Thomson Holidays' Marketing Strategies - Size, Segmentation, And Promotion Essay.

Macro analysis (PESTLE)

Analyse methods of determining the size and structure of markets and of segmenting particular markets. (The assignment presentation allows students to achieve this outcome)

Evaluate methods of promoting sales at different product types and services and identify the interrelationship to broaden company strategies. (The assignment report  allows students to achieve this outcome)

Produce a marketing plan for a company given its resources and objectives. (The assignment report allows students to achieve this outcome)

Thomson Holidays is a UK based travel and tourism organization which is a subsidiary of Touristic Union International or TUI. The company was founded as a part of Thomson Travel Group in 1965 by Roy Thomson. The initial name of the organization was Thomson Tour Operators which was changed into the current name in the year of 1997 (Major and McLeay 2013). In its beginning days, the organization had five operators that are Sky tours, Riviera, Luxitours, Gay tours and the Britannia Airways (Plé and Lecocq 2015). Intense competition among the operators allowed the rival Clarkson Travel Group to become the lead player in the new and rapidly growing holiday market in the UK. However, in the year of 1971 the new managing director of the company Bryan Llewellyn created a whole new board of directors with the travel trade expert Norman Corkhill as the chairman of the company (Bessant 2013). Since then the company slowly but steadily gained their position in the market. The company gained headlines for the first time when they offered a three and four night holidays in Majorca for only 19 pounds (Major and McLeay 2013). In 1972, the organization acquired Lunn Poly, the largest chain of travel agents in the United Kingdom (Kraut 2013). Thereafter using various strategies, the company slowly became the leader in the tourism industry of UK. This assignment will focus on different strategies of Thomson Holidays and will find out how they could suppress all their rivals.

PESTLE analysis categorizes the environmental factors into six sections which are political, economic, social, technological, environmental and legal.

Figure 1: PESTLE Analysis

(Source: Kraut 2013)

Political:

Currently, Thomson Holidays is facing several issues due to terrorist attacks that result in tight security and strict immigration laws. Foreign and Commonwealth Office has put some tourist destination on hold because of these terrorist attacks. Therefore, travel insurers are refusing to cover tourists who want to travel to those destinations. Besides, Government toppling and instability is also affecting not only Thomson Holidays, but also other tourism organizations (Kraut 2013). Another major aspect that is affecting Thomson Holidays is different taxation policies in different countries.

Microanalysis “Porter's five forces model”

Economic:

Among several economic factors, the exchange rate is such a factor that creates a huge impact on any tourism company. Especially in the current scenario, when the value of Euro is declining the gap with Pound Sterling. This might affect UK in the case of outbound tourism to other European Nations. Besides, the economic condition of UK is severely affected by recession. As a result of economic crisis, most of the tourism companies collapsed (Skripnuk et al. 2015). However, Thomson Holidays managed to survive this hard time and is now expecting a post-recession boom that will give them more market space and consumers to absorb in.

Social:

Brand consciousness is the most powerful social factor that has cultivated satisfying results of Thompson Holidays. Being a part of TUI group, Thomson Holidays has a rich brand value and has provided better customer services from years. Therefore, they could successfully inject brand loyalty among their customers. Besides, nowadays customers are more concerned about the environment than anything else. A research result conducted by Boston Consultancy group clearly indicates the going green attitude of consumers (Major and McLeay 2014). Thomson Holiday Group could understand this fact and have introduced several effective actions to meet the environmental needs of the consumers. Their actions include brochures and printing, saving of energy and waste and recycling management. As a part of Thomson's safety policy, they strictly follow Group Child Protection Policy and the company dismisses any business relation with any person who is engaged in any form of child exploitation.

Technological:

Thomson Holidays is empowering their internet and online sales slowly but steadily. As from appendix1, it is clear that most of the UK customers have access to the internet, it is expected that they would like to deal with the organization through the internet. However, in spite of having cost cutting and staff reducing advantages, internet business also possesses threat such as a low barrier to entry and threat of newcomers (Falzon 2012). Besides, advanced technologies such as video conferencing can hurt tourism sector. Television, social networking sites and video games also serve the same purpose of reducing the demand for tourism.

Environmental:

Tourism organization like Thomson Holidays is suffering because of Air flight rationing rule proposed by the UK Government. Besides, the Government is also campaigning for green holiday locations that can affect Thomson Holidays as they will be forced to cut-off several tourist locations from their lists (Schuckert et al. 2015).

Legal:

Government across the globe has recommended several rules on Flight Safety and Guidelines that shields national, ecological, healthiness and customer problems and flight permits (Major 2012). Different laws of different countries can also affect Thomson Holidays. Besides, Trade Laws are playing crucial part in their business.

