instrument. In preparing a questionnaire, decisions have to be made on what questions to ask, what form the questions should take, how they should be worded, the layout, the sequence and the length. A common failing is to exclude questions that should be asked and to include those that cannot, will not and need not be answered. For this reason a questionnaire should be tested before being used on a large scale.

The objectives of a questionnaire can be summarised as:

to suit the nature of the target population in terms of its style, wording, sequence etc;

to suit the research methods being employed ie whether it is being administered through interviewer or interviewee completion;

to suit the research objectives through ensuring the questions being posed are central to the purpose of the research;

to collect the right kind of data through focussing on the information which is essential and cutting out that which is superfluous;

to aid data analysis through designing the questions in a format to make it easy for the responses to be inputted into an analytical framework;

to minimise error and bias through careful wording; and

to encourage accurate and full responses through using a style which interests the respondent and uses wording which is clear.

A key consideration in designing a questionnaire is whether the questions should be open-ended or closed. Open-ended questions do not give a range of potential responses to choose from. They are used where insights into respondents values and attitudes are sought but do not lend themselves to ready statistical analysis since responses can be long and show wide variation. Closed questions can be of two types: dichotomous where there are only two choices eg yes or no; and multiple-choice where the respondent selects from a list of possible answers. Closed questions are easier to analyses but restrict the ability of the respondent to explain or elaborate on the answer given. Many questionnaires combine open-ended and closed questions to overcome this problem.

As an example of how the wording of questions can harm a research exercise, consider the following by a tourism office wanting to discover how to attract more visitors. In a survey of the population of a target catchment area, it started its questionnaire with:

Where did you go on holiday last year?

This question might seem a perfectly reasonable starting point BUT it ignores the fact that a significant proportion of the population do not take holidays away from home, while others take several holiday breaks. How are the differences in these two categories of the population taken into account in this question?

The correct way to address the question of the level of holidaytaking and destinations chosen would be for a sequence of questions as follows:

Did you go on holiday last year?

YES

NO

IF YES

How many holidays did you take last year?

Which place(s) did you visit on holiday last year?

There are two main scaling methods for rating responses from attitudinal and motivational research: Likert summated ratings and semantic differential scales.

In the Likert system various statements built up from preliminary research and piloting are given to respondents who are asked to indicate their view on a five-or seven-point scale. Typical would be a scale which asks for responses ranging from strongly agree at one extreme to strongly disagree at the other.

Semantic differential scales were developed to measure differences in the meaning of words or concepts, and are valuable in developing brand image positioning and advertising. This method involves a bipolar five-or seven-point rating scale, with each extreme defined by carefully selected adjectives representing opposite extremes of feeling. A destination might test how it is perceived by having a series of scales including safe unsafe, friendly unfriendly, good value-for-money poor value-for-money.

Collecting and Analysing Statistics

The management of any tourist destination whether a country, a resort or an individual attraction or facility (eg park, hotel) - can collect statistics about visitors to aid future planning. Visitor flows and patterns can be measured at point of entry (or registration) or through sample interviews or self-completion questionnaires. For a hotel, registration is the most effective source of collecting useful information if the system employed is sufficiently detailed (without comprising an administrative hassle for the customer). For an individual facility like a park, the entry point where the ticket sale takes place is a less effective way because less information can be collected from the customer as routine or with justification as compared with a hotel. Sample surveying is necessary.

The hotel operator has a varied room stock, caters for a range of different markets and segments, and may have many variations in the rates charged to each of these. Overall room or bed occupancy levels may not tell a meaningful story. The operator will normally set budget targets for each of the hotels customer groups so sales will need to measure against these targets rather than overall. The data collected by the hotel from and about its customer groups must enable those assessments to be made. A typical resort hotel may divide its customers into the following categories:

DOMESTIC

individual

corporate accounts individual, group; meetings large/small

functions large/small groups separately

INTERNATIONAL

individual business, holiday

tour operators allocations typically by operator and source country

corporate accounts individual, group; meetings large/small

functions large/small groups separately

By measuring achievement against budget, the hotel management can assess which markets/segments are performing best and what changes are needed to next years allocations, rates etc

The decisions on these factors have to take account of the fact that typically the average room occupancy for business travellers is 1.25 persons since most business travellers are not accompanied by their spouses while for holiday travellers it is typically between 1.5 and 2. This higher level of room density for holiday than for business travel has to be assessed against the room rates and the level of non-room spending in the hotel. If the business guest spends 50% more than the holiday guest, then the lower room density is more than compensated for.

