Identify and Discuss an Example

of a Niche Market Which Has

Gone From Small and Focused to
Much Larger and Profitable:
Airbnb
STUDENT ID: U1435976
MODULE CODE: TM6010
DEADLINE: 19/12/16
WORD COUNT: 3,122 (EXCLUDING ABSTRACT AND CITATIONS)
Abstract 3
Introduction 4
Campaign Strategies 5
Further Development 8
Collaborations | Vertical Integration 8
Social Content in Real Time Strategies 9
Competitions | Promotional Tool 10
Social Media Presence 11
Challenges | Negative Press 11
Conclusion 12
References 14
 U1435976

Abstract
This essay explores the online lodging service company; Airbnb and looks at how the company
grew from targeting a very niche market, to a larger, more broad niche market(s). In order to do
this, the discussion identifies and analysis the marketing strategies Airbnb have used, including the
use of social media, video, vertical integration, cause-related marketing (CRM), collaboration,
competitions as a promotional tool and app development. The essay then moves on to discuss the
challenges of negative press, and how Airbnb respond, before coming to the conclusion which
evaluates the strategies previously mentioned from an overall perspective, as well as briefly
discussing the advantages of technology for the company and its consumers.
 U1435976

Introduction
The online, lodging service company, Airbnb started off by targeting an incredibly niche market:
People who were visiting a specific destination within America for a few days during an event,
needed an alternative place to stay when hotels were fully occupied, and were tech savvy
(millennial demographic). It was only after Airbnb endured some trial and error that they were
finally able to obtain the investment they needed in order to pursue their vision and expand beyond
the U.S.A and begin adding more hosts to their website, ultimately reaching a much wider
audience as illustrated in further detail in the infographic below:

Figure 1 | How Airbnb Started (Vital , 2014)

The unique aspect about Airbnb, is that they are attracting two completely different types of niche
markets: The hosts, who want to monetise their spare space, and the consumer, who wants an
alternative option to a hotel, which may promise a more authentic experience. This essay
determines to identify and discuss what strategies the company have used that have enabled them
to successfully expand its audience, from what started as very few individual consumers, to go
beyond its niche market potential and begin attracting multi niches and build segments, as
illustrated in the bottom-up approach below:

Figure 2 | Niche Building Strategy: Bottom-Up Approach

(Adapted from Dalgic, 2005: 6)

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Whilst identifying these strategies, the essay will refer to academic research of marketing theory
and will apply these to the Airbnb findings by comparing and contrasting them. Furthermore, the
essay will explore how Airbnb managed to maintain competitiveness and discuss how they deal
with rivals within the same market. The essay will also set out to identify any challenges the
company have/are facing before concluding from an overall perspective.

Campaign Strategies
Since Airbnb was valued at $10 billion in 2014 (as shown in figure 1 above), the company has
since more than doubled to $30 billion this year (2016) making it the second most valuable tech
startup in the US (businessinsider, 2016). Airbnb now showcases places to stay in over 191
countries, providing over 60 million customers an alternative to hotels, as illustrated in figure 3.

Figure 3 | About Airbnb

So how does Airbnb market itself to its customers? Airbnb have focused on what it is that a tourist
desires and noticed a trend that has been a key topic for many academics; that tourists are
seeking an ‘authentic’ experience. Many of these academics have echoed that since the tourist
experience has been commoditised, staged and altered in order to satisfy the tourist expectation,
the very act of commoditisation strips the experience of authenticity completely, making it virtually
impossible for a tourist to gain an authentic experience (for example; Boorstin, 1962, Butler, 1980,
Dwyer et al, 2008, Greenwood, 1989, Hughes, 1995, MacCannell,1976, and Redfoot, 1984).
However, Airbnb are claiming that by supplying tourists with a locals’ home, they are essentially
providing guests with an ‘authentic’ experience that is unobtainable from package holiday deals, or
from staying within a tourist resort in general. This is the message they are sending with their
campaigns such as #BelongAnywhere which they released in 2014:

“For so long, people thought Airbnb was about renting houses. But really, we’re about home. You
see, a house is just a space, but a home is where you belong…so much of the way we travel has
been mass-produced and commoditized. Airbnb is just the opposite” - Chesky, 2014

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Airbnb continued with this theme after data they had collected showed that 52% of modern tourists
felt more overwhelmed at crowded tourist attractions than they did doing their taxes, along with
42% finding it as stressful as visiting the dentist (Roderick, 2016). 86% of their consumers said the
reason they used Airbnb was due to them seeking to experience what it was like to live like a local
(Chesky, 2016). Airbnb then took this information and used it to their advantage in their largest
marketing campaign to date; #LiveThere released in early 2016. The campaign emphasised the
authentic experience Airbnb delivers by producing a cinematic video, highlighting stereotypical
tourist traits such as huge groups taking pictures, some with selfie sticks and participating in
activities a local probably would not do with a voiceover urging its listeners: "Don’t go to Paris.
Don’t tour Paris. And please don’t ‘do’ Paris. Live in Paris.” (Airbnb youtube, 2016).