Microanalysis “Porter's five forces model”

Porter’s five forces model will help to find out the bases of rivalry in the travel industry. Five forces model will build a link between competitive services and the key drives in the macro atmosphere.

Figure 2: “Porter’s five forces model”

(Source: Phillips and Moutinho 2014)

New entrants:

According to Moreno et al. (2015), high capital requirements create barrier to the entry for newcomers. In the UK, more that 70% market share is controlled by top 10 tourism companies and Thomson Holidays works with nearly 30% of the UK compendium holiday market share (Evans 2016). Therefore, chances of new entrants are low.

Substitute:

Evolution of technology and introduction of several new entertainment options might act as a substitute for tourism industry. Especially in the UK, the entertainment industry is solely responsible for the economic growth of the country. Movies, video games and music are playing enormous roles in human lives (Phillips and Moutinho 2014). From the appendix 2, it is clear that the demand of television is on the higher side in UK. This can work as a substitute and can affect the tourism industry in UK. 

Suppliers:

Suppliers are known to have high negotiation power against companies that have low market share. However, as Thomson Holidays acquires 30% of the market share in the UK tourism industry, there is a power balance between the suppliers and the organization (Dobrivojević 2013). The suppliers of Thomson Holiday Group have a moderate bargaining power.

Buyers:

Switching cost is relatively low in the tourism industry in the UK because of the internet and online sales. However, low differentiation of offered products and services and a lesser number of substitutes do not allow the buyers to bargain strongly.

Competitive rivalry:

Thomson Holidays is the subsidiary of TUI and TUI currently holds 21% market share when Thomas Cook holds 13% (Brouder and Eriksson 2013). A significant 8% difference in market share lessens the competition in the industry.

Figure 3: SWOT analysis model

(Source: Babalâc 2013)

Strengths:

Thomson Holidays is the leading tourism organization in the UK and there are some strong supports behind this (Thomson Holidays 2016). Their one the biggest strengths is their vertical integration that allows the organization to spread their business throughout the globe. Thomson Holidays also has a strong multi-channel distribution that is focusing on online sales (Tsitsiloni et al. 2013). Besides, as a result of stable and management friendly shareholders, Thomson Holidays is also offering high quality customer services.

Weakness:

Being a market leader in the UK tourism industry, Thomson Holiday does not have much of weaknesses. However, the major recession has forced them to reduce the volume of holiday packages. Besides, their assets can only cover 34% of total assets (Babalâc 2013).

Opportunities:

The UK market was hit by recession in recent years (Brewer 2013); however, the country is slowly recovering from recession and industries like tourism is expecting a post-recession boom in coming years. Besides, Thomson Holidays Group is also planning to expand their business in developing markets such as India and China (Lam and McKercher 2013). Joining hands with other tourism companies in those markets can provide them several opportunities to grow their business.

Threats:

The tendency of customers to switch to rail and bus services for short-haul travels can threaten the tourism organization the UK, including Thomson Holidays Group. Besides, as a result  of recession, many companies are mainly focusing on 4-star hotels to provide low-cost packages to the customers (Rahmani et al. 2013). This can affect Thomson Holidays Group as they might lose their customers.

Objective	Aim
Specific	The recession in the UK has changed the picture of tourism completely. Consumers are focusing on cheaper options like rail, bus and ferries than airlines; even though these options take more time than other transports. Thomson Holiday's 90% travel options are though airlines (Everett and Slocum 2013). Therefore, their primary objective is to expand its differentiation by providing land transportation.
Measurable	Fuel price fluctuations are creating major issues in Thomson Holidays. Therefore, they will have to negotiate with the oil companies to stabilize the variations. However, there is a risk of facing revenue loss in the process (Becken and Lennox 2012). Therefore, the authority of Thomson Holidays will have to measure the fuel prices regularly to increase or decrease tourism packages accordingly.
Achievable	Companies such as lastminute.com and expedia.co.uk made their mark in UK’s tourism industry through their online services (Mitrokostas and Apostolakis 2013). Therefore, Thomson Holidays is looking to achieve a strong presence in online services by providing necessary services shortly.
Realistic	As a result of "Go Green" attitude of the customers, Thomson Holidays is planning to reduce carbon emission problems in their airline's system. However, they have already implemented staffs that are taking care of environmental factors in their organization such as recycling the wastes.
Time bound	Thomson Holidays is the leading tourism organization in not only the UK but also in Europe. Therefore, they are now taking their time to focus on Asian markets such as India, China and Russia. Besides, they are waiting for a post-recession boom to strengthen their position in European markets.

Table 1: SMART analysis of Thomson Holidays UK

(Source: Mitrokostas and Apostolakis 2013)

Market segmentation of Thomson Holidays can be understood by defining their geographic segmentations, demographic segmentation, psychographic segmentation and behavioral segmentation.