Take the following example - simplified for the purposes of ease of illustration - of a hotel which has 50 standard rooms, 40 superior rooms and 10 suites. The figures relate to a given time period.

Room Type Business Independent Holiday Tour Operator

Occ.;Rate Occ.;Rate

Occ.;Rate

Standard 5/$100 10/$120

20/$75

Superior20/$125 10/$150

10/$100

Suites

7/$200 2/$250

Zero

A straightforward analysis would indicate that the hotel achieved a room occupancy of 84%. This would mask the fact that the standard rooms only achieved 70% while the superior rooms were fully occupied indicating a possible upgrading of the standard rooms or a lowering of the tariff for them. Then, of course, decisions would have to made as to the extent a heavier reliance on tour operator custom might have on the hotels more up-market business clients who patronise the superior rooms and the suites.

In planning the hotel stock for a given location, a model can be used on a Microsoft Excel or Lotus spreadsheet programme taking account of:

grade of hotel (low, mid, high)

mix of custom (holiday independent, tour operator; business independent, corporate; other)

average persons per occupied room differentiated by category of guest

average length of stay important since business guests tend to have shorter stays than holidaymakers

number of different hotels stayed in during course of visit important where a destination comprises a circuit that visitors travel around

average year round occupancy, again possibly differentiated according to category of guest (eg reflecting the fact that business travel is likely to be more consistent throughout the year as compared with holiday travel which will be more seasonal related to climate etc).

To calculate total room requirements, the total volume of visitors should be divided by number of establishments stayed in times average length of stay divided by 365 days to get even spread over the year divided by average occupants per room adjusted by a factor to produce a realistic year round occupancy level. Then the more detailed analysis by type of (or specific) location, grade of accommodation and type of guest can be conducted.

Interpreting and Reporting Research

In interpreting and reporting research results the researcher should avoid over-reliance on statistics but focus on those findings that aid decision-making. Since findings can be interpreted in different ways, detailed discussion between research and management personnel should take place to check that the research was executed properly and to examine the results and findings through dialogue. The research data should also be made available to managers for their own analysis. The need is to eliminate bias in interpretation, and to avoid unquestioning acceptance of research results. The commissioning manger and the researcher share responsibility for the research process and the resulting decisions. Some of the problems areas that can occur during a research project as identified by Kotler et al are:

making invalid assumptions

lack of qualitative data

failing to look at different segments within a sample

improper use of sophisticated statistical analysis methods

failing to have the research sample representative of the population

MARKETING RESEARCH THE SUCCESS AND THE PITFALLS

Successful marketing research depends on:

the setting of clear objectives

the selection of an appropriate method of research

limiting the scope of the survey to the collection of valid data only

undertaking research over a sufficient time scale, with ongoing surveys likely to yield better results than one-off, snapshot ones

a thorough but clear and concise briefing to the research team

the provision of sufficient resources to carry out the research most efficaciously ie human and financial

a speedy analysis mechanism

ability both within the research team and in the commissioning body to interpret the results with insight

a user friendly presentation of the results

Matching the research objectives to the methods is central to successful research

The five key areas of challenge for marketing research which need to be addressed in order to gain the maximum benefits are:

a greater amount of reliable research into why consumers do what they do and how they arrive at their purchasing decisions

finding out about non-users of the product/service type in question eg why do non-tourists stay at home?

identifying real trends from the analysis of the research data

obtaining greater knowledge about the behaviour of individuals

increasing marketing research funding

KEY READINGChapter 5 Marketing Information Systems and Marketing Research pp. 153-195 in Kotler, P., Bowen, J. and Makens. J. (2003) Marketing for Hospitality and Tourism Pearson Education/Prentice Hall, New Jersey.

UNDERSTANDING AND MEASURING THE MARKET AND ITS SEGMENTS

Marketing strategy is implemented through a sequential process of segmentation targeting and positioning by identifying the different groups within the total market according to specific characteristics or other variables, isolate those with most compatibility with the goals of the destination of organisation, and use marketing and promotional tools to communicate a specific position to these targeted segments thereby creating an identity and image in the minds of these targets which will converted into purchase.

Market segmentation is the process whereby producers organise their knowledge of customer groups and select for particular attention those whose needs and wants they are best able to supply with their products. It is a process of dividing a total market such as all visitors, or a market sector such as holiday travel, into subgroups or segments of the total for marketing management purposes. Its purpose is to facilitate more cost effective marketing through the design, promotion and delivery of purpose-designed products, aimed at satisfying the identified needs of the target groups.

