Research Paper (undergraduate), 2007
30 Pages, Grade: 2
2. Problem definition
3. Definition of Best Agers
4. Segmentation of Best Agers
4.1 Theoretical background for market segmentation
4.11 Geographic segmentation
4.12 Demographic segmentation
4.13 Psychographic segmentation
4.14 Behavioural segmentation
4.2 Proposals for segmenting the Best Ager market
5. Analysis of the Best Ager market
5.1 Demographic development
5.2 Financial situation of the Best Agers
6. Free-time activities of the Best Agers
6.1 Health and sports
6.21 Frequency of travelling
6.22 Kind of travelling
6.23 Means of travel
6.24 Types of accommodation
6.26 Motives of the Best Agers for travelling
6.27 Internet use
List of figures
Appendix 1: Segmentation variables of consumer markets
Appendix 2: Types of accommodation preferred by the Germans
Appendix 3: Holiday destinations 2006
Appendix 4: Motives of Best Agers for travelling
This report deals with the analysis of the Best Ager market for the tourism industry. It first presents the several segmentation methods in the theoretical part and defines the term Best Ager. Then proposals for segmenting the Best Ager market are given. The best methods are developed by the two agencies Grey and TNS Emnid. They use methods which combine lifestyle variables with demographic variables which is most suitable for segmenting the Best Ager market. A tour operator can either stick to these proposals or segment the market with primary research data on itself if it has the necessary financial resources to do so.
After the proposals for segmenting the Best Ager market, the travel market is analysed .First the general trends are mentioned and then the trends for the Best Agers are analysed to investigate if the Best Ager market has a potential for the tourism industry in the future.
Additionally the demographic development in Germany and the financial situation of the Best Agers is analysed to display if the market will grow in the future and if the Best Agers have the income and assets to afford traveling in the future.
The Best Ager market will increase in the future due to decreasing birth rates and longer life expectancies. The financial situation at the moment is quite promising because the pensions are still high and the inherited money is likely to increase in the future due to savings of the past generations.
The Best Agers today like to travel and an increase in traveling, especially in trips abroad, city trips, air travels and packaged holidays is expected in the future. The travel propensity for the over 60 year’s olds lies at about 68%.
The preferred holiday forms of the Best Agers are cruises and study trips. The most popular holiday destination is Spain and it is likely to increase in the future. Many Best Agers also like to stay longer in the warmer regions especially in the winter months.
This has already been recognized by the tour operators but still can be improved and the offers can be more extended.
Best Agers in comparison to other target groups have a high focus on quality and price/quality ratios have to be therefore of an accepted standard. Best Agers like good food and also try the specialties of the different countries or regions, the hotels have to recognize this important fact.
Due to the increasing importance of the Internet, the travel industry has to use this medium more effectively in the future. Best Agers already make use of informing about holiday destinations via the Internet. Some also book their holidays there but this number can be increased in the future.
The Internet use will increase in the future Best Ager market because the younger generations are used to computer and the Internet and have a lot of experiences by using it.
The course IT_IO4 Individual Topic is part of the fourth year of International Business and Management Studies at Fontys International School of Business and Economics. The course was designed to meet the individual needs of the students within their studies.
Every student has to choose a topic related to Marketing, any field of Business Administration or Economics and will write a report about this topic after discussing it with his provided tutor for this course. This report has been written during this course.
It first describes the several segmentation methods which could be useful to segment the Best Ager market for the tourism industry. After the theoretical part, proposals for a segmentation of the Best Ager market are given and this market is analysed concerning its potential for the tourism industry.
The research methods used in this report consist of several literatures of marketing and tourism, internet sources and studies of research agencies as well as statistics of national agencies.
Venlo, 18th November 2007
“When I was 40, my doctor advised me that a man in his 40s shouldn't play tennis. I heeded his advice carefully and could hardly wait until I reached 50 to start again. “
Hugo L. Black (1886-1971)
This statement by Hugo Lafayette Black is quite old but fits very well in the mindset of the Best Agers today. They do not feel old and want to enjoy their rest of the life.
