Market Segmentation Survey
Market Segmentation Survey
Abstract
In the following paper we study the theory of market segmentation, the approaches to the profiling mechanisms to establish profit-maximizing segmentation, in order to keep on in a competitive market as the airline transportation is, after the liberalization. Also a short survey on the segmentation discrete choice modeling is made to bring the theory to the practice.
Keywords: Market segmentation, airline transportation, discrete choice models.
1. Introduction
Market segmentation is the art to group individuals that share a quality; this quality is something that can be exploited in order to benefit another group, is considered an art because whoever achieves a better segmentation may obtain better profits.
Traditional airlines segment the market into two major segments, one profitable (Business Travelers) and one unprofitable (Leisure Travelers). These two segments can further be broken down by average length of trip, frequency of trips, and loyalty to a certain airline.
While, in the past, the airline industry was characterized both by high growth rates and governmentally regulated protectionism, the liberalization of the airline industry in the EU has lead to the development of a highly competitive market (Doganis, 2006), the competition drives airlines to clarify their market segments. Passenger information is crucial for retargeting and repositioning.
Numerous methods to obtain those segments were developed, by Geographic variables, by media (based on the fact that different media tend to reach different audiences), by price, by demographics (gender, age, income, housing type, education level, etc.) and psychographics, but since the problem is the choice itself, the modern modeling methods are made with discrete choice models, known as Logit and Probit Models.
In this paper in the chapter two is made a survey of the theory of market segmentation and how evolved the airline market and how the now focus -around
Abstract
In the following paper we study the theory of market segmentation, the approaches to the profiling mechanisms to establish profit-maximizing segmentation, in order to keep on in a competitive market as the airline transportation is, after the liberalization. Also a short survey on the segmentation discrete choice modeling is made to bring the theory to the practice.
Keywords: Market segmentation, airline transportation, discrete choice models.
1. Introduction
Market segmentation is the art to group individuals that share a quality; this quality is something that can be exploited in order to benefit another group, is considered an art because whoever achieves a better segmentation may obtain better profits.
Traditional airlines segment the market into two major segments, one profitable (Business Travelers) and one unprofitable (Leisure Travelers). These two segments can further be broken down by average length of trip, frequency of trips, and loyalty to a certain airline.
While, in the past, the airline industry was characterized both by high growth rates and governmentally regulated protectionism, the liberalization of the airline industry in the EU has lead to the development of a highly competitive market (Doganis, 2006), the competition drives airlines to clarify their market segments. Passenger information is crucial for retargeting and repositioning.
Numerous methods to obtain those segments were developed, by Geographic variables, by media (based on the fact that different media tend to reach different audiences), by price, by demographics (gender, age, income, housing type, education level, etc.) and psychographics, but since the problem is the choice itself, the modern modeling methods are made with discrete choice models, known as Logit and Probit Models.
In this paper in the chapter two is made a survey of the theory of market segmentation and how evolved the airline market and how the now focus -around
References: Doganis, R., 2006. “The Airline Business”. Routledge, London and New York. Smith, W. R. 1956, “Product differentiation and market segmentation as alternative marketing strategies”, Journal of Marketing, July, 3–8. Thorsten T., Edlira S., Iwan V. W. 2006, “Customer segmentation revisited: The case of the airline industry”, Elsevier. Suriya, K. 2006, “Airline Market Segments after Low Cost Airlines”, Faculty of Economics, Chiang Mai University