Do service providers adopting market segmentation need cooperation with third parties? An application to hotels
International Journal of Contemporary Hospitality Management
ISSN: 0959-6119
Article publication date: 11 January 2016
Abstract
Purpose
This study aims to analyze the tradeoff between two potential marketing strategies for service providers, namely, market segmentation on the basis of reservation lead time and cooperation with third parties.
Design/methodology/approach
This paper proposes an optimization model to describe market segmentation strategy after cooperating with third parties by taking hotels for example.
Findings
The results show that the profitability of adopting two strategies simultaneously is lower than that with market segmentation alone under some cases, which is relevant with attributes of travel agencies, such as switch rate and market share.
Research limitations/implications
This study indicates that cooperation with third parties has a negative impact on profitability of hotels using market segmentation in some cases. However, randomness of demand, customer loyalty and existence of cancellation should be considered in further research.
Practical implications
In an e-commerce era, hotels with market segmentation based on reservation lead time, are not required to cooperate with third parties under a number of situations (e.g. high switch rates and small market sizes of travel agencies). In addition, hotels should revise the segmentation strategy based on the change rate of potential demand of individual customers. Furthermore, hotels should enhance customer loyalty, strengthen cooperation with travel agencies that possess large market shares or small switch rates.
Originality/value
The study preliminarily formulates the optimal market segmentation strategy on the basis of reservation lead time after cooperating with third parties, which contributes to the revenue management.
Keywords
Acknowledgements
The authors thank Editor Professor Fevzi Okumus and four anonymous referees for their encouraging and comments, constructive suggestions and hard work. The quality of the paper was improved substantially as a result of these suggestions. And the authors would also like to express thanks to Dr Xiaolong Guo from the School of Management, University of Science and Technology of China, for his valuable suggestions and comments. The financial supports from National Natural Science Foundation of China (Grant Nos. 71322101 and 71271195 for Prof. Feng Yang and Grant No. 71110107024 for Prof. Liang Liang) are acknowledged.
Citation
Du, F., Yang, F., Liang, L. and Yang, M. (2016), "Do service providers adopting market segmentation need cooperation with third parties? An application to hotels", International Journal of Contemporary Hospitality Management, Vol. 28 No. 1, pp. 136-155. https://doi.org/10.1108/IJCHM-01-2014-0014
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited