What is the most profitable targeting strategy from mass marketing to personalization? Results from a simulation in tourism

Scholars know that setting the right target, from the aggregated market to personalization, raises a cost-benefit trade-off, but we found little research on this topic. Personalization is very popular, but it may be costly. Using broader market segments can be affordable but less accurate. We did a simulation analysis in the tourism industry based on a case-study. We compared the profits of four different targets, aggregated market, large segments, micro-segments, individuals, in different conditions by varying consumers' attitudes, price, and scale/scope economies. Our findings show that micro-segmentation is the most profitable strategy on average, but the comparison strongly depends on the business conditions.