CONSUMER BEHAVIOUR COURSEWORK · ongoing process, not merely what happens at the moment a consumer...

Gilles Saraillon – id : I054999

Segmentation analysis in the travel industry – coxandkings.co.uk

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CONSUMER BEHAVIOURCOURSEWORK :

SEGMENTATION ANALYSIS IN THE TRAVEL INDUSTRY Written by Gilles Saraillon



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table of contents

1. foreword

2. consumer behaviour & communications

I On the camel’s backII The talk of the town

3. segmentation methods

I Generic segmentation modelsII The Ark Leisure segmentation model

4. conclusions and recommendations

5. bibliography and references



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1. foreword

Before attempting to address the challenges of this assignment, I’d like to point out a few issues that I encountered while gathering informations and data in order to present a compelling perspective of the matter at hand.

Despite hours of research on the internet and in libraries I had a hard time finding any freerelevant data regarding segmentation in the UK travel industry. As a matter of fact, numerous resources offer insights on the subject but unfortunately, these resources come at a price (ranging from £300 to £2,000).

In my opinion, it’s quite difficult for an individual student to paint an accurate picture and to properly segment a whole industry without evidence-based materials such as market research documents or similar data widely used by marketers.

That’s the reason why I had to resort to using general models from which I derived my findings and conclusions. I’m not very keen on pure theoretical work to say the least, but to my great disappointment, I lacked information covering the hard facts such as statistics and real-life market survey results to back my assumptions.

Therefore, this work relies heavily on my own extrapolations and general frameworks by various authors rather than current market research data findings emanating from primary research.

I tried my best to refrain from merely regurgitate generic informations and really emphasized on using my own work experience and knowledge to write this report.

I hope that I succeeded in making the course material my ‘own’ so to speak and that the views presented below are both comprehensive and representative of a good grasp of the subject matter.

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2. consumer behaviour & communications

On the camel’s back

According to the World Tourism Organization (WTO) regular folks become tourists as soon as they travel (by any transportation means) at least 160 km in any direction for a purpose other than working or going home. This means that, distance-wise, your passport to adventure is just a stone-throw’s away.

Modern transportation systems and infrastructures have considerably shrunken the perceived size of the Earth. This ‘small—world syndrome’ is a blessing for millions of aspiring travelers who in the past, didn’t dispose of the adequate resources (financial or temporal) to benefit from a nice vacation in the sun.

Today’s tourist doesn’t have much in common with his ancestor. He generally has more time than him, is likely to be more knowledgeable about possible travel destinations and he has greater buying power (save currency fluctuations) because exotic places and activities have become much more affordable than in the past.

Traveling abroad or staying in your home country to discover it (technically you can also be a tourist in your own country) is hopefully synonymous with excitement, freedom and leisure. If it’s not the case, then why go on vacation in the first place?

Thanks to the continuous expansion of niche services in the tourism industry, people have grown accustomed to be offered very creative destinations and activities at any time of the year and for almost any budget.

Cox & Kings Travel seems to be embracing this ‘shotgun’ approach with an extremely broad range of specialized packages (shopping-centered, wine-centered, etc…), prices, services and more generally travel ideas that span the four cardinal points, reach the poles in canoe and then go home on a camel’s back. This is a situation of ‘consumer hyperchoice’, where options are so bountiful that an untrained holiday-maker surfing their website might just walk away with a safari in Kenya when he came to buy a cruise in the Caribbean. Having too many choices is actually detrimental to our decision-making abilities and hinders our good judgment instead of aiding it (Mick, Broniarczyk & Haidt, 2004)1.



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This serve-all/be-all philosophy caters to a very fragmented market and the following work offers to streamline it and make it as lean as possible, so marketing communications become easier to perform and in return better responses will emerge.

The talk of the town

Buying a service is very different than buying a palpable product. This has to be taken into account when trying to understand the motivations underlying the decision-making process of travel products consumers. Besides, the ‘’high-spend aspect of tourism, means that tourism for the consumer is a high-risk decision-making process’’ (Swarbrooke & Horner, 2007)2. In order to elicit specific responses from the consumer, we must engage specific means. Exposing potential consumers to a flurry of indiscriminated offers and packages won’t trigger the expected returns.

Involvement being “a person’s perceived relevance of the object based on their inherent needs, values and interests’’ (Zaichkowski, 1985)3, it is of utmost importance to a company marketing a product like travel packages that it does its very best to keep its customers engaged at every stage of the purchase decision-making process.

