Market Segmentation and Branding in the Hotel Industry

Contents

List of Exhibit

1 Introduction

2 Market Segmentation
2.1 Definition
2.2 Tasks of Market Segmentation
2.3 Criterias for Segmentation Strategy
2.3.1.1 Geographic Segmentation
2.3.1.2 Demographic and socioeconomic Segmentation
2.3.1.3 Psychographics
2.3.1.4 Behavioural Segmentation
2.4 Targeting Strategies
2.4.1 Concentration Strategy
2.4.2 Multisegment Strategy
2.5 The Benefits of Segmentation
2.6 Limitations of Segmentation
2.7 Market Segmentation within the Hotel Sector

3 Branding
3.1 Definition
3.2 Tasks of Brand Management
3.2.1 Positioning
3.2.2 Brand Equity
3.3 Brand Policies
3.3.1 Individual Branding
3.3.2 Multiple Branding
3.3.3 Family Branding
3.3.3.1 Overall Family Branding
3.3.3.2 Line Family Branding
3.3.4 Brand Extention Branding.
3.3.5 Company Branding
3.4 Benefits of Brands
3.5 Changing Brand Strategies in the Hotel Sector

4 Market Segmentation and Branding within Hilton Hotels Corporation
4.1 The Company
4.2 The Hilton Family
4.2.1 Conrad Hotels
4.3 DoubleTree
4.3.1 Embassy Suites Hotels
4.3.2 Hampton Inn & Suites
4.3.3 Hilton
4.3.4 Hilton Garden Inn
4.3.5 Homewood Suites by Hilton
4.4 Company’s Market Segmentation and Branding Strategy

5 Conclusion

Bibliography and List of REferences

List of Exhibit

illustration not visible in this excerpt

1 Introduction

In today´s market place managers are constantly seeking to find the best ways to reach and serve their customers. Market segmentation, dividing the market into submarkets, and branding products and services plays a major part in marketing activities.

Globalization is one of words used nowadays to describe the convergence of cultures. Cultures are believed to move closer together as a result of increased travel, better communication methods and enhanced transportation opportunities. Companies try to anticipate this change by offering standardized products to a global audience. Cultural differences are a logical barrier to standardization of the marketing strategies on a global scale. However, even on a national scale, there are many different types of consumers, who need to be treated differently. Market segmentation plays a major part in marketing, as all marketing activties depend on precisely defined and carefully choosen market segments.

In the second chapter different types of market segmentation, segmentation strategies as well as the benefits and limitations of market segmentation are explained and illustrated.

Branding, a topic which is often linked with market segmentation, as a lot of global companies offer different brands to different market segments, is the topic of chapter 3.

Due to increased technolgical capabilities enabling competitors to market extremely similar goods and services, a brand is often a product´s most important distinguishing characteristic and may be the only part of a product a competitor cannot copy.

In this essay I put my focus on brand management, brand policies and the benefits the supplier as well as the consumer can have when selling and buying branded goods.

Chapter 4 is the practical part of this report. As I worked a during my internship for a Hampton Inn in Ohio, USA, I decided to introduce the Hilton Hotels Corporation, which offers different types of hotels to different types of travellers. Hilton´s brand family includes mid-priced, upscale and luxury hotels as well a a brand for extended stay.

The last chapter is a conclusion of the entire report.

2 Market Segmentation

2.1 Definition

Market segmentation is the process of naming and then segmenting broad product markets to find potentially attractive target markets.^[1]

“Segmentation is the process of partitioning markets into groups of potential customers with similar needs and/or characteristics who are likely to exhibit similar purchase behavior. It has emerged as a key marketing planning tool and the foundation for effective strategy formulation in many ... companies. The objective of segementation research is to analyze markets, find niche opportunities, and capitalize on a superior competitive position. This can be accomplished by selecting one or more groups of users as targets for marketing activitiy and developing unique marketing programs to reach these prime pospects (market segments).”^[2]

“Segmentation means splitting a population down into sub-groups or segments whose members show similar characteristics, needs and buying behavior. There are four classic ways in which markets are segmented. 1. Geographical, in other words, categorizing people on the basis of their geographical characteristics, for example, where they live. 2. Demographics, which means dividing the population into groups on the basis of their demographic characteristics such as age, sex or race. 3. Psychographic, which differentiates people on the basis of their attitudes and opinions, for example. 4. Behaviouristic, This puts people into groups in terms of their relationship with particular types of products, for example, whether or not they are first time users, or the benefits they seek from using a particular product.”^[3]

2.2 Tasks of Market Segmentation

For most business firms, locating and specifically targeting unique market segments is both a reality and a necessity in today’s competitive marketplace. In North America, for example, the assumptions of the mass market no longer hold true for most businesses and product categories. Creative market segmentation strategies often afford the business organization a strategic advantage over its competition. Foreign firms often enter a domestic market by segmenting the market, uncovering an underserved niche, and then concentrating their marketing and financial resources into that niche.^[4]

The task of market segmentation therefore is to split the market into individual sub-groups that are similar, so that different marketing strategies can be used for different groups of buyers.