Market segmentation is the necessary first stage in the process of setting precise marketing objectives and targets, and the basis for effective planning, budgeting and control of marketing activities. Apart from national tourism organisations (NTOs), no individual producer is likely to be concerned with the whole of a countrys tourist markets, usually being concerned with particular sub-groups of visitors, or segments, within the total market. A five-star city hotel will target business guests and the top end of the discretionary target markets with budget travellers and family groups unlikely to be prime targets; while self-catering facilities will be likely to attract these latter groups. NTOs also find it necessary to segment the total market of potential tourists in order to carry out targeted marketing campaigns, though their information services need to cater for all visitors.

The process of segmentation starts with understanding peoples motivations. Maslow (1954) developed what he terms a hierarchy of needs. This is relevant to travel and tourism since demand is largely shaped by mental concepts and felt needs. Maslow sees a sequence of needs which move from basic needs to sophisticated desires. The word need is commonly used to cover all these but I need to eat represents a clearly different need than I need to a new television. Where does I need a holiday fit into the scale?

Maslows Hierarchy of Needs

Self-actualisation

(e.g. self-fulfilment etc)

Ego needs

(e.g. self-respect, status)

Social needs

(e.g. affection, love, friendship)

Safety needs

(e.g. security, protection)

Physiological needs

(e.g. food, water, air)

Source: after Maslow (1954)

The countries of industrialised countries have evolved over the past two centuries from being predominantly needs-driven (that is, all activity geared to survival) to the strong growth sparked by the industrial revolution of being outer-directed (that is, geared to satisfying an employer in return for which a better standard of living is obtained). With the development of the railways starting in the middle of the nineteenth century, discretionary travel began to be possible for those who had spare time and money having satisfied basic and outer-directed needs. These people could address their inner-directed needs (that is, activities which they enjoy and which make them feel better about their lives). As economies grew, more strata of society used an increasing proportion of their time and money to satisfying inner-directed needs and the provision of travel and tourist products (such as holiday camps from the 1930s, and package tours from the 1950s) enabled them to do so. Present day society in industrialised countries divides broadly 40:40:20 between inner-directed, outer-directed and basic needs.

The translation of needs into motivations and into actionable market segments depends on detailed, accurate and up-to-date information on the market. With the development of electronic databases and other sophisticated means of generating consumer information, this has become increasingly possible during the last few decades.

Criteria for actionable market segments

There are four main criteria to be applied to any segment if it is to be usable in marketing. Each segment has to be:

Discrete

Measurable

Viable

Appropriate

Discrete means it must be possible to separately identify, or ring fence, the segment according to specific characteristics or variables like those listed later in this Unit.

Measurable means that the characteristics distinguishing the sub-groups must be measurable by means of available market/marketing research data, or via new such data as can be obtained within available budgets. Segments that cannot be measured accurately or in sufficient detail cannot be properly targeted. If targeting is not sufficiently precise, the effectiveness of marketing activities cannot be evaluated with any degree of accuracy.

Viable means for a market segment to be viable the revenue it generates over the long run must exceed the full cost of the marketing mix (ie product, promotion, place and price) to achieve such revenue by a margin in line with the organisations objectives. Viability, therefore, is a function of the costs of designing products for the target customers, promoting to such groups, and ensuring they can find convenient access to the products, at prices they find attractive.

Appropriate means it is essential that segments to be supplied are mutually compatible and contribute to the image or position in the market adopted by a producer. An economy car with a Rolls Royce label would be inappropriate, while destinations that have the aim of establishing an upmarket quality image worry about the impact of attracting backpackers or budget tourists.

Other criteria can be added to this core list.

Defendable means that unless a producer has distinct market advantages in supplying, or catering for, the identified segment which make it immune to the marketing activities of competitors it is not likely to warrant targeting.

Stable means that segments that exhibit volatile demand patterns or have short product life cycles are not attractive to the marketer.

Market segmentation methods

There are many ways of segmenting markets, the only limit being the needs of the producer and the availability of market/marketing research information. These methods are not mutually exclusive but overlap and are complementary, enabling the marketer to build up a detailed view of the market and its needs. Many travel and tourism suppliers use three (or more) of the main seven methods of:

Purpose of travel

Buyer needs, motivations and benefits sought

Buyer or user characteristics

Demographic, economic and geographic characteristics

Psychographic characteristic

Geo-demographic characteristics

Price

Details and examples of these variables are included in the recommended reading from Middleton and Clarke (2001).