Generally, consumer involvement rises according to the price or the complexity of the objectsought (product/service). The amount of time a prospective buyer spends gathering informationabout an object is also telling. Routine purchases like food or toiletries require little to no involvement, whereas a £2,500 travel package will have its prospect involved in a lot of information-seeking and collecting before a purchase decision can be reached.

In the case of holidays, the seller has to make sure in every step of the buying process that relevant and compelling informations are made available to the prospective buyer. Equally important is the post-purchase assessment phase where, as we’ll see in figure 1.1, the feedback given by the seller contributes to the overall experience and comforts the consumer in his choice.

The well-known buyer’s remorse effect takes place when there’s insufficient response or feedback from the seller, plunging the consumer into an uncomfortable state where despite having been convinced and having willingly purchased an item, and also probably being satisfied by it, he stills needs input from the seller to comfort him once and for all in his choice. This is especially true with pricey products or services like travel packages.

As we will see in the segmentation section of this work, behaviouristics, psychographics,demographics or geographics also play a large role when it comes to buying and being. Many external aspects are to be taken in consideration as well as internal aspects like personality traits, lifestyle or social background just to name a few.



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Figure 1.1 – stimulus-response model of buyer behaviour, Middleton & Clarke (2001)

This model of purchase decision-making process was chosen for its clarity and because it illustrates quite well where the challenges for Cox & Kings Travel lie. Having an internet website as a store-front has obvious advantages but also hinders Cox & Kings’ ability to maximize their reach and communicate in ways other than those offered by a direct marketing communications channel (newsletters, banner ads, etc…).

Marketing budget and scope is unknown at the time of writing, but it is assumed that such a company would greatly benefit from other ‘talking tools’ in order to engage its customers in collaborative exchanges rather than mere transactional exchanges that occur independently of any previous or subsequent exchange (Bagozzi, 1978 ; Houston and Gassenheimer, 1987)4.

In other words, these exchanges shouldn’t happen in a vacuum ; they should be conveyed through different integrated and intertwined channels to maximize their effectiveness.

Figure 1.2 below depicts the ‘spectrum of marketing exchanges’ and sustains the view that in order to build tight bonds with its customers, Cox & Kings should diversify its range of communications tools. Engaged consumers are more likely to ‘feel at home’ if a particular



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company gives them the latitude to express themselves by means other than those involving reaching their pockets or swiping their credit cards.

This customer-centric approach is relatively recent and therefore it’s no surprise that many companies are still lagging behind in this area. The concept of ‘pushing/pulling’ products or services is old hat in an age where every effort is made to let the customer express his needs, wants and demands more freely and more directly than ever.

Figure 1.2 – spectrum of marketing exchanges (Fill, 2009)

Consumers are no longer passive recipients of marketing communications slavishly modeling their behaviour in response to a unilateral flux of information. Consumer behaviour is “in fact an ongoing process, not merely what happens at the moment a consumer hands over money […] and in turns receives some good or service’’ (Solomon, 2009)5.

Without emphasizing too much on the marketing communications aspects, we see that consumer behaviour for the tourist industry is positively affected by five major communications tools, as evidenced by the ‘communication channels’ section of figure 1.1.

These tools are surprisingly absent from Cox & Kings’ arsenal, which mostly relies on direct marketing to engage in communications with its customers.

It is the view of the author that glaring weaknesses exist in this area, and that positive attitude and perception changes could be achieved provided that the proper course of action is taken.

3. segmentation methods

Generic segmentation models



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Below we’ll discuss the pros and cons of the generic segmentation models notably used in the travel industry in an attempt to ‘pigeonhole’ consumers and hence make them more controllable and more persuadable.

This figure takes a look a the four mainstays of market segmentation with a tourist industry approach :

Figure 2.1 : Classic segmentation techniques (reviewed by Horner and Swarbrooke, 1998)

GeographicalAt a basic level, defines tourist consumers according to their geographic location on the assumption that behaviour is influenced by where people live.

DemographicAttempts to define tourist consumers’ behaviour in relation to age, sex, family lifecycle stage, social class, income and other such criteria.

PsychographicAssumes that tourist’s purchasing behaviour is related to their personality or lifestyle.

BehaviouristicFocuses on tourist’s behaviour in relation to a particular tourism product, and attempts to segment the market based on differences in behaviour, for example the benefits sought, buying patterns and trends, or degree of loyalty.