In the past they were seen as financially unsure, personally isolated and in bad health condition but this stereotype of the Best Agers is not valid anymore and is changing in these times. The Best Agers today are mainly dynamic, adventurous and like to spend their money instead of saving it for their relatives or worse times.
This changing lifestyles and better health condition of the Best Agers and the demographic development of the German society makes this segment very interesting for the economy. Concerning their changing interests and lifestyles this group could be also interesting for the tourism industry but not only the changing behaviour makes this segment interesting , their high disposable income and their potential to spend the money for traveling will change the travel sector in the future. The Best Agers do not only get money from their pension, they will inherit amounts of money which haven’t been so high since long decades.
This report will analyse the current market situation in the tourism industry and will work out the chances and perspectives for the tourism industry.
However it first has to be defined what a Best Ager is and how these group of people can be differentiated from the rest of the society. Therefore the heterogeneity of this market segment will be described and different methods how to segment this market will be discussed.
An Analysis of the Best Ager market in Germany will be carried out to describe the demographic situation in Germany as well as the financial situation of the Best Agers in these times. Only a big enough segment and people with spending power are interesting to deal with further.
After that the free-time activities of the Best Agers will be analysed. The focus lies here in the traveling behaviour of this group of people. First the general travel behaviour of the German population is mentioned and then the travel behaviour in every category for the Best Ager will be analysed. The kind of traveling, the holiday destination, the preferences for accommodation, the frequency of traveling, the transport mode for traveling , the motives for traveling and finally the use of the internet for tourism web pages or booking behaviour will be analysed. The main source for the travel behaviour used is a study from the Forschungsgemeinschaft für Urlaub und Reisen e.V. because this organization is very famous for tourist analysis and publishes every year a study of the general travel behaviour of the Germans.
This report deals with the main question: Do the today's and future Best Ager generations in Germany represent an attractive potential for the tourism industry and how can this market be segmented, and gives a conclusion to the analysis and possible segmentation methods in the end.
This chapter describes the content and main problems with which the report will deal further.
Concerning the fact that many markets are saturated, it is very important for companies nowadays to gain advantages against their competitors. In order to reach a turnover growth, it is essential to attract new unsaturated market segments. So far a frequently neglected target group is that of the seniors. Since the seniors become in the future in many industries the most important market segment, a purposeful treatment of this group of consumers opens new market chances especially in the market for travels.
The age structure of the population changed in the last decades heavily. The population growth took place mainly with older humans. A historically new situation develops, in which ever older humans face an even smaller number of younger humans. Main causes of this demographic aging process are on the one hand due to individualizing and emancipation trends and a decline in the birth rate, on the other hand a rising life expectancy due to improved environmental conditions.
The seniors nowadays take part actively in life. They are adventurous and like to consume.
The quantitive volume increase of older travellers and the fact that they have enormous disposal income and buying power will change the conditions in the travel industry. Furthermore, the trend of the reinforced utilization of low-price-flight-offers and the rising internet-utilization for trip-bookings lead to drastic changes in the tourism-sector. At present older people, already use the internet for acquisition or information about trips and vacations. This comfortable information and booking-behaviour will possibly turn into the normality with the future generation of the older people.
Some companies have already started to develop successful marketing programs for Best Agers; nevertheless the offering is not very wide. This may lie in the difficult assessment of this new target group on the one hand. No other consumer group is so heterogeneous in itself like the one of the older people. In the course of their life, they collected all life-experience, that their consumption-behaviour essentially shapes and shows consequently individual behaviours. On the other hand, lacking knowledge about the wishes and benefit expectations of the older people put a remarkable hurdle for usually young Marketing managers.
Therefore this report will show up several segmentation methods and will propose the one most suitable for segmenting the Best Ager market. Additionally it will analyse the different behaviours and lifestyles of the German Best Agers with focus on the tourism market.
