Monthly Archives: February 2018

Tourism Futures: Targeting Customers in the Digital Age

This is an excerpt from: Camilleri’s latest book on Travel Marketing (2018)

How to Cite: Camilleri, M. A. (2018). Market Segmentation, Targeting and Positioning. In Travel Marketing, Tourism Economics and the Airline Product (Chapter 4, pp. 69-83). Springer, Cham, Switzerland.

The advances in technology have enabled many businesses to reach their potential customers by using digital and mobile applications.

Google, Facebook, Ebay and Amazon, among others are dominating digital marketing; and are pushing the entire field of advertising to new levels. The use of personal info, web-browsing, search history, geographic location, apps and eCommerce transactions have gone mainstream. For example, Google has begun using transaction records to prove that its ads are working, and are pushing people to make more online purchases. This allowed the technology giant to determine the effectiveness of its digital ad campaigns and to verify their conversion rates.

All individuals leave a “digital trail” of data as they move about in the virtual and physical worlds. This phenomenon is called, “data exhaust”. Initially, this term that was used to describe how Amazon.com has used predictive analytics as it suggested items to its customers. However, pre­dictive analytics cannot determine when and why individuals may decide to change their habitual behaviours, as the possibility of “one off” events must never be discounted. Yet, a firm with sufficient scarce resources could be in a position to exploit big data and analytics to improve its businesses operations.

For instance, Deloitte Consulting have developed a mobile app that has enabled Delta Airlines’ executives to quickly query their operations. For instance, when users touch an airport on a map, the system brings up additional data at their disposal. Executives could also drill further down to obtain granular information on staffing requirements. and customer service levels, as they identify and predict problems in their airline operations.

Nevertheless, business intelligence and predictive analytics could possibly raise a number of concerns. Many customers may be wary of giving their data to the businesses and their stakeholders. Very often, the technological advances anticipate legislation, and its deployment. These contingent issues could advance economic and privacy concerns that regulators will find themselves hard-pressed to ignore. Some academics argue that the digital market and its manipulation may be pushing the limits of consumer protection law. Evidently, society has built up a set of rules that are aimed to protect personal information. Another contentious issue is figuring out the value of data and its worth in monetary terms. In the past, companies could have struggled to determine the value of their business; including patents, trade secrets and other intellectual property.

Targeted Segmentation through Mobile Devices

The mobile is an effective channel to reach out to many users. Portable devices, including smart phones and tablets are surely increasing the productivities and efficiencies of individuals as well as organisations. This has led to the growth of mobile applications (apps). As a result, the market for advertising on mobile is still escalating at a fast pace. Moreover, there are niche areas as new applications are being developed for many purposes on different mobile platforms.

Recent advances in mobile communication and geo-positioning technologies have presented marketers with a new way how to target consumers. Location-targeted mobile advertising involves the provision of ad messages to mobile data subscribers. This digital technology allows marketers to deliver native ads and coupons that are customised to individual consumers’ tastes, geographic location and the time of day. Given the ubiquity of mobile devices, location-targeted mobile advertising are increasingly offering tremendous marketing benefits.

In addition, many businesses are commonly utilising applications, including browser cookies that track consumers through their mobile devices, as they move out and about. Very often, when internet users leave the sites they visited, the products or services they viewed will be shown to them again in retargeted advertisements, across different websites. Several companies are using browsing session data combined with the consumers’ purchase history to deliver “suitable” items that consumers like. There are also tourism businesses who are personalising their offerings as they collect, classify and use large data volumes on the consumers’ behaviours. As more consumers carry smartphones with them, they may be easily targeted with compelling offers that instantaneously pop-up on their mobile screens.

Furthermore, consumers are continuously using social networks which are indicating their geo-location, as they use mobile apps. This same data can be used to identify where people tend to gather. This information is valuable to brands as they seek to improve their consumer engagement and marketing efforts. Therefore, businesses are using mobile devices and networks to capture important consumer data. For instance, smart phones and tablets interact with networks and convey information on their users’ digital behaviours and physical movements to network providers and ISPs. These devices have become interactive through the proliferation of technologies, including; near-field communication (NFC). Basically, embedded chips in the customers’ mobile phones are exchanging data with the retailers’ items possessing such NFC tags. The latest iPhone, Android and Microsoft smartphones have already incorporated NFC ca­pabilities. The growth of such data-driven, digital technologies is surely adding value to the customer-centric marketing. The latest developments in analytics are enabling businesses to provide a deeper personalisation of content as they use socio-demographic and geo-data that new mobile technologies are capable of gathering.