These campaigns have strategically targeted the millennial demographic specifically, as it makes
use of the hashtag (#) feature as a marketing tool. Originally used on the social media site; Twitter,
the hashtag feature quickly became a global trend that is now used across all social media
platforms including Facebook and Instagram (McFedries, 2013). The hashtag feature enables
consumer participation as specific subjects are made easier to find by simply using a common,
relative and real-time hashtag (Chang, 2010). Another reason these campaigns have become so
successful is via the use of videography. Key notes speaker from WTM, Neasa Costin (2016), says
that every marketer is using video as part of their 2017 strategy now that video has become such a
huge trend (World Travel Market London, 2016). Airbnb’s ‘live there’ video campaign can be
considered successful because it distinguishes the brand and creates emotion through the use of
telling a story, which is more likely to persuade their audience (Costin 2016, Aaker 2013). Aaker
(2012) states that stories are 22% more memorable than facts alone, whilst Cisco predicts that by
2020, 3/4 of the world’s mobile data traffic will be video, which indicates just how significant the use
of video as a strategic marketing tool is and will be.

Additionally, Airbnb relaunched their app with three key, updated features: the first feature is the
new ‘matching innovation’ which matches their consumers search results to suit their personal
preferences (Chesky, 2016). The second feature allows consumers to define their search results
by being given the option to choose what kind of neighborhood they want to stay in, whether that
be a quite, scenic or hip one (ibid). For this feature, Airbnb hired photographers to capture ‘real’
images of numerous neighborhoods, honing their product vision of offering an authentic
experience. The last feature, and probably most important; is the guidebook feature - which now
has 3.5 million recommendations that the hosts of Airbnb have provided for their guests.

The matching innovation is used to personalise an individual’s search results and is recognised as
a great marketing strategy for customer relationship management (CRM), in terms of developing
the relationship with the customer, as it enables the likelihood of customer loyalty for the company,

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due to the efforts of personalisation automatically making the customer feel more valued (Pires,
Stanton and Rita, 2006). The second feature continues with the use of customer personalisation
and reinforces the promise of an authentic experience, as it not only features non-commercialised
photos of the area, but gives customers the option of choosing the neighborhood they want to stay
in as if they truly are moving house, and provides the opportunity to avoid an area that may be
deemed too touristy. This is the key feature which gave Airbnb the competitive advantage, as no
other company within the tourism accommodation sector was offering anything like it. Thomas
Cook, Thomson, Hostelworld and many more were all offering tourists the same thing; a
commoditised tourist experience in a commoditised tourist resort, shared among thousands of
other tourists.

The third feature, ‘the guidebook’, enhances the authentic experience tourists are demanding, as
Chesky (2016) explains that, unlike other tour operators, the host who is a local in the
neighbourhood being visited, makes recommendations for the tourist which the consumer can see
on the map before booking with Airbnb, whereas Tripadvisor for example, has a list of
recommended sites and activities for tourists, by tourists, as shown in figure 3:

Figure 4 | Recommendation lists: Tripadvisor v. Aribnb (Chesky 2016)

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Further Development
Since their ‘Live There’ campaign which introduced the new features mentioned above, Airbnb has
further developed the company: Airbnb had realised that some potential hosts could be lost due to
either not having the time, or sometimes even the confidence to host their own space. Thus, Airbnb
took this problem and saw it as an opportunity to expand their niche market by making it possible
to become a co-host instead. This means that people who may not have the space to rent could
become a co-host in place of their neighbors who could not physically be there to host it
themselves, as seen in figure 5. This strategy not only prevented the loss of potential hosts, but
opened up revenue from new clientele as well. Furthermore, Airbnb took it a step further, providing
people to host experiences too, which is essentially like being a tour guide except anyone can do
it, with or without any type of specific qualification(s) (although it is suggested that some sort of
experience is had by the host). Once again, this feature really amplifies the product of an authentic
experience, as it takes the tourist away from mass tourism commodities, and allows the tourist to
engage instead with locals and participate in activities that they themselves enjoy.