Geographic:

From the point of geographic segmentation it can be said that Thomson Holidays is a worldwide travel retailer that provides services to the people from various countries (Petrick and Durko 2013). It has successfully segmented the customers depending on their country, culture, hobbies and interests.

Demographic:

Thomson Holidays divides its customers into groups based on variables such as age, gender, size of the family and life cycle of family and income. Thomson Holidays, having 1/3 UK market share provides several services among which some suit men and some are favored by women (Skripnuk et al. 2015). Some services are made especially for young people and some are catered for retired people.

Psychographic:

Thomson Holidays divides its customers into different groups based on their social class, lifestyle and personality characteristics. As a result of the different economic level, people prefer different services and Thomson Holidays does the same (Durasevic 2014).

Behavioral:

Using this factor of segmentation, Thomson Holidays divides its customers based on their knowledge, attitudes and responses to a product. Some customers love to travel in the metropolis for shopping while others would like to have rest in the countryside. Therefore, the organization has projected travel different routes for different people.

Thomson Holidays mainly targets wealthier and older empty-nester customers. However, it does not mean that the organization does not focus on middle-class families. Using innovation and service delivery, the company is planning to provide more targeted holidays with exclusive additional add-ons (Datta et al. 2015). Thomson Holidays is all set to target non-British customers as they are ready to feature destinations including Malaysia, Vietnam, Argentina, South Africa, Hawaii and Bali.

Thomson Holidays is increasing its unique combination of aircraft seats and hotel beds with an automated pricing system. The application can automatically adjust holiday prices to make sure that uses all available flights and hotel capacity. The system can also increase prices where the demand is high and decrease prices where demand is low (Bilotkach et al. 2015). Recently the company has announced that there will be no additional discount while booking tickets from the company’s online site (RahmaniSeryasat et al. 2013).

Figure 4: 7Ps of marketing mix

(Source: Khan 2014)

Place:

Thomson Holidays has placed them as a leading tourism organization in the UK. They are considered as the leading retailer in tourism industry not only in the UK but also in Europe. Besides local routes for traveling, the organization also provides hundreds of international routes (Durna et al. 2015). They are also planning to introduce Asian location such as India, China and Russia in their tour packages.

Price:

Market penetration strategy of Thomson Holidays is very simple. Using their automated pricing system, the company uses low pricing strategy to the countries where demand is low and high pricing strategy where demand is high. Besides, they also understood that discounts to the customers who buy tickets online could cost them their offline customers (Skripnuk et al. 2015). Therefore, they have recently announced that prices will be same while buying travel packages from online or offline stores.

Promotion:

Thomson Holidays uses various methods to promote itself which are the advertisement, personal selling, sales promotion, direct marketing and public relation. Via television, radio, newspapers, magazines, billboard and social networks, Thomson Holidays communicates with its potential customers. Appendix 3 shows an example of Thomson Holidays advertisement in their magazine.

People:

People refer to the customers, employees, management and normal people who are involved as Thomson Tour operators. The authority of the company understands that customers are the most important asset of their business. Therefore, they always take care of their customers. Their employee's system is also unique as the employees can leave anytime they want. As of 2014, Thomson Holidays had 100,000 employees in their organization (Thomson Holidays 2016). Each employee of the organization receives proper training, job rotation, job enrichment and motivation.

Physical evidence:

Physical evidence of Thomson Holidays is one of the most important parts of Thomson tour operator. It includes furnishers, lighting and air condition. In one word it’s all about organization’s decoration (Skripnuk et al. 2015). From appendix four it is clear that company has provided beautiful decoration to their offline stores as they understand that physical evidence helps to acquire customer impression and the first impression is always the last impression.

Process:

The process of an organization helps to provide superior services to its customers. Thomson Holidays allows high-speed internet for providing quick and first class services to its customers. Besides, due to a good process strategy, communication between their each branch and existing customer is also satisfying.

Product:

Thomson Holidays is a travel and tourism company that provides charter and schedules passenger airlines, package holidays, cruise lines and hotels and resorts to its customers.

Conclusion

In the conclusion, it can be said that each strategy used by Thomson Holidays has helped them to acquire the leading market position in the UK and in Europe. Market segmentation, pricing strategies, promotional strategies and all other different methods used by the authorities of Thomson Holidays has cultivated productive results for the company. The organization never put a foot wrong and always did the right thing. Especially their market segmentation strategy by which they have successfully divided their huge customer base is quite impressive. As a result of these strategies the company has more strengths and opportunities than weaknesses and threats. The company is so firmly placed in their home market that it is now planning to expand in new but unstable Asian markets.

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