Customer segmentations have been around for a long time. Over the years, pretty much every customer driven business will have developed at least one segmentation to help them get closer to their existing customers and, indeed, their prospects.
Can any business in the travel & transport sector honestly say that their segmentation is fit for purpose right here and now?
Many businesses will have developed various iterations for different business needs and then refreshed their segments umpteen times.
Constantly updating a segmentation and then embedding it throughout a business is an expensive and time consuming exercise but it’s often the right thing to do – consumer preferences, attitudes and behaviours are constantly changing. And none of us need reminding that 2020 has been a year of unprecedented change. It’s no wonder that many businesses are looking at their segmentations yet again.
The travel & transport industry is no exception. Customer (passenger) segmentations have been used extensively by many operators for a whole range of purposes. Of course, these segmentations can differ greatly. A lot will depend on the ultimate purpose of the segmentation and, therefore, which factors are important. The data available is also a key determinant. For instance, the information held by airlines on their passengers is going to differ massively from that held by bus and rail operators where walk-up fares are common. Whatever their make-up, one thing is likely to be true – none would have been designed with a global pandemic in mind. Can any business in the travel & transport sector honestly say that their segmentation is fit for purpose right here and now?
There are many new factors in play
The ‘factor groups’ used to differentiate segments in the travel & transport industry have traditionally been similar to those used across other sectors. For example:
- Demographics – age, gender, ethnicity, location (geographic and urban vs rural)
- Socio-economic – income, occupation, education
- Attitudinal – general attitudes to travel and transport, dictated by lifestyle, personal beliefs etc.
- Behavioural – frequency of travel, journey purpose, journey lengths / destinations, travel companions
Some segmentations will rely heavily on one group or another, others will incorporate a mix. Behavioural factors have often been dominant. The rail industry, for instance, still frequently uses segments that are characterised by use cases i.e. business / commuter / leisure.
What is clear is that the Covid-19 crisis will have had a substantial effect on every segmentation. It seems obvious that many will need a substantial refresh and, in many cases, a complete re-think. This may not be the case if your segmentation is based on demographic and/or socio-economic factors, however, if this is the case, you probably should be thinking about updating it anyway, COVID-19 or not.
So, what should travel & transport operators be doing right now? A good start would be reading Dr Nick Baker’s article “Navigating the yellow brick road – Creating a commercially successful segmentation”.
As Dr Nick rightly points out, the trick to every successful segmentation is to start at the end. Or, in other words, be very clear about what the segmentation will be predominantly be used for. For the time being at least, many businesses in the travel & transport industry desperately need to understand how attitudes towards the pandemic are affecting travel behaviour. What new segments have evolved and, most importantly, how should they be communicated with?
It is very likely that your existing segments, no matter how they were created, are currently redundant. This does not mean that they will not re-emerge in time – just that, for the remainder of 2020 and well into next year, we should be concentrating on other factors. These may include many new considerations related to COVID-19 and our new way of life:
- Current desire to travel
- Risk aversity
- Level of worry/ stress
- Feelings of personal responsibility
- Attitudes towards authority and new rules
- Trust in operators
This list is by no means exhaustive. Indeed, a sensible first step is to speak to your customers to help build a list of factors that could differentiate segments. New behaviours and attitudes will, of course, sit alongside more traditional factors that will still be relevant. Personal finances are related to economic conditions and are clearly a factor when it comes to the tourism sector and international travel. Other demographic factors, such as age and ethnicity, may well still be key differentiators due to the different levels of risks identified for sub-groups within our society.
Don’t leave it too late
As we know, many companies are likely to have already refreshed their segmentations on numerous occasions down the years. What we are recommending here could be the most important refresh of all, resulting in a very different set of segments to those you currently have.
And, it may seem a strange thing to say, but we’d hope that yet another refresh will be required sooner rather than later. This is not just the wish of a specialist agency looking to profit from creating actionable segmentations for its own customers. Rather, another refresh in 2021 would mean that the travel & transport industry had moved on, to some degree at least, from the crisis conditions of 2020. In other words, the attitudes and behaviours driving different segments would no longer be totally dominated by COVID factors and will once again be related to the core values of passengers.
In the meantime, if you want to communicate effectively with your customers and successfully market your services, your existing segmentation is unlikely to cut it. We are here to help.
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