Market segmentation is a strategy any entity in the tourism industry can use to strengthen their competitive advantage by selecting the most suitable subgroup of tourists to specialize on and target.
A wide variety of alternative techniques can be used to identify or construct segments. Approaches range from simple commonsense segmentations (where tourists are split on the basis of a predefined personal characteristic) to multidimensional data-driven approaches where a set of tourist characteristics is used as the basis for grouping. Once tourists are grouped using the correct and most suitable analytical techniques the resulting segmentation solution has to be assessed by the users (tourism managers) who will not only evaluate the segmentation solution per se but also the fit of potentially interesting segments with the strengths of the tourism destination.
Tourism managers can benefit from market segmentation by using it actively as a method of market structure analysis. In doing so, they can gain valuable insight into the market and specific sections of the market and identify the most promising strategy to gain competitive advantage. Typically such a strategy will not only require market segmentation, but also product positioning. Both approaches will have to be evaluated in view of competitors’ segmentation and positioning choices to be successful. Segmentation solutions should be computed regularly to ensure that current market structure is captured.