Figure 5 | 3 ways to host on Airbnb (www.airbnb.co.uk/host 2016)

Collaborations | Vertical Integration

Airbnb’s latest vision was to help consumers make their holiday planning experience less
exhausting and time consuming, whilst at the same time making themselves more user friendly by
making it possible for their consumers to book all their holiday essentials from the same app:
Airbnb has often been referred to as ‘disruptive innovation’ for the accommodation sector
(Christensen & Raynor, 2003) and as a result, Airbnb’s competitors were within the
accommodation sector. However, with big commodity chain companies such as Thomson and
Thomas Cook who incorporate vertical integration, offering many services which fall under the
tourism umbrella (Mosedal 2006), Airbnb remained only attracting the minority of consumers
wanting something other than package holidays. These consumers who sought for accommodation
from Airbnb would still have to arrange their own flights and activities from external sources. Thus,

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Airbnb saw the potential to incorporate their own type of vertical integration. As well as introducing
hosted experiences mentioned above, Airbnb have very recently began collaborating with other
companies such as Qantas airlines (Airbnb 2016). Together, the two companies have devised a
customer loyalty scheme called Qantas Frequent Flyer which allows members to earn Qantas
Points when they book their Airbnb accommodation through the website (ibid). This partnership is
of mutual benefit for the two companies as they would not compete against one another - being in
separate sectors of tourism, but in building an alliance, they both raise brand awareness via
exposure to one another’s consumers (Reid, Smith and McCloskey 2016). This is especially
beneficial for Airbnb, as the scheme particularly targets Qantas’ 11.4 million loyal and repeat
customers who have memberships.

“The way that people around the world plan, book and experience travel is changing rapidly with
the digital revolution,” Mr Joyce said. “We know that our customers today are just as likely to
arrange an Airbnb as they are to book a hotel, and we wanted to recognise and reward them for
that.” - Mr Joyce, Qantas CEO, 2016 (Airbnb 2016)

As well as airlines, Airbnb have now added a variety of services to their app, such as car rental,
table booking systems for local restaurants and have even made it possible to order food from
local farm markets, once again emphasising the authentic experience that defines Airbnb (ibid).
The final feature of the app makes recommendations and suggests the best time/date to book
according to your schedule, accentuating personalisation once more by acting as a personal
planner (ibid).

Social Content in Real Time Strategies

Besides targeting consumers seeking an authentic experience, Airbnb began targeting those
seeking an experience a little more unique in early 2016 with their #LiveInTheMovies campaign.
The campaign highlights the idea of Airbnb enabling people to live in a castle for a week, or a
treehouse for a fortnight and advertises it by suggesting that; something consumers would only
relate to seeing in a movie, could become a reality. Airbnb strategically released the campaign on
the same weekend as the Oscars, which is deemed to be one of the most popular social nights of
the year (Vale 2016). Airbnb worked with Twitter to deliver relevant social content in real time and
asked the world; “If you could live in any movie what would it be?” (ibid), whilst using hashtags they

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anticipated would be trending at the time, such as #Oscars and tweeted over 30 relevant tweets
similar to the snapshot in figure 6, which received quite a lot of attention.

Figure 6 | #LiveInTheMovies Tweets (twitter.com/Airbnb 2016)

Competitions | Promotional Tool

Another promotional tool Airbnb have used in accordance to the #LiveInTheMovies campaign, is
competitions. For 2016 Airbnb held a competition for a couple to win a night in Dracula’s Castle for
Halloween. All the participants had to do was answer a vampire related question and post it to
Airbnb in time. K. Peattie and S. Peattie (1996) point out the effectiveness of promoting a
competition, as it not only reminds consumers of its #LiveInTheMovies campaign, but tends to
have a rapid response rate too (ibid). Promoting a competition, especially in tourism, can add a
tangible feature to the product, due to tourism being such a picturesque product, it easily lends
itself to social media posts, creating tangible, visible point-of-sale material (ibid). One of the
advantages of the combination of both the competition and social media is that it generates
involvement and interaction between the consumer and the service, and almost certainly increases
the opportunity of electronic word of mouth (eWOM) via sharing/retweeting (Gruen, Osmonbekov
and Czaplewski 2006), ultimately raising brand awareness to potential consumers (Toop 1992).

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Social Media Presence

Being a digital based company, it is essential for Airbnb to maintain the utmost social media
presence across as many platforms as possible (Kotler, et al 2010). Currently, Airbnb have strong
presence on most of the Social Media platforms, such as Facebook with over 4.5million followers,
Instagram with 1.4million, Twitter and Snapchat. Strong social media presence is crucial for
marketers and this is apparent in every single one of Airbnb’s marketing campaigns and strategies
mentioned above (ibid). Using social media as a platform for marketing has proven to be incredibly
cost efficient, as making an account is completely free and any likes or comments received on a
brand post from fans reflect active statements which automatically become visible to their friends
and family and is thus akin to word of mouth communication (WoM) (Vries, Gensler and Leeflang
2012, Pietro and Pantano 2013).

