Market segmentation is a powerful tool for airlines to identify and cater to the diverse needs of their customers. Unlike traditional segmentation based on seating classes, which primarily addresses price sensitivity and service levels, more nuanced approaches like psychographic, geographic, and behavioral segmentation uncover deeper insights into traveler motivations, preferences, and behaviors. These insights enable airlines to tailor their offerings and communication strategies more effectively, ultimately enhancing customer satisfaction and loyalty.
By adopting segmentation bases like psychographics, airlines can understand the lifestyles, values, and attitudes that influence travel choices, such as preferences for luxury, sustainability, or adventure. Geographic segmentation, on the other hand, highlights regional differences in travel habits and destination preferences, allowing airlines to adapt routes, schedules, and promotions to suit local markets. Each segmentation approach sheds light on unique customer needs, enabling airlines to offer personalized experiences, streamline operations, and compete more effectively in a crowded marketplace.
The following examples illustrate how airlines can leverage psychographic and geographic segmentation to create meaningful customer segments. These examples go beyond the surface-level categorization of travelers by class, showcasing how airlines can delve into motivations, behaviors, and regional influences to design tailored marketing strategies and service innovations. This approach not only enhances the travel experience but also strengthens the airline’s position as a customer-centric brand in a competitive industry.
Example of Market Segmentation for Airlines Using Behavioral Segmentation
Typically we think that airlines will segment their customers by class of seating, such as economy class, business class and first class. However, while this gives some indication as to the willingness to pay for additional service and the consumers overall price sensitivity, it does not give us much insight into the consumers’ needs and motivations in terms of their needs for airline travel.
In this market segmentation example for airlines, five distinct market segments are identified each having quite distinct needs and different evaluation and purchase approaches. These five market segments (as shown in the following diagram as well) are:
- We’re off again
- Loyal to loyalty
- Urgent travelers
- Business travelers
- Budget conscious
We’re off again
These are non-business consumers that are frequent travelers via airlines. Generally they would be older consumers, perhaps retirees, who have the time and money to holiday quite frequently.
Because they are experienced travelers, they are likely to be loyal to a small number of airlines, depending upon their final destination.
They would seek some comforts of travel and probably would not choose an airline simply based on price. They would be less likely to research airlines as well, as they are very experienced consumers in terms of airline travel. In fact, they are more likely to be opinion leaders, contributors to Trip Advisor and other similar sites.
Therefore, in addition to their frequency of purchase, they are an attractive and important market segment as they have significant ability to influence the purchase decisions of other consumers in the airline market.
Loyal to loyalty
The second market segment of airline consumers are also quite regular airline travelers. Some may travel for business, but the majority will travel for personal reasons, such as holidays and visiting family.
As suggested by their segment name, they are highly brand loyal to a particular airline wherever possible. The prime motivation for their strong loyalty is to accumulate frequent-flier and/or loyalty points, which they can generally redeem for free flights in the future.
As a consequence of their brand loyalty, they may form an emotional view of the airlines brand (that is, see them as a very good airline), far less price sensitive and are far less willing to consider alternative airlines.
This is an ideal target market for airlines, as they provide a long-term customer base. Of course, the difficulty with this market segment is attracting them in the first place they are far less willing to switch between airline brands.
Urgent travelers
Urgent travelers are infrequent users of airlines and generally represent a fairly small market segment in terms of size. These consumers have an urgent need to travel that is usually unexpected. An example of urgent travel may relate to attending a wedding or funeral, or having a sick relative or having some business/work situation that needs immediate attention.
Given their need to travel almost immediately, they are more concerned flight availability and destination requirements, rather than any consideration of price or airline brand.
Airlines will typically withhold a handful of seats on each flight in the last few days prior to the flight to be sold at a premium price in expectation that a proportion of consumers will have an immediate need to travel.
Business travelers
Business travelers usually form a large proportion of an airline’s domestic customer base. Many businesses have operations in different parts of the country or will have sales opportunities in different cities, necessitating the need to frequently travel by plane.
Generally, business customers make an organization-wide decision as to the choice of airline, rather than the individual traveler being involved in the purchase decision.
As indicated by its name, many businesses choose travel business class, particularly for employees expected travel frequently or for management and executive level staff.
Needless to say, this market is relatively brand loyal to an airline and is quite price insensitive. As a result, it is common for the airline to arrange a contractual deal with larger businesses, organizations and even government bodies in order to win a significant proportion of this business on an ongoing basis.
Budget conscious
Budget conscious air travelers tend to be more infrequent travelers and holidaymakers, or consumers who perceive little difference between airlines.
Most markets will have a group of consumers (that is, a market segment), who are more price sensitive. In this case, infrequent travelers may not have the direct experience to distinguish between airlines and therefore may use a price decision to simplify their choice. (However, some of these consumers may choose a more expensive flight, believing it to be of higher quality.)