Geographic and demographic segmentation

At first glance, segmenting consumers using their geographic position seems like a seducing option. As a matter of fact, most people nowadays are easily located. Whether by using the traditional phone or business directory method or through various websites, most notably the social ones, where most people are more than happy to share personal and confidential information with the rest of the world.

Social networks, for better or worse, foster transparency and the need of belongingness. This results in having people gratuitously give precise information regarding not only their gender, age or even sexual preferences, but about their income, the make of their car or their favorite brand of toilet paper.

A marketer’s dream some would say. Unfortunately, consumer behaviour is as complex and hard to define as the human brain commandeering the behaviour itself. Therefore, marketers must be able to point the finger on what really makes people ‘tick’ in order to achieve a somewhat accurate result, and can no longer afford to rely exclusively on the yellow pages to build their marketing campaigns.



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Horner & Swarbrooke implicitly challenge the relevance of these methods by basically saying that a sensible parallel cannot be drawn between the location of an individual and his/her predictable behaviour in the context or role of a tourist consumer.

The two went as far as saying that geographic and demographic segmentation were ‘‘yesterday’s techniques’’ when they critically wrote about it back in 1998! (Williams, 2008)6.

Another technique would be to hybridize geographic and demographic methods to create a more refined way of segmenting consumers. However, geodemographics, are accordings to Williams, ‘’still relatively poor predictors of visitors’ leisure interests and associated touristic behaviour’’ (Williams, 2008)7.

This is probably due to the fact that despite quantitatively knowing more about consumers, we still don’t know more about them qualitatively. This stresses the importance of having different segmentation models to use and juggle with rather than a couple of inflexible ones that paint a somewhat accurate picture, yet don’t make good use of ‘pigments’ to color the findings properly.

In other words, geographic and demographic segmentation might be a viable starting point and a useful base of investigation but proves too narrow-sighted to procure the type of data modern marketers need.

Psychographic segmentation

‘’Fashionable but too difficult to implement’’ (Horner & Swarbrooke, 1998)8. In just a short sentence this segmentation method is swept away and deemed as unpractical. When looking at it a bit closer it makes sense because it would be difficult to tie someone’s lifestyle to a predictable consumer behaviour toward tourism.

To be extremely concrete and to the point : would it be possible to predict – with a fair amount of accuracy – the expected behaviour of a prospective holiday-maker passionate about mountaineering using only psychographics ? Probably not, because a lifestyle, and the opinions or attitudes attached to it doesn’t do a good job of telling us what this person values. As we’ll see with the Ark Leisure segmentation model, which blends three main elements of measures, values play a central role in the definition of a precise segmentation.

Behaviouristic segmentation



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This method focuses solely on discovering the behaviour of consumers in relation with a tourist destination or product and categorizes them in term of visits (first-timers/returners), attitudes towards the destination, etc…(Williams, 2008)9

Again, here it seems that using a behaviouristic segmentation along with the other models mentioned above is still insufficient in the quest of reaching the heart of consumers and learning about their values as a whole, not by ‘segmenting the segments’ so to speak.

The Ark Leisure segmentation model

This model was developed by Arkenford, a market research company that was commissioned by Visit Britain and tasked to come up with a segmentation method that would no longer rely on data about locations, populations and their psychographics or behaviours, but rather provide a solution able to highlight the beliefs and values of holiday-makers in order to sell them not only a destination product but also an experience relevant to their aspirations.

The Ark Leisure model consists of three elements :

Aspirations (value statements that identifiy segments on the basis of perceptions and judgements of quality).

Life factors and choice drivers (such as income and stage in the family lifecycle).

Tourism purchase scenarios (eg accommodation and attraction preferences, purpose of trip, satisfaction with choices previously made, and other purchase drivers and determinants).

(Williams, 2008)

As we can see from the elements chosen to form the model, a delicate blend of ‘soft’ (aspirations) and ‘hard’ (income) factors are taken into account in order to produce more nuanced profiles that hopefully are better suited to address modern tourism industry offerings.

Marketing to niches of consumers has become extremely popular lately with the advent of small companies operating on well-defined markets with highly targeted offers.

This is especially true in the case of Cox & Kings given the constellation of offers and packages they propose. It would be of great help if they could use the profiles below to provide a more refined value tourism proposition.



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Figure 2.2 – Ark Leisure segmentation model (Arkenford, 2008)

Using this figure as a means to establish Cox & Kings’ current customer base would probably lead to the realization that their offers and products could potentially cater to most of the value-based segments above.

