Creating market segments is a key action for carrying out effective Revenue management at your hotel. But how can we segment our customers? Is this differentiation worth the effort?
Why segment our market?
Not all the customers who come to our hotel share the same socio-economic characteristics or the same tastes, so why treat them all the same?
Offering a personalised service to every customer is impossible, since most hotels have neither the resources nor the time to do so.
On top of being an almost impossible task!
The solution to this problem is to segment the market we operate in and find our target market. In other words, to divide our potential consumers into small, homogeneous groups according to their needs or some specific quality.
This grouping by characteristics will be useful when it comes to defining our marketing strategy and sending campaigns, offers and personalised information.
Market or customer segmentation in the hospitality sector is very easy to carry out these days. All you need is a good CRM.
A CRM for hotels lets you store all the data of your current or potential customers automatically and group them according to whichever characteristics you consider relevant.
So, with just a few clicks and in a matter of minutes, you can segment your entire customer base.
The advantages of segmenting your guests
The advantages this practice brings are immense:
- Creating a clean customer list. This lets us distinguish the customers who are profitable from those who aren't.
- It lets you get to know your customer better. Knowing what they need and meeting that need by offering them personalised products and promotions.
- Identifying new market niches and expanding your network of potential consumers.
- Building brand loyalty, since the communications we send are of interest to our customer.
- Focusing our marketing and sales strategies in the right direction. As a result, it helps us reduce our costs and make better use of our resources.
- It improves our image as a company in the customer's eyes.
- It lets us gain and benefit from competitive advantages.
- Locating and operating in so-called “blue oceans”.
Is this the first time you've read the term “blue oceans”? Keep reading.
It's a relatively new theory, since it came to light in 2005 with the publication of the book “Blue Ocean Strategy”, which explains that thanks to good market segmentation you can come to operate in a “blue ocean”. By that term we mean market niches that haven't yet been exploited commercially and in which competition is therefore minimal or even non-existent.
As you can see, segmenting your market is fundamental for your hotel, since the benefits it brings are not, exactly, few.
Types of market segments in the hospitality sector
The next step is knowing how to segment our market, since if we do it incorrectly we'll be wasting resources and may even end up losing customers.
Let's look at the main market segments that exist in the hospitality sector.
Broadly speaking, we could segment the market according to two variables:
1. Market segmentation by reason for travel
- Leisure
- Business
The first major division we can make when talking about the hospitality sector is the reason for travel. These days it's hard to know what the reason for our future guest's stay is, since most bookings are made online.
A good solution to this problem is to ask the customer during the booking process what the reason for their trip is.
Individuals or companies travelling for business are the easiest customer to build loyalty with that we can find, since if we offer a service that meets their expectations we could win not just one customer, but every individual in that company.
The communications we can send in this case would be focused on our loyalty plan, information about the possibility of late check-out, meeting-room availability, copy-shop or laundry hours…
By contrast, the communications we send to travellers visiting us for holiday or leisure reasons would be focused on the activities our hotel offers, the area's tourist attractions, holiday-season promotions…
2. Market segmentation by number of guests
- Individual
- Group
The other major variable we can segment by is whether it's a group trip or an individual one.
More and more people are travelling solo. A clear example is the new travel trends that have been emerging in recent years, such as “singles travel” or “solo trips”. This is a new and very interesting market niche that we might want to explore.
Within group trips, we could create sub-segments based on whether it's a family, a group of friends, a couple…
For example, in the case of a family, we could focus our communications on the school holidays.
Other market segments we can find in the hospitality sector are:
3. Market segmentation by geographic variables
This will let us know the nationality of the customers who visit our hotel most. This is useful when it comes to creating a promotions calendar focused on the public holidays and holiday periods of the guests' country of origin.
4. Market segmentation by socio-economic characteristics
This might be segmenting the market by age, purchasing power, gender, religion, marital status…
A very common form of segmentation today is segmenting the market by generations, since the individuals of each generation tend to share the same values and behaviours:
- Silent generation (1920–1948): this would involve Imserso trips.
- Baby boomers (1946–1964): they tend to buy travel packages and visit physical travel agencies.
- Generation X (1965–1979): they look for more local, less crowded experiences.
- Millennials (1980–2000): they're adventurous and connected to new technologies. They're the group that would include families.
Besides helping us when it comes to designing our communication strategy, these values also help us get to know our buyer persona.
That is, to create our ideal customer. And to focus the actions of our marketing plan on them.
Besides segmenting our potential customers, we can also do it with those who have already been our guests, and thereby obtain information that will be useful for learning more about their behaviour during their stay.
For example, we can segment them according to:
Segmentation by average stay
Segmentation by repeat rate
Segmentation by average cost of stay
How to make market segmentation work at your hotel?
There are 3 factors we need to keep in mind when segmenting the market so as not to run any risks:
1. Know our target market.
Before segmenting, we should have carried out a market study on the basis of which we'll create our segments of potential customers. That's why the information we gather from our research has to be useful and accurate.
2. Don't over-segment.
If this happens, the audience we'll address will be very small and the ROI we obtain could be very low, since for the amount of resources invested the reach would be minimal.
3. Segmenting without any strategy.
We must always segment our market with our main objective in mind.
Take action. Start today 🚀
Fideltour is a CRM for hotels created by hoteliers for hoteliers. We know what they need and how to get it. Starting to segment your data, multiply your database and deliver targeted communications is the key to steering your hotel towards stardom. Care to give it a try? You can start here — it's completely free.
