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by fbdjskajxb 3039 days ago
I don’t understand, how would AirBnB segmenting their marketing cause it to cost twice as much?

Imagine AirBnB and the low cost company both exist as you imagine. Now suppose AirBnB buys the low cost company and doesn’t change their marketing at all. Of course marketing ROI for each of the two segments doesn’t change. Compare this to the case where AirBnB operates in the two segments without buying low cost company. How are these cases different?
2 comments
ghaff 3039 days ago
Furthermore, many of the major hotel chains have a bunch of brands, each of which caters to a particular demographic. Usually one or more of the brands cater to the price conscious and others are higher-end. If anything, there's an argument for AirBnB to have come up with more distinctive branding for a new product.
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matte_black 3039 days ago
When a marketing budget that once served a uniform segment splits to serve multiple segments, you must either divide the budget amongst segments or increase the budget to support the previous standard of marketing activity for a segment.
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ghaff 3039 days ago
Yes but, if you serve multiple segments vs. just one, you presumably can amortize your marketing dollars over more volume. (And if you're not increasing volume by going after more segments, those new segments obviously aren't working out for you.)
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matte_black 3039 days ago
In this case the low end market becomes a drain on AirBnB because the ROI is not nearly as high as their high end market. However the ROI would be acceptable to a smaller player. Is it worth for AirBnB to dilute their brand at this critical juncture just to hold on to as wide a market as possible?

No.

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