Preliminary Study

Preliminary Study: Analyzing customer segments for a Mexican Hotel:

Student:

Contractual party:

February 04, 2011

Table of contents

1. Aim of the research 3
2.Literature Review 4
3. Methodology 5
3.1 Background 7
3.2 Research Objectives 8
3.3 Research Questions 9
3.4 Research Design and Methods 9
3.3.1 Phase One: Quantitative Research 9
3.3.2 Phase Two:Analyzing Data base 9
3.3.3 Phase Three: Creating and develop new product or services 10
3.3 Results 10
Bibliography 11
Appendix A: Work and research plan 12

1. Aim of the research

Market segmentation is an essential element of marketing in industrialized countries. Products and services can no longer be produced and sold without considering customer needs and recognizing theheterogeneity of those needs. Hence to identify the specific needs of group of customers will be able to develop the right offer for one or more sub-markets and thus, obtain a competitive advantage. Responding to differing preferences within group of customers for more precise satisfaction increases their loyalty (Robinson 1938).

Hotel wants to increase profitability and retain customers by creating anddeveloping new products or services to its best customers. Thus, customer segmentation will be conducted applying RFM model and the customer value matrix in order to identify the most profitable customers from the Hotel and provide further recommendations for the other customer segments.

2. Literature Review

Tourism as social phenomenon and as an economic activity is, in recent years, areality assumed. It can be said that the tourism sector is currently experiencing a period of remarkable growth and development in which travel, tourism flows and tourists’ expenses are continuously increasing, also increases competition between regions or countries of destination, knowing better the growing impact of tourism, (economic, cultural or environmental) conditions are receiving higherattention, the tourist is better informed about destinations and travel options and more demanding when choosing between different tourism products and services etc. (Arthur Andersen, 1994): "La posición competitiva del sector turístico español".)

Against the background that currently characterizes the tourism sector customers also have adopted a behavior that has been experimenting a series ofchanges, among which may include the following: "Excessive customer expectations (quality confuse the tour operator the infrastructure of the destination / country). Customers are getting used to continuous price declines ("price war") because supply exceeds demand. No product offerings to suit the demand of foreigners (other times other than summer vacation). In times of crisis the client seemsto only value price. Mass tourism negatively affects the kindness / treatment of people.

A deeper understanding of customers has validated the value of focusing on them. It is now generally accepted that it costs about five times more to gain a new customer than to keep an existing one, and ten times more to get a dissatisfied customer back (Massnick, 1997). Studies across numerous industrieshave also shown that a five-point increase in customer retention can increase profits by more than 25 percent (Reichheld, 1996).
With numbers like these, it is no wonder that database marketing is quickly becoming a powerful tool for mainstream businesses.

While the availability of customer purchase information has allowed marketers to develop richer, more sophisticated customer segmentationschemes, simplicity has also proven its place. For years, catalog companies and other direct marketers have used RFM (recency, frequency and monetary value) analysis to segment their customer base and optimize the purchase response rates of their marketing efforts (Hughes, 1994). Time and time again, RFM has been challenged by innovative conceptual approaches made possible by new technologies...