Indeed, if we take a closer look (figure 2.3 below) at the characteristics of the eight segments composing this model, it’s rather easy to correlate a tourism product currently offered by Cox & Kings.

This further demonstrates that the company tries to accommodate a wide spectrum of possible clientele and by doing so paradoxically reduces its chance to address the needs of the most financially attractive segments.

Furthermore, this generalist positioning might hurt them in the long run in a market where consumers expect innovation, specific product knowledge and sophisticated offerings from companies.

The figure has been annoted to show real cases of products matching possible segments.

Figure 2.3: Ark Leisure Segment Descriptors (Arkenford, 2008)

Cosmopolitans Strong, active, confident Style and brand important, but as an



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example of product match :

Brazil in Style

(http://www.coxandkings.co.uk/tourdetails.aspx?tourcode=bia2011&type=private&int=la)

expression of their self-made identity High spenders especially on

innovation and technology Looking for new challenges, new

experiences Globetrotters

Discoverers


Jidai Festival of Kyoto

(http://www.coxandkings.co.uk/ideas-month.aspx?month=10)

Independent in mind and action Little influenced by style or brand

but interested in new options Buy on function and value to them Looking for new and educational

experiences

Traditionals


Paris

(http://www.coxandkings.co.uk/citybreak.aspx?tourcode=prt2008&type=short&int=ee)

Self-reliant, internally referenced Slow to adopt new options Strong orientation towards

traditional values Value individual attention and

service

Functionals


Barcelona

(http://www.coxandkings.co.uk/citybreak.aspx?tourcode=bcs2010&type=short&int=ee)

Self-reliant Price-driven Value function over style Traditional values, but interested in

new experiences, not risk averse

Habituals


Malaga

(http://www.coxandkings.co.uk/citybreak.aspx?tourcode=pmg2010&type=short&int=ee)

Largely inactive, low spending group Very traditional, strongly resistant to

change Risk averse Value relaxation, peace and quiet

Followers Strongly influenced by what others



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Florence, Lucca & Pisa

(http://www.coxandkings.co.uk/tourdetails.aspx?tourcode=flp2011&type=private&int=ee)

will think Don’t want to be seen as old

fashioned Less active Slow to adopt Avoid risk

High Street


Bangkok & Koh Phangan

(http://www.coxandkings.co.uk/tourdetails.aspx?tourcode=gbth2&type=private&int=fe)

Mainstream early adopters Followers of high street fashion Care what others think Happy to buy packaged options

Style Hounds


Bordeaux Wine Tour

(http://www.coxandkings.co.uk/tourdetails.aspx?tourcode=ckb2011&type=group&int=ee&tourtypesub=w)

‘Young Free Single’, impulsive Fashion counts Brand counts Looking for fun with friends Most not seriously sporty

As further evidenced here, there really is ‘something for everyone’ in Cox & Kings’ catalog of products. A typical gut-reaction would tell that the wider the selection the wider the reach.

This is not necessarily the case. As discussed before, wanting to cater to every segment possible is commendable, but superfluous and counterproductive. Bargain shoppers don’t mix with high-end boutique lovers, and the same can be said for the travel industry.The Ark Leisure segmentation model is now ‘’extensively used by regional agencies and strategic tourism bodies’’ (Williams, 2008)10, because of its effectiveness in detecting the most attractive segments and its flexibility.

Although other segmentation models exist, it is the view of the author that if Cox & Kings is to succeed in an increasingly competitive and targeted market, the adoption of the Ark Leisure model seems inevitable.

According to what has been demonstrated it would be advisable for Cox & Kings to focus on three main segments, namely the cosmopolitans, the style hounds and the discoverers. Their



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respective social classes and relatively close situations in terms or age groups, cultural backgrounds and attitudes make them attractive segments to cater to.

Besides, as we’ll see with the website renovation task, cosmopolitans are sensitive to technology in a broad sense, so the opportunity to influence them with a sleeker, more current website design proposition is definitely there. Positive forays could also be made by designing and promoting high-tech destinations like Hong Kong, Taiwan or California. A trip to San Francisco tied-in with a detour to the Silicon Valley for a ‘tech visit’ would work well in their case.

For the stylehounds segment, some thinking could be made in respects of strategic partnerships with winemakers for example. A tie-in with strong brands like Curious Grape or Davenport would help influence their choice and perception towards Cox & Kings as an innovative travel company daring to brand their travel packages.

As for the discoverers, most of the offer is already there. What Cox & Kings need to do though, is take those adventure-packed travel offers to the forefront and expose them in a much clearer, assumed way. This would translate into an improved perception and a firmer attitude towards the company’s offerings.