For example, mobile service companies are partnering with local cinemas, in response to the location-targeted mobile advertising; as cinema-goers may inquire about movie information, and could book tickets, and select their seats through their mobile app. These consumers who are physically situated within a given geographic proximity of the participating cinemas may receive location-targeted mobile ads. The cinemas’ ads will inform prospects what movies they are playing and could explain how to purchase tickets through their smart phone. The consumers may also call the cinemas’ hotlines to get more information from a customer service representative. Besides location-targeted advertising, the mobile companies can also promote movie ticket sales via mobile ads that are targeted to individuals, according to their behaviour (not by location). Therefore, companies may direct their mobile-ad messages to those consumers who had previously responded to previous mobile ads (and to others who had already purchased movie tickets, in the past months). Moreover, the cinema companies can also promote movies via Facebook Messenger Ads if they logged in the companies’ websites, via their Facebook account. Mobile users may also receive instant message ads via pop-up windows whenever they log into the corporate site of their service provider.

It is envisaged that such data points will only increase in the foreseeable future, as the multi-billion dollar advertising monopolies are being built on big data and analytics that are helping businesses personalise immersive ads as they target individual customers. The use of credit card transactions is also complementing geo-targeting and Google Maps, with ads; as the physical purchases are increasingly demanding personalisation, fulfillment and convenience. There may be consumers and employees alike who out of their own volition, are willing to give up their data for value. Therefore, the businesses need to reassure them through concise disclosures on how they will use personal data. They should clarify the purpose of maintaining their consumer data, as they are expected to provide simple user controls to opt in and out of different levels of data sharing. This way, they could establish a trust-worthy relationship with customers and prospects.

Companies are already personalising their shopping experience based on the user situation and history. Tomorrow’s tourism businesses are expected to customise the user experiences of their mobile applications and web interfaces, according to the specific needs of each segment. Big data and analytics capabilities are increasingly allowing businesses to fully leverage their rich data from a range of new digital touchpoints and to turn them into high impact interactions. Those businesses that are able to reorient their marketing and product-development efforts around digital customer segments and behaviours will be in a position to tap into the hyper-growth that mobile, social media and the wearables markets are currently experiencing.

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Filed under Airlines, Analytics, Big Data, digital media, Education, Hospitality, ICT, Marketing, tourism, Travel

The Segmentation of Demographics in the Travel Industry

This is an excerpt from: “Market Segmentation, Targeting and Positioning”

How to Cite: Camilleri, M. A. (2018). Market Segmentation, Targeting and Positioning. In Travel Marketing, Tourism Economics and the Airline Product (Chapter 4, pp. 69-83). Springer, Cham, Switzerland.

Demographic segmentation involves dividing the market into groups that are identifiable in terms of physical and factual data. The demographic variables may include; age, gender, income, occupation, marital status, family size, race, religion and nationality. These segmentation methods are a popular way of segmenting the customer markets, as the demographic variables are relatively easy to measure. For example, the age range for business travellers may usually span from their late twenties to their mid-fifties.

Younger employees are travelling for business purposes and their buying habits are completely different than their older counterparts. On average, millennials took 7.4 business trips in the last year, compared to 6.4 for Generation Xers and 6.3 for baby boomers (Skift, 2018). Younger travellers are less likely to book air travel based on loyalty programme perks. They are more likely to book their flight according to the airline service and the customer experience they offer. Moreover, young travellers are more likely to use room share services like Airbnb, than other segments (Skift, 2018). However, for the time being, major hotel brands are not under any serious threat.

At the same time, Uber and other ridesharing services are becoming mainstream across all age groups, as they may be cheaper than taxis (Pew Research, 2016). The age range in the leisure market is a very broad one and quite different to that in the business market. Children particularly can play an important role in leisure travel, as they travel abroad on holidays with their families. Young people in their early to mid-twenties too are prepared to spend their disposable income on travel before they take on the responsibilities of family life. At the other end of the scale, we have those who are retired from work, are in a relatively good health and in good financial position which allows them to travel.

In the past, middle-aged males dominated the business travel market. However, recently, the advertising and promotion of airline services have increasingly targeted female business travellers. This market controls 60% of U.S. wealth and influences 85% of purchasing decisions (Skift, 2014). The female gender is high-tech, connected, and social. They represent 58% of online sales (Skift, 2014). To maintain their competitive edge, travel brands must start focusing their campaigns to better target women. The leisure travel market is far more balanced in terms of gender. In fact, in older categories of leisure travellers, that is over the age of sixty, women outnumber men due to their longer life expectancy (Boston Globe, 2016).

The ability to travel for leisure purposes greatly depends on an individual’s income. Leisure travel is a luxury which may be foregone when times are financially difficult. Generally, as personal income rises, the demand for air travel increases. However, should there be a recession, money belts are tightened, and less leisure trips may be taken. This is an example of a concept known as income elasticity (this topic will be discussed in Chapter 8). Income elasticity can be defined as the relationship between changes in consumers’ income level and the demand for a particular item.