READ Chapter 7 Market Segmentation for Travel and Tourism Markets pp. 34-51 in Middleton, V.T.C. and Clarke, J. (2001) Marketing in Travel and Tourism, Butterworth Heinemann.

Lifestyle Segmentation - Psychographics

There is growing emphasis among tourism marketers at trying to understand an individuals mental attitudes and psychological make-up through lifestyle segmentation. Stanley Plog pioneered what he called psychographic segmentation over three decades ago, and has updated his analysis constantly over the period see paper (2002) and book listed in the references to this unit. Psychographic analysis is relevant in travel and tourism where destinations and products are perceived as mental concepts prior to purchase. If common values among groups of consumers translate into purchasing patterns, these can be targeted through marketing. Some individuals are predisposed to seek adventure, enjoy risks and active holidays; while others are risk-avoiders, choosing passive and unstressful trips. These segments cut across the traditional objective dimensions of demographic segmentation like age, gender, income and life-cycle. Age and income do not determine whether an individual prefers to stay by the hotel pool-side or trek through the bush, though clearly these physical dimensions set the boundaries of choice. By way of example, research undertaken by the author in Mauritius found adjacent guests in a luxury resort hotel to be British tourists one a merchant banker from an affluent suburb of London, the other a plumber from a primarily working class town in Essex. Conventional segmentation methods would not have identified the latter as a possible buyer for this type of product.

The measurement of consumer attitudes and values lifestyle is possible through computer programmes that identify and measure the extent and strength of correlations between these factors and consumers travel and tourism purchasing behaviour. Such measurement can be further refined by probing attitudes towards, and perceptions of, individual destinations (and their attractions) and companies (and their products). This type of research supports the technique of product positioning.

Understanding the lifestyle of target customers has advantages when formulating new products or creating messages designed to motivate people. Lifestyle segmentation reflects an understanding of individuals needs, benefits sought, and motivations. It requires a significant market/marketing research spend. One of the earliest commercial developers of lifestyle segmentation in travel and tourism was Club Mediterranee which designed and presented (through their promotional campaigns) their villages at individuals with, or who aspired to, a clearly-defined, pleasure-oriented life-style.

Psychographic research divides the population between psychocentric (inward looking) and allocentric (outward looking) extremes. The shape of the psychographic breakdown of any population is bell-shaped, with most individuals exhibiting a combination of psycho and allo characteristics - that is, mid-centric. Destinations can be placed along the continuum between the extremes. Their placement varies according to source market being researched and changes over time. For example, Hawaii Waikiki is near psychocentric for the bulk of the US market but still mid-centric for most Europeans. Asian destinations like Thailand have moved over the past two decades from being allocentric/near-allocentric for Europeans to near-allocentric/mid-centric.

The travel and tourism characteristics of extreme psycho and allo-centric individuals can be illustrated as follows:

Psychocentric

Prefer the familiar in travel destinations

Like commonplace activities at places visited

Prefer sun and fun spots, with a focus on relaxation

Low activity level

Prefer destinations they can drive to (giving a sense of being in control)

Prefer developed tourist areas, with a range of hotels, family type restaurants and tourist shops

Prefer familiar atmosphere - manifested through international fast-food, familiar entertainment with minimal interest in exposure to the people or culture of the place visited

Customer for full tour packaging, with heavy advanced scheduling of activities

Allocentric

Prefer non-touristy areas

Enjoy the sense of discovery and delight in new experiences, visiting places before others

Prefer novel and different destinations

High activity level

Prefer flying to destinations

Tour accommodations should include adequate-to-good hotels and food, but not modern or chain hotels, and few tourist-type attractions

Enjoy meeting the people of the destination and gaining access to their customs and culture

Tour arrangements should include the basics but allow for considerable freedom and flexibility

Lifestyle Segmentation - Geotourism

The National Geographic Society broadly classifies tourism into

three destination styles:

touring

rest and recreation, and

entertainment.

The touring style depends on both the human and physical character of a place. It is typified by, but not limited to, the early stages of tourism development before it becomes industrialised. Typical activities include sightseeing, history, hiking, photography, and eating local cuisine. The tourism style is characterised by diffuse impacts and support for small business. The key characteristic of this destination style is that it requires protection of nature and heritage and needs architecture, landscapes, cuisine, etc., distinctive of the locale. Its based on the particular features of a place that differentiate it from elsewhere. Typically, therefore, it is not just, for example, a beautiful lagoon but the way the local people in relate to this aspect of the environment. There are lots of lagoons - differentiation in large part comes from the elements of local economy, culture, and heritage of human occupation.

