Market consists of large number of actual and potential customers. The process of splitting the market into different groups or segments based on the needs, characteristics or buyer behavior is called as Segmentation (Kotler, Brown, Adam, and Armstrong, 2007).
Singapore Airlines (SIA) has used traditional approach adopted by legacy carriers for segmentation. SIA focuses on business travelers and the price sensitive leisure travelers. The business paradigm of SIA has clearly differentiated these two segments by catering to their heterogonous need. In order to penetrate their existing market and expand their revenue base they are also focusing on additional segment based on consumer loyalty. The increasing revenue of SIA has been depicted in appendix 1. Detailed analysis of segmentation strategy used by Singapore Airline is given as below:
Preferences: The two major groups of business and leisure travelers differ in their preferences. It’s believed that on an average in aviation industry elite travelers contribute up to 50% of revenue though they add up to less than 20% in passenger number (Brancatelli, 2009). Hence the preference of this particular segment (Business travelers) is given additional importance. They are given exclusive in-flight service with respect to variety of cuisines being served, exotic drinks and special seating comfort (Wirtz and Johnston, 2003). At the same time since the other segment i.e. the leisure travelers form the major chunk of passengers their preferences also cannot be ignored. They too are given in-flight services which can be termed best as per industry practices.
Nature of demand: Since the nature of demand varies with respect to business and leisure travelers it is used as a parameter for discriminator analysis. Business travelers demand more working space, internet and telephone connections whereas leisure travelers demand more in-flight entertainment features (Singapore