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The political environment of marketing

 

This is excerpt from: Camilleri, M.A. (2018). Travel Marketing, Tourism Economics and the Airline Product, Springer, Milan, Italy. ISBN 978-3-319-49849-2


To be successful, companies must adapt to ongoing trends and developments in their macro and micro environments. Therefore, it is in the interest of organisations to scan their marketing environment to deal with any possible threats from the market and to capitalise on any available opportunities. This chapter explains the external environmental factors, including; political, economic, social and technological influences. It also considers the internal environmental factors, including; capital structures, resources, capabilities and marketing intermediaries; as it identifies competitive forces from differentiated or low-cost service providers.

A sound knowledge of the customer requirements is an essential ingredient for a successful business. For this reason, companies should consistently monitor their marketing environment. The marketing environment is continuously changing, as it consists of a number of unpredictable forces which surround the company.

The regulatory and competitive conditions as well as other market forces, including; political, economic, social and technological forces, could affect the organisational performance of the tourism businesses. Hence, this chapter will look into some of these issues. The tourism industry is highly influenced by economic factors, including; strong exchange rate fluctuations, the price of oil and other commodities, among other matters. Moreover, social factors including global concerns about safety and security could influence tourist behaviours. Notwithstanding, the regulatory environments will also have an impact on tourism and airline businesses. For instance, the airline industry’s deregulation and liberalisation has created numerous opportunities for many airlines, including low-cost carriers. At the same time, it has threatened inefficient airlines who have been protected by regulation.

Competition is a vitally important element in the marketing environment and it should not be under-estimated. The businesses competitors comprise suppliers of substitute products. They may be new entrants in the marketplace. Alternatively, they may include customers and suppliers who were stakeholders of the business. In this light, tourism marketers should be knowledgeable of different business models as competition can take different forms, like for example, differentiated, full-service companies or low-cost service providers. For these reasons, organisations should have effective mechanisms to monitor the latest developments in the marketing environment.

Environmental Scanning

Environmental scanning entails the collection of information relating to the various forces within the marketing environment. This involves the observation and examination of primary and secondary sources of information, including online content from business, trade, media and the government, among others. The environmental analysis is the process of assessing and interpreting the information gathered. An ongoing analysis of the gathered data may be carried out by marketing managers or by researchers who have been commissioned to conduct market research (as explained in the previous chapter). Through analysis, marketing managers can attempt to identify extant environmental patterns and could even predict future trends. By evaluating trends and tendencies, the marketing managers should be able to determine possible threats and opportunities that are associated with environmental fluctuations. When discussing the ‘marketing environment’ we must consider both the external environment (i.e. the macro-environment) as well as the internal environment (i.e. the micro-environment) (Kotler, Armstrong, Frank & Bunn, 1990).

The Macro Environment

The tourism businesses must constantly assess the marketing environment. It is crucial for their survival and achievement of their long-term economic goals. Therefore, marketing managers must engage in environmental scanning and analysis. Most firms are comfortable assessing the political climates in their home countries. However, the evaluation of political climates in foreign territories is far more problematic for them. Experienced international businesses engage in political risk assessment, as they need to carry out ongoing systematic analyses of the political risks they face in foreign countries. Political risks are any changes in the political environment that may adversely affect the value of any firm’s business activities. Most political risks may result from governmental actions, such as; the passage of laws that expropriate private property, an increase in operating costs, the devaluation of the currency or constraints in the repatriation of funds, among others. Political risks may also arise from non-governmental actions when there is criminality (for example: kidnappings, extortion and acts of terrorism, et cetera). Political risks may equally affect all firms or may have an impact on particular sectors, as featured hereunder. Non-governmental political risks should also be considered. For example, Disneyland Paris and McDonalds have been the target of numerous symbolic protests  who view them as a convenient target for venting their unhappiness with US international agricultural policies. In some instances, protests could turn violent, and may even force firms to shut down their operations, in particular contexts.

Typical Examples of Political Risks

Type                                                   Impact on Firms
Expropriation Loss of future profits.
Confiscation Loss of assets, loss of profits.
Campaigns against businesses Loss of sales; increased costs of public relation; efforts to improve public image.
Mandatory labour benefits legislation Increased operating costs.
Kidnappings, terrorist threats and other forms of violence Increased security costs; increased managerial costs; lower productivity.
Civil wars Destruction of property; lost sales; increased security costs.
Inflation Higher operating costs.
Repatriation Inability to transfer funds freely.
Currency devaluations Reduced value of repatriated earnings.
Increased taxation Lower after-tax profits.

 

References:

Camilleri, M. A. (2018). The Marketing Environment. In Travel Marketing, Tourism Economics and the Airline Product (pp. 51-68). Springer, Cham, Switzerland.

Kotler, P., Armstrong, G., Franke, G., & Bunn, M.D. (1990). Marketing: An Introduction, Vol. 1. New Jersey: Prentice Hall.

 

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