If you work in the hospitality industry, you must know how crucial it is to tackle your hospitality management issues. Well, one of the most vital elements of your revenue management strategy is market segmentation.
In addition to expanding your hospitality business into new markets, market segmentation enlarges your consumer base and gives you better market insights. What’s more, it allows for better forecasting, faster decision-making, and easier budget-making.
This guide teaches you everything you need to know about market segmentation in the hospitality industry. Including what it is, its benefits, and the four segmentation types. Let’s Get Started
What is market segmentation in the hospitality industry?
Market segmentation in the hospitality industry involves subdividing the types of guests your business receives into groups based on their characteristics: age, booking channel, price sensitivity, booking lead time, etc.
It’s a strategy that allows hospitality business owners to comprehend better what drives guests and determine each trip’s objective.
When done correctly, market segmentation can be the key to your growth and increased profits. It’ll help keep you updated, help you recognise new market trends, and give you the upper hand amongst your competitors.
What are the benefits of market segmentation?
As mentioned above, market segmentation involves analysing your target audience, sub-dividing them based on their price sensitivity and booking behaviours. This helps you better understand your customers to enhance their services and increase your total revenue.
Also, you can use market segmentation to determine why a thing like a drop in bookings has happened. In such a case, owners in the hospitality industry can take the necessary steps to increase the number of guests they receive.
Generally, four different types of market segmentation apply to various industries, with the hospitality industry being no exception. They include demographic, psychographic, geographic, and behavioural hospitality. Let’s explore each of these market segmentations.
1. Demographic Segmentation.
This is the most basic way of describing a customer. Demographic segmentation looks at identifiable non-character traits, including:
- Income Level
- Educational Level
Demographic segmentation can help you target your prospects based on their income or age. This ensures that your marketing budget isn’t wasted on unfruitful advertisements.
2. Psychographic Segmentation
This segment contains a list of your customers based on their interests and personality. We look and define the customers through their:
- Personality traits
- Life goals
Although this is harder to identify than demographic segmentation, it can allow for incredibly effective marketing strategies that “speak” directly to the customers. You may tailor your hospitality adverts based on the customers’ goals and values.
3. Geographical Segmentation
This is the “where” subdivision of the business. It’s the easiest to identify and involves grouping your customers based on their physical location. It could include the following:
- Post Code
For example, it’s possible to group the hospitality industry customers based on the radius of a specific location and offer relevant services. There are online tools you can use to show different services depending on your restaurant’s location.
4. Behavioural Segmentation
This involves grouping your prospects according to trends of how they have behaved in the past. Some behavioural trends you can follow are:
- Purchasing habits
- Spending habits
- Loyalty to brand
- Previous service ratings
- Interaction with the brand
The good thing is that you can harvest all of these subsets of data from a customer’s site usage or interaction with your establishment. Once you have the relevant information, you can tailor your services to meet the demand of your customers.
how to segment in the hospitality industry
Now that you know the different types of market segmentation let’s see how you can segment your hospitality business.
After identifying your market segments, you can begin working on your market segmentation strategy by determining the most crucial market segments. Getting to know the kind of customers you’re dealing with helps you segment each piece of your market segmentation puzzle according to the types of customers you have.
You can use each segment to better understand your audience, according to the information you gather from the current trends in the hospitality industry.
Here are further steps to guide your market segmentation journey:
- Identify your customers – Your customers are the major source of your business’s profit. So, determining their price sensitivity and booking behaviours can go a long way toward increasing your business’s revenues.
- Identify the most profitable customers – Revenue data can help you in determining the most profitable guests.
- Verify your data – you’ll need accurate data to have a fruitful market segmentation.
The bottom line
Despite the effects of the COVID-19 pandemic, the Hospitality industry remains vital for the UK’s economy. To excel at this, establishments in the hospitality industry need to use market segmentation to remain operational and relevant in the market.
This post outlines everything there is to know about market segmentation, including what it is, its benefits, and how you can segment the market. Good luck as you wish to use it to boost your revenues and gain a competitive advantage over your close competitors.
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