The rest and recreation style depends on the physical character of a place but does not generally depend much on the human character of a place - human culture or heritage. Activities coastal resorts, walking round a golf course (rather than in the bush), downhill skiing (rather than the low tech. cross-country skiing), water sports, and vacation homes. Associated with it are a risk of sprawl, environmental impacts, and opportunities for architecture, landscaping, cuisine, that suit the locale.

The third destination style, National Geographic termed entertainment, does not depend on the character of a place at all. This style is typified by theme parks, outlet malls, amusement parks, convention centres, sports arenas, and casinos. Entertainment style tourism changes the nature of the locale; it is high impact, and a high employment generator (although many jobs are menial). This is mass tourism with high traffic. The critical lesson that the National Geographic draws from this is that if development is unchecked and unguided, then the destination style will drift from touring to rest and recreation and towards entertainment. This is because the path of development is determined by a large number of individual commercial decisions rather than a collective vision and

a plan for tourism.

National Geographic has developed the concept of geotourism to connote tourism that sustains or enhances the geographical character of a place - its environment, culture, aesthetics, heritage,

and the well-being of its residents. Geotourism is therefore wider

than the (as yet) better known concept of ecotourism as it includes

both people and their environment. This is reflected in the range of resources for geotourism:

flora and fauna;

heritage;

scenic places;

traditional architecture;

local crafts;

arts;

cuisine; and

dance.

A striking aspect of the work on geotourism is the results of a combined study the National Geographic did in 2002 with the Tourism Industry Association of America. This identified 53 million people in the US who had traveled in the past three years as candidates for geotourism those fitting within the geo-savvys, urban sophisticates and good citizens segment categories identified in the survey (see Executive Summary on www.tia.org/survey.pdf). Clearly geotourism-type experiences are already a major driver for travel, even if most of the travel to date has been domestic in the US; and equally clearly the values of geotourists are closely aligned to the tenets of responsible tourism.

IMPORTANCE OF THE DOMESTIC MARKET

A common oversight among destination tourism planning departments anxious to achieve expansion of their competitive standing and recognition of their tourism attractions is to concentrate on international tourist source markets rather than those closer to hand. In countries with developed economies, tourism grew based on domestic demand but there are mutual benefits from having a combined national and international market 70% of Londons theatre income is derived from British audiences with foreign visitors contributing the remainder, thereby enabling price levels to be lower than if totally dependent on local demand.

The recent UNEP workshop on Marketing Sustainable Tourism Products found that over-ambitious new tourism projects with limited resources to attract hard-to-reach international tourists should be deferred in favour of promoting to the domestic market, and the extension of current products.

South Africa is an example of a country that has recognised both the need to cater for local tourists and the significant economic contribution they can make. A South African Tourism report states hat the domestic tourism market is comparable with the international tourism market in terms of size and value even with only a small proportion of the domestic population currently taking trips for holiday purposes (Domestic Tourism Growth Strategy, 2004 to 2007, p.3).

In 2002/3 the domestic South African market amounted to almost 50mn trips and involved expenditure of Rands47billion, with considerable potential for sustained growth. The South African Tourism report, op cit, states the opportunity exists to grow the domestic market, increase the value of the market and combat issues of seasonality, geographic spread and limited trip expenditureThis reduces the exposure of the tourism industry to fluctuations in international demand, which is extremely sensitive to global, political and economic issues. In consequence, South African Tourism has a fully-segmented marketing strategy and plan for the domestic market seven segments ie young and up-coming, independent young couples and families, striving families, well-off homely couples, home-based low income couples, basic needs older families, and golden active couples.

One-to-One Marketing: the Ultimate Segmentation

Electronic technology facilitates the growth of what is known as relationship or one-to-one marketing. The essence of this is that market segmentation becomes so refined that each person is a separate target. Instead of selling one product at a time to as many customers as possible, relationship marketing is about selling as many products and services as possible to one customer using databases and interactive communication. It involves getting to know the customer by posing questions of existing and potential clients, then adapting to the customers needs by making suggestions, guiding the customer and adding a personal touch. It creates markets of individual customers with diverse needs and leads to increased customer retention and business per customer when all other forces are operating against brand loyalty, as argued by Olsen (2001) see reading below.

