Research 101: Multi-Dimensional Segmentation

Travellers are heterogeneous. Every traveller is attracted to different destinations, has distinctive travel planning and booking habits, and likes to participate in different activities while on vacation. Market segmentation is the strategic tool to account for the heterogeneity among travellers.

In today’s highly competitive tourism market, most destination marketers have turned away from mass marketing towards more targeted marketing efforts aimed at specific travel segments. Because each segment comprises distinct groups of travellers with similar wants and needs, it is often easier and more cost-effective to develop travel products and communications that are targeted at a few strategically selected segments that will generate greater revenues and higher return on investment. Market segmentation is also useful in identifying niche markets where a destination may have a unique marketing advantage or that are generally under-served.

The complexity of travel as a consumer product means there are a multitude of ways to segment a travel market, each of which is useful to different end-users. For tourism markets, we typically recommend a multi-dimensional segmentation approach to serve the varying needs of marketers, advertising agencies, product developers, tour operators, and other industry end-users. In our experience, the most useful approaches for the tourism sector (in no particular order) are:

Needs/Benefits-Based Segmentation –

Usage: use this to understand why travellers travel;

Classification: travellers are segmented based on experiences sought and perceived benefits (“I really need some fun in my life”);

Advantage: useful for developing advertising campaigns and messages that appeal to travellers’ underlying needs and motivations.

Values-Based Segmentation –

Usage: use this when building your marketing messages and promotional offers;

Classification: travellers are segmented based on travel attitudes, beliefs and lifestyles (“I’m way too busy and don’t have time to plan a major trip”);

Advantage: permits marketing strategies to be based on groups with similar psychographic profiles.

Decision-Making Segmentation –

Usage: use this to increase your relevancy – be there with the right message at the right time;

Classification: travellers are segmented based on decision-making styles, variety seeking behaviour, information search, media usage and distribution channel preferences (“I just jump in the car and go”);

Advantage: segmentation is based on direct linkages to destination choice.

Usage/Loyalty-Based Segmentation –

Usage: use this to map out customer valuation tiers;

Classification: travellers are segmented based on past and potential behaviour (“I’ve been to Canada a million times and want to go back as soon as I can”);

Advantage: useful for direct marketing campaigns that target customers offering high-lifetime yield.

Product-Based Segmentation –

Usage: use this when building your products/services/infrastructure;

Classification: trips previously taken are segmented based on key product drivers (“I went skiing on my last vacation”);

Advantage: tells product developers what travel preferences and activities can be bundled together.

Geographic Segmentation –

Usage: use this to target your marketing communications by region;

Classification: travellers are segmented based on location (“the United States is right next door so I go there all the time”);

Advantage: permits cost-effective and focused marketing.

Demographic Segmentation –

Usage: use this to target your marketing communications by different demographics;

Classification: segments travellers based on demographics (“I am young, single, LGBT…”);

Advantage: segments are easy for advertising agencies to work with and reach.

Socio-Demographic – or Lifestyle – segmentation –

Usage: use this to target your marketing communications by lifestyle;

Classification: travellers are segmented based on socioeconomic characteristics (“My kids have left home so now we can afford to travel”);

Advantage: segments are easy for advertising agencies to work with and reach.

Psychographic segmentation –

Usage: use this for strategic guidance (such as market sizing) and directional guidance (media purchases);

Classification: a type of lifestyle categorization that is developed around customer opinions and often merges several schemes in the list above;

Advantage: give your destination a relationship edge; connect with travellers according to their values.

Q: Do you need them all?

Absolutely not! Which scheme(s) you choose will depend on what problem(s) you're trying to solve... segmentation models appropriate to developing advertising programs may be quite different to those used to develop marketing strategy.

Q: Which one is best?

The best segmentation analysis is the one that is most useful to you. Our experience—across a multitude of studies—shows that no one method invariably works best. Finding the one that will be most useful requires careful attention to strategic goals and is a process of exploring numerous alternatives until the best one emerges.

Final Thoughts

Knowing your target market has never been more important; it informs every part of your business. One segmentation scheme cannot inform all concerns; more and more destinations find they need to develop a multifaceted understanding of their consumer. 

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If you already have a segmentation scheme in place, consider using a new lens (or two, or three!) to help you dig deeper and bring your understanding of your target market to the next level. New segmentation schemes can change market understanding, challenging existing organizational perspectives. Put your existing data to work – explore the market in new ways to truly stay ahead of the competition.

If you don’t already have a segmentation scheme in place, what are you waiting for?

If you are interested in learning more about market segmentation, or need advice on the best type of segmentation approach for your destination, contact Summus Insights.