4. conclusions and recommendationsWe have seen that Cox & Kings existing clients range from low-income, low-risk segments to the adventurous and affluent consumer. Although this might appear as a strength, it actually is a weakness that competitors could potentially exploit to their advantage in a market that present multiple facets and where the consumer has grabbed the reins to make in own decisions.

It is also posited that an abundance of choices don’t necessarily translate to an abundance of sales. It would be ill-advised to pursue divergent target markets in the hope that they’lleventually coalesce and form a coherent unit.

The reassuring over-simplification in offerings based on the generic segmentation models exposed above actually serve the wrong purpose of presenting the market in a very basic way and might lure companies into believing that simple explanations are often the truest.

The definition of future clients for Cox & Kings should be based upon the company resources and specific knowledge as well as upon the respective attractiveness of the value-based segments proposed by the Ark Leisure segmentation model.



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Today’s tourist doesn’t have much in common with his ancestor : he is more demanding, better informed and looking for offerings that provide high value for his money. Then it is all the more natural that companies catch up with him, inform themselves about exactly who he is and provide in turn what he wants.

It is thus recommended that Cox & Kings define their target consumer in a much clearer way and learn to cater to fewer segments, according to pre-defined business objectives, whether they are volume-based or profit-margin based.

As we’ll later see in the website renovation task, Cox & Kings’ future success heavily hinges on the quality of their website and their capacity to engage their customers and converse with them in the contexts exposed earlier.

A retrenchment is then in order if they want to compete with other sites that are leaner, less wordy and less overwhelming. Less is definitely more in the age of information overload and in a context where social networks, review sites or aggregators never cease to reinvent themselves in order to keep up with the everlasting center of all attentions: the consumer.

5. bibliography and references

1. David Glen Mick, Susan M. Broniarczyk, and Jonathan Hait (2004). Choose, Choose, Choose, Choose, Choose, Choose : Emerging and Prospective Research on the Deleterious Effects of Living in Consumer Hyperchoice. Journal of Business Ethics 52: pp.207-11 ; see also Barry Schwartz, The Paradox of Choice : Why More Is Less (New York : Ecco, 2005). Quoted in: Michael R. Solomon (2009), Consumer Behaviour, p.332, ninth edition, New Jersey, Prentice Hall.

2. John Swarbrooke & Susan Horner (2007). Consumer Behaviour in Tourism. Second Edition. Oxford, Elsevier.

3. Judith Lynne Zaichkowsky. Measuring the Involvement Construct in Marketing. Journal of Consumer Research 12 (1985) :pp.341-52. Quoted in: Michael R. Solomon (2009), Consumer Behaviour, p.163, ninth edition, New Jersey, Prentice Hall.

4. R. Bagozzi (1978). Marketing as exchange : a theory of transactions in the marketplace.American Behavioral Science, 21 (4), pp.257-261. F. Houston & J. Gassenheimer (1987). Marketing and exchange. Journal of Marketing, 51, pp.13-18. Quoted in: Chris Fill (2009), Marketing Communications – Interactivity, Communities and Content, p.8, fifth edition, Harlow, Pearson Education Limited.



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5. Michael R. Solomon (2009), Consumer Behaviour, p.34, ninth edition, New Jersey, Prentice Hall.

6. Paul Williams (2008), Segmenting the Tourism Market, Insights.org.uk


8. John Swarbrooke & Susan Honer (1998). Key Issues in Market Segmentation in Tourism Today. Insights, A7-A18 (1998), English Tourist Board. Quoted in : Paul Williams (2008), Segmenting the Tourism Market, Insights.org.uk


10. Paul Williams (2008), Segmenting the Tourism Market, Insights.org.ukWebsites used :

www.arkenford.co.uk

www.insights.org.uk

www.coxandkings.co.uk

Figures :

Figure 1.1 : Middleton & Clarke (2001). Quoted in : Paul Williams (2008), Segmenting the Tourism Market, Insights.org.uk

Figure 1.2 – Chris Fill (2009), Marketing Communications – Interactivity, Communities andContent, p.8, fifth edition, Harlow, Pearson Education Limited.

Figure 2.1 : www.insights.org.uk

Figure 2.2-2.3 : www.arkenford.co.uk

Wordcount : 3,754 (biliography and references excluded)

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CONSUMER BEHAVIOUR COURSEWORK · ongoing process, not merely what happens at the moment a consumer...

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