To conclude the advantages of Market Segmentation, there are three main reasons why to divide a market into smaller segments:

- Easier Marketing: The more common traights a group has (same benefits, same age, gender etc.) the easier the marketing is to that group.
- Efficiency: Offering your product or service to the best segments instead of the whole market, you can use your marketing resources more efficiently. Segmentation can help you avoid sending the wrong message or sending your message to the wrong people
- Identify Niches: Find under-served or un-served markets. Using niche-marketing, segmentation can allow a new company or new product to target less contested buyers and help a mature product seek new buyers^[5]

There are also several requirements an identified segment has to fullfill:

- Big enough: The market which should be splitt, has to be large enough. It makes no sense to divide a market which is already very small.
- Different: There has to exist differences between the members of the market and these differences must be measurable through traditional data collection approaches (i.e., surveys).
- Responsive: Once the market is segmented, you must be able to design marketing communications that address the needs of the desired segments. If you can't develop promotions and advertising that speak to each segment, there is little value in knowing that those segments exist.
- Reachable: Each segment must be reachable through one or more media. You must be able to get your message in front of the right market segments to be effective.
- Interested in different benefits: If everyone ultimately wants the same things from your product, there is no reason to segment buyers.Segments must not only differ on demographic and psychographic characteristics, they must also differ on the benefits sought from the product.
- Profitable: The expected profits from expanding your markets and more effectively reaching buyer segments must exceed the costs of developing multiple marketing programs, re-designing existing products and/or creating new products to reach those segments.^[6]

2.3 Criterias for Segmentation Strategy

2.3.1.1 Geographic Segmentation

“Where you live determines how you live.”^[7]

The geographic segmentation of a market is a logical starting point, because it is one of the simplest methods of dividing markets into possible target segments.

For geographically segmenting the market, there is no single, best method. There are several points to be considered such as the market you are competing in, available corporate resources, competitors´ strategies, flexibility in the manipulation of the marketing mix variables and the firms operating philosophy.^[8]

In general geograpic variables are city, census tract, county, region, metropolitan or rual location, population density, climate etc.

A rationale for geographic segmentation is to tailer the product´s advertising to every region or country it is offered. For a regional product such as the Texas beer, Lone Star Beer or Cornish Pasty in Cornwall, local humor and dialects can be used to advertize and promote the product. Thus local associations can provide SCAs (Sustainable Competitive Advantages) that are not easily overtrumped by national brands, which are constrained by a national program.^[9]

A nationwide operating supermarket chain, for example, should always offer appropriate regional products to commit the customers to the store and to see the company as a regional establishment and not as a nationwide inapproachable and monsterious company.

2.3.1.2 Demographic and socioeconomic Segmentation

“Nowadays people can be divided into three classes – the Haves, the Have-Nots and the Have-Not-Paid-For-What-They-Have”^[10]

Splitting the market into segments according to demographic variables is called demographic segmentation. This includes dividing by population, number of households/families, household/family size, age distribution, family life cycle, marital status, gender, race nationality, religion. Even though race, nationality and religion are inherent attributes such as marital status or age, many demographers have the opinion that in actual practice they are used if they were related to economics and social class.^[11]

Socioeconomic criterias are income, occupation, education and social status. People´s product needs often depend on their income, which shows how useful this variable can be to segment a market. It affects their ability to buy and their aspirations for a certain syle of living. Obviously this category includes housing, furniture, clothing, cars, food, and certain kinds of sporting goods. The occupations of the members of the household have an impact on the kind of products and services that are bought. Sales of products for refurbishment and decoration such as paints, fabrics and wallpapers, will occur predominantly among those professions that have owner-occupier status.^[12]

2.3.1.3 Psychographics

“There are times when I look over the various parts of my character with perplexity. I recognize that I am made up of serveral persons and that the person that at that moment has the upper hand will inevitably give place to another. But which is the real one? All of them or none”^[13]

Psychographic segmentation contains consumers´ activities, interests and opinions (AIOs). Psychographics inform us about attidutes and lifestyles, allowing the marketer to differentiate beween “party people” and “homebodies”, between liberals and conservatives, between those admiring sports figures and those identifying with movie stars. It enriches the description of market segments beyond simple demopraphics.

The psychograpic segmentation focuses on:

- how people spend their time;
- their interests, what they place importance on in their immediate surroundings;
- their view of themselves and the world around them; and
- some basic characteristics such as their stage in life cycle, income, education, and where they live.^[14]

Psychographic variables help to target market identification, to understand consumer behavior, to plan marketing strategies and to minimize risks. Consumer differences extend beyond demographics, researchers must understand individuals´s state-of-minds to piece together the total “market puzzle.” Brand choice, company loyalty, motivations and needs, attitudes, and

perceptions/preferences can be explored via this segmentation approach. By incorporating psychographics into a firm´s product testing and R&D program, projects successes are more likely.^[15]

[...]

^[1] Comp. http://www.mhhe.com/business/marketing/fourps/pdf/chap3.pdf 07/07/03

^[2] Weinstein, Art: Market Segmentation, Revised Edition, Probus Publishing Company, Chicago, 1994

^[3] Swarbrooke, John: The Development and Management of Visitor Attractions, Butterworth-Heinemann;1995, page 64

^[4] Comp. http://www.marketingpower.com 07/07/03

^[5] Comp. http://dssresearch.com 07/07/03

^[6] Comp. http://dssresearch.com 07/07/03

^[7] Michale J. Weiss, 1988

^[8] Comp. Weinstein, Art: Market Segmentation, Revised Edition, Probus Publishig Company, 1994, page 70

^[9] Comp. Aaaker, David D.: Strategic Market Management, 2nd Edition, John Wiley & Sons, New York, 1988, page 227

^[10] Earl Wilson, 1964

^[11] Comp. Weinstein, Art: Market Segmentation, Revised Edition, Probus Publishig Company, 1994, page 81

^[12] Comp. Dibb, Simkin, Pride, Ferrell: Marketing, 3rd Edition, Houghton Mifflin Company, 1997, page 211-213

^[13] W. Somerset Maugham, 1874

^[14] Comp: Kinnear, Thomas & Bernhardt, Kenneth: Principles of Marketing, 3rd Edition, Scott Foresman and Company 1990, page120-121

^[15] Comp. Weinstein, Art: Market Segmentation, Revised Edition, Probus Publishig Company, 1994, page 115-118