Database profiling tells you:

Who are my best customers?

Where can I find more like them?

What are their common characteristics?

How can I reach and motivate them most effectively?

How can I achieve the greatest return on investment with my marketing budget?

With changing industry structure and new technology, destinations themselves, through destination marketing organisations, and tour operators are encouraging direct business relationships. Destination marketing systems allow centralisation of all information, including of customers, onto one central database, accessible through various channels. Tour and travel operators are increasingly establishing their own call centres.

The principles of one-to-one marketing are:

Meeting customer needs individually;

Knowing your customers and their value to you the life time value (LTV) concept that is, the stream of expected future profits, net of costs, on a customers transactions, discounted at some appropriate rate back to its net present value. Forecasts are made based on probabilities, and some account is taken of the added benefit of referrals of other customers;

Investing in customers with high value LTVs, encouraging medium value ones to buy other company/destination products, and dropping those with low LTVs; and

Defining the right strategy aimed at improving the capabilities needed to turn the business into more of a one-to-one enterprise.

For a destination, a backpacker will have different needs from an elderly couple or honeymooners or a family group. The destination is the same but the offering is varied and is customised to the individuals needs. In calculating LTV, it is noteworthy that while the short term value of the honeymooning couple may be greater than of a backpacker, the latter are often the opinion formers who will travel repeatedly in future.

Implementing one-to-one marketing entails: customer tracking, interactive dialogue, customisation of products and processes to customer needs, and the use of loyalty programmes. It is expensive requiring the differentiation of customers (not products), the exploitation of economies of scope (not scale), and a focus on increasing the share of each customers business (not on market share).

KEY READING Hospitality and the Tourist of the Future by Olsen, M. (2001) In Lockwood, A. & Medlik, S. (eds) Tourism and Hospitality in the 21st Century. Butterworth Heinemann, pp. 206 215.

REFERENCES

Font, X. & Carey, B. (2005) Marketing Sustainable Tourism Products. Report on Workshop. United Nations, Environment Programme, Nairobi.

Frechtling, D.C. (2001) Practical Tourism Forecasting: methods & strategies. Butterworth & Heinemann, Oxford.

Kotler, P., Bowen, J. and Makens, J (2003) Marketing for Hospitality and Tourism. Prentice Hall Pearson Education, New Jersey

Kotler. P., Hamlin, M.A., Rein, I. and Haider, D.H (2002) Marketing Asian Places: attracting investment, industry, and tourism to cities, states & nations. John Wiley & Sons (Asia) Pte. Ltd., Singapore

Kotler, P., Haider, D.H. and Rein, I (1993) Place Marketing. Free Press, New York

Maslow. A. (1954) Motivation and Personality. Harper & Row, New York

Middleton, V.T.C. & Clarke, J. (2001) Marketing in Travel & Tourism. Butterworth Heinemann, Oxford

Millington. K. & Cleverdon, R., (1999) National Tourist Offices: their Budgets and Performance. Insights. September 1999. pp B-1-19 London: English Tourism Council

Mintel (2005) British Lifestyle. Mintel, London.

Naisbitt, J. and Aburdene, P. (1990) Megatrends 2000. Sidgwick and Jackson, London

National Geographic (2003). Geotourism survey shows millions of travelers care. http://news.nationalgeographic.com/news/2003/10/1024_031024_travelsurvey.html.

Olsen, M. D. (2001) Hospitality and the Tourist of the Future in Lockwood, A. & Medlik, S. (eds) Tourism and Hospitality in the 21st Century. Butterworth Heinemann, Oxford

Plog, S. (2002) The Power of Psychographics & the Concept of Venturesomeness. Journal of Travel Research 40:244-251. Sage Publications, London.

Plog, S. (2003) Leisure Travel: a Marketing Handbook. Sections II The Psychographics of Travel, and III Marketing Leisure Travel. Prentice Hall, New Jersey.

Semone, P. (2005). South Pacific Tourism within a Regional Perspective. Paper at Tourism Investment Conference: Creating Partnerships. www.profitpacific.com/site_en/partnership_meeting/papers_speeches.php.

South African Tourism (2004) Domestic Tourism Growth Strategy, 2004 to 2007. Department of Environmental Affairs, Pretoria. http://www.info.gov.za/otherdocs/2004/growthstra.pdf.

Travel Industry Association of America - TIA (2002). The Geotourism Study. TIA/National Geographic Traveler, Washington DC. (www.tia.org/survey.pdf)

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