However, consumers who see little difference between airline offerings will simply aim for the cheapest price, as it represents the most value for them, given they see no extra benefits attached to any particular airline.
In terms of this market segment, it is important to remember that some consumers in this segment low income earners, but other consumers are simply using price as a point of differentiation in their purchase decision.
Example of Market Segmentation for Airlines Using Psychographic Segmentation
Typically, airlines segment customers by seating class (e.g., economy, business, first class) to indicate service levels and price sensitivity. However, psychographic segmentation provides deeper insights into consumers’ travel motivations, attitudes, and values, allowing airlines to cater more effectively to specific needs.
Psychographic Segmentation Example
Market Segments Identified:
- Luxury Leisure Seekers
- Profile: Affluent travelers prioritizing comfort, exclusivity, and premium services during travel. These customers value experiences over cost.
- Needs: Personalized in-flight services, gourmet meals, spacious seating, private lounges, and seamless airport transfers.
- Marketing Approach: Highlight luxury features, exclusive experiences, and loyalty program benefits through premium channels like travel magazines and exclusive events.
- Eco-Conscious Travelers
- Profile: Environmentally aware customers who value sustainability and responsible business practices.
- Needs: Carbon offset programs, eco-friendly aircraft technology, and information on the airline’s environmental impact.
- Marketing Approach: Promote green initiatives and partnerships with environmental organizations through targeted digital campaigns and social media.
- Adventure Enthusiasts
- Profile: Active and adventurous travelers seeking unique destinations and activities. They prioritize exploration over comfort.
- Needs: Flexible ticket options, partnerships with adventure tour companies, and promotions for off-the-beaten-path destinations.
- Marketing Approach: Use social media influencers, travel blogs, and adventure-specific promotional content to appeal to this group.
- Family Vacationers
- Profile: Parents and caregivers planning trips for family vacations, prioritizing convenience, safety, and affordability.
- Needs: Family packages, kid-friendly in-flight entertainment, assistance for travelers with young children, and family discounts.
- Marketing Approach: Advertise through family-oriented platforms, travel websites, and email newsletters emphasizing ease and value.
- Work-Life Balancers
- Profile: Remote workers and digital nomads blending leisure travel with work commitments.
- Needs: In-flight Wi-Fi, quiet work-friendly seating zones, and access to airport lounges with workspace facilities.
- Marketing Approach: Partner with coworking brands and promote services in productivity and tech-related media outlets.
Psychographic segmentation allows airlines to go beyond service tiers to tailor marketing strategies to the deeper motivations of different traveler types, enhancing customer satisfaction and loyalty.
Market Segmentation for Airlines Using a Geographic Segmentation Base
Airlines often rely on geographic segmentation to understand and cater to location-specific preferences and travel patterns. This approach highlights regional and cultural differences that influence consumer behavior.
Geographic Segmentation Example
Market Segments Identified:
- Domestic Commuters
- Profile: Frequent travelers within a single country, often commuting for work or family reasons. Includes business professionals and individuals living in different cities from their workplaces or families.
- Needs: Frequent flights, convenient schedules, loyalty rewards for regular travel, and cost-effective pricing for repeated trips.
- Marketing Approach: Focus on convenience, high-frequency routes, and corporate partnerships through local media, business networks, and loyalty programs.
- Regional Adventure Travelers
- Profile: Consumers seeking short-haul flights to explore nearby destinations for weekend getaways or regional tourism.
- Needs: Affordable prices, flexible bookings, and partnerships with local tourism operators or hotels.
- Marketing Approach: Advertise destination packages through regional travel agencies, social media, and localized content on digital platforms.
- Intercontinental Tourists
- Profile: Long-haul travelers exploring international destinations, often seeking exotic vacations or cultural experiences.
- Needs: Affordable long-haul fares, stopover options, cultural cuisine in-flight, and multilingual cabin crew.
- Marketing Approach: Highlight cultural attractions and exclusive travel offers through global online campaigns, influencers, and international tourism events.
- Hub-City Residents
- Profile: Residents of major airline hubs with access to a wide network of direct flights, including both leisure and business travelers.
- Needs: Diverse flight options, special deals for hub-city departures, and perks for frequent flyers.
- Marketing Approach: Use hyper-local advertising in the hub city, such as billboards, transit ads, and targeted digital campaigns promoting the city’s strategic location.
- Seasonal Travelers
- Profile: Customers traveling during specific times of the year for events, holidays, or seasonal work. For example, travelers heading to ski destinations in winter or tropical beaches in summer.
- Needs: Seasonal flight schedules, promotional fares, and partnerships with seasonal tourism activities.
- Marketing Approach: Create campaigns tied to local seasonal demand and advertise through event organizers, travel forums, and seasonal magazines.
Geographic segmentation allows airlines to align their offerings with the unique travel demands of specific regions, boosting both market reach and customer satisfaction.