The report will deal with the main question of: Do the today and future Best Ager generations in Germany represent an attractive potential for the tourism industry and how can this market be segmented?
This chapter gives a definition of the term Best Ager and why it will be used in this report.
In the literature there are numerous expressions of the different age groups starting from 40 years on. Schlaffer uses terms like Selpies" (second life people), "Woopies" (wave off more older people), "Wollies" (wave income old leisure people) or "Grampies" (growing retired active moneyed people in excellent state) as well as "eagle owl" (Under hundred years olds) and "master consumers" without mentioning the concrete age allocation ( Schlaffer H. 2003).
Many of these expressions take into account the financial situation of these groups. Verheugen talks about the ” free invisible generation "," golden Oldies”, “Young Olds”, Muppies "(middle aged urban professionals)," Senior Dinks "(senior double income, no kids) or" Woofs "(waving off more older folks) (Verheugen E. 2004), but where can the expressions “Best Ager” and “Senior” be classified?
For this one must know that the term "seniors" has a rather negative touch in Germany. For this reason this expression should not be used in Marketing as long as possible. Many people associate with the expression “senior” the dignified age, pension, decreasing consumption and demand ( Neunzig W. 2000). The word senior does not reflect the interests and lifestyles of the older generation nowadays. In the past one spokes of seniors at the age of about 60 years. Nowadays this expression is used for 75-80 year olds ( Verheugen E. 2004). Concerning the changing lifestyles and interests of the older people, the expression Best Ager will be used further in this report. This definition is already used in Marketing and suits best to the age group of people over 50 years old, although there are distinctions in the age range of this expression in the literature.
This chapter describes methods for market segmentation and will give proposals how to segment the Best Ager market for the tourism industry.
In the previous chapter the Best Agers were already classified by age and distinguished from other population groups. In the course of consumer research the providers will however recognize that a distinction only by age is not very useful. Artho pointed out that the behaviours, interests, personality structures and health conditions differ more in the age range from 60-70 years than in the age range of the 15-20 years old (Artho S. 1996).
For the development of offers suited to specific target groups like a travelling offer, the differentiation of Best Agers only by age range is unsuitable. A more fine tuned segmentation of the Best Ager market is recommended. Concerning the different ageing processes of the individuals the differentiation by psychological age would be more suitable than by chronological age.
In the following the theoretical background for the segmentation of the Best Ager market for a tourism product will be given. The different methods for segmenting a market will be shown and finally a method will be recommended to segment the market for the tourism industry.
It has to be mentioned that none of the methods will be perfect but the segmenting suggestions will provide a better structuring of the increasing market of the Best Agers.
Market segmentation is the dividing of a total market into its different parts by some method (Cahill D. 2006).
A market segment consists of a group of consumers who share the same set of needs and wants. The benefit of market segmentation is that a company can better design the marketing mix to satisfy the target market. The division of the total market in several customer groups can be done by different variables. Two broad groups of variables exist nowadays, the descriptive characteristics and the behavioural characteristics. The descriptive ones consist of geographic, demographic and psychographic where the behavioural look at consumer responses, pattern of usage or brand preferences.
For the travel market the variables are similar and will be explained further in the following subchapters.
A table with variables for segmenting a consumer market can be found in the Appendix.
4.11 Geographic segmentation
Geographic segmentation is divided into micro- and macro-geographical market segments. Macro-geographical segments are nations, states, regions, counties, cities or AC Nielsen areas, where micro-geographical segments taken neighbourhood relations into account, which means that persons at certain places and in direct neighbourhood behave similar in practice regarding life-styles and purchase behaviour (Meffert H. 2000 ).
Marketing of macro-geographical segments is generally cheaper and easier to obtain through secondary market research materials but nowadays micro-geographical marketing has become accessible even to small organizations as database costs decline, PCs increase, software becomes easier to use, data integration profligates, and the Internet grows (Kotler P. 2006).
It is important to take into account the regional differences of Germany.
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