Challenges | Negative Press

In spite of all of these successful marketing campaigns and business development, Airbnb have
been subject to a lot of negative press: Bautista (2015) and many others have claimed that Airbnb
had been avoiding taxes, however Airbnb denied the accusations and attempted to defend
themselves by releasing data which proved that 95 percent of hosts (within New York, the city in
question) were not operating with Airbnb illegally (Bromwich, 2016), but this was later found to be
incorrect, as Airbnb had removed more than 1,000 listings before releasing the data to the public,
something Airbnb have done repetitively (ibid).

Furthermore, Airbnb have also experienced problematic issues concerning prostitution in countries
such as Sweden (Dyer, 2016), where hosts have returned to their homes to find that it has been
used as a sort of brothel. It has been argued that unlike Airbnb hosts, who are sometimes absent
during their guest’s stay, hotel employees are trained on how to notice and deal with situations
involving prostitution and are able to prevent the issue in a professional manner (Caverly, 2016).
Additionally Airbnb have been accused of discrimination, disregard of health & safety checks prior
to permitting the listing of homes, and have been known to contribute less than 1 percent towards
damage costs totalling over $10,000, if not evade them completely (truTV, 2016).

Considering the publicity and amount of attention received the from the issues mentioned above,
Airbnb could be susceptible to a loss in demand, as a result of the potentially influential negative
aspects. Nevertheless, Airbnb have attempted to redeem themselves in numerous ways: Social
responsibility and philanthropy is widely considered as an investment for businesses, as it can be
used as a marketing strategy that promotes a positive brand image, otherwise known as cause-
related marketing (CRM) (Stroup and Neubert 1987 cited in Varadarajan and Menon, 1988). Thus,
Airbnb followed suit and associated themselves with charitable associations such as Make-A-

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Wish®, with intentions to “donate up to $1 million in travel credits to fulfil a wish a day for Make-A-
Wish families in 2017” (Airbnb, 2016).

Airbnb have also been active members of sustainable tourism, strategically competing with hotels
by claiming that home sharing has statistically proven to be more eco-friendly than staying in a
hotel whilst travelling, as tourists are likely to consume less water and produce less waste etc
(ibid). Airbnb have raised awareness of these statistics via having recently partnered with
SolarCity. In an attempt to further promote sustainable travel, SolarCity are offering the Airbnb
community up to $1,000 cash back on solar power products in hopes to persuade hosts to switch
to make the switch (ibid). These CRM collaborations are ultimately capable of regaining customer
trust, as it promotes positive brand publicity and may perhaps avert attention from negative
aspects (Varadarajan and Menon, 1988, Bowie and Buttle, 2004).

Conclusion
Without technology and its constant development, it would not be possible for Airbnb to reach such
a niche market, thus leaving consumers to have no choice but to rely on mainstream holiday
companies, who often neglect their niche market’s needs and instead focus on the majority’s more
commonly known needs, due to niche markets being viewed as not financially viable (Anderson
2009). However, due to technology development came the birth of the sophisticated consumer,
who have changing demands (Dwyer, et al, 2008). As shown in figure 7 below, more tourists are
actively seeking alternative options to fulfil their demands, otherwise known as the longer tail,
compared to those who stick to mainstream companies, referred to as the head, illustrated in figure
8 (Anderson 2009).

Figure 7 | Brands Visits (Mintel cited by Wenjie

2016, 2016, Lecture 2 Slide 8)

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Figure 8 | The Long Tail (Anderson

2009)

Airbnb’s expeditious growth make it conspicuous that its Internet presence benefits its guests and
hosts alike, as well as a few of the local communities that would otherwise lack the means to
attract tourists and bring in foreign revenue (Kaplan and Nadler, 2013). It is evident that Airbnb’s
marketing strategies have sufficiently led the company to growth, particularly marketing to a
millennial audience with the use of social media and hash tagging as a means of communication.
Meanwhile, with the companies more recent app development, Airbnb have stated that they have
the vision of making things easier for consumers (especially for the older demographic), enabling
them to book everything all from the same app, along with the planner feature which helps to

recommend when to book according to the individual’s schedule (Airbnb 2016). Since the

developments and collaborations mentioned have been implemented fairly recently, it is difficult to
determine the future of the company, however it is safe to assume that due to the company
introducing vertical integration by offering more services and products, they are likely to attract a
wider audience, make more profit and build in scope, especially as consumers are increasingly
adapting and growing with technology (Dwyer, et al, 2008).

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