Market Segmentation: the Pros and Cons for your Hotel

26th Mar 2014

NB: This is an article written By : Vince Torres –  part of the content marketing team at E-Marketing Associates.

Market segmentation is a marketing strategy used by businesses that mostly results in the targeting of a specific group of customers. Some might use it to get an overall idea of the type of customers they attract so that they may decide how to market their business accordingly. If you haven’t guessed it yet, hoteliers can use the same technique to create a business plan for their hotels, but a smart and careful approach is the key to making this strategy work for you instead of against you.

Vertical segmentation vs. horizontal segmentation

There are two types of segmentation to consider for your business: vertical and horizontal. Vertical segmentation is simply choosing a niche in the market in which to cater your business towards. For example, a store might decide to specialize in children’s apparel and toys in order to attract the business of eager parents looking to buy their child something special.

For a hotel, there is a bit more to thinking involved before one takes that plunge into targeting a specific niche in the market, but the principle is the same. Let’s take a hotel that is located near a popular attraction. Upon closer examination, this hotel may notice that they attract more families taking a vacation rather than couples looking for a weekend getaway. This hotel can, in essence, start targeting a specific group in the market by creating a marketing strategy that attracts families with kids. They may create more specials that are great for families with many children or design entertainment packages.

This is a sure way to get more business in that regards, but by doing so, it runs the risk of neglecting another niche in the market. Since the hotel is located near a popular attraction that families love, this type of vertical segmentation may not be such a bad idea. The only other factor to consider is how to sell your rooms during the off-season, but then again, you can always restrategize to make your hotel more accessible to the guests that prefer traveling during these times. Remember that nothing is permanent, but you have to make sure to be on top of things to so that you can take advantage of the situation!

Horizontal segmentation takes a different approach. Instead of targeting a specific group in the market, this technique will, one could say, distribute the products evenly across an even field. That same store mentioned earlier may decide that they want to stop selling children’s apparel and toys exclusively and start selling clothing for men and women as well. They will now attract business from not only parents but everyone in general. This may sound like a great thing at first, but remember that they are dividing their resources and therefore run the risks on a guaranteed ROI.

The hotel located near a popular family attraction may use this strategy, but horizontal segmentation is more suited for a hotel that is centrally located in a city, which usually attracts a more diverse group of guests. By creating a marketing plan that favors a wider group rather than a niche, this hotel may be more consistent business-wise because they are casting a larger net to “catch more fish.” Rather than specializing in one particular group, this hotel can cater towards a group of traveling college students, a person on a business trip, or some retirees looking for a quick stop on their cross-country trip, and the ability to cover more ground will ensure longevity in profit for a hotel in such a location.

How does one gather data for such statistics?

The time it takes to conduct market research will vary. It all depends on how properly equipped hoteliers are and what type of approach they’ll take to get the data they need. Remember that gathering data is not invasive, and all the information is available for you as long as you are using an appropriate source such as a social media site or your own hotel survey forms.

If you haven’t been using social media to actively monitor your hotel activity, then you are missing out on a very valuable tool to help you get the data you need. Using Facebook’s Insights tool can give you instant access to the type of guest or potential customers that are visiting your hotel’s Facebook page, who are most likely interested in learning more about your establishment or looking to leave a comment or review. You can get general information on criteria such as the location where your guests are coming from, their gender, and the ages of your customers. Public online forums like social media pages and review sites can also give you some insight on the variety of guests your hotel attracts. By reading the profile pages of these guests who leave reviews, you can determine the type of guest that have positive and negative things to say about your hotel, and with this data, you can modify your marketing strategy to fit accordingly and better serve you and your guests.

Additionally, your hotel may use the data gained from customer surveys or, if you have the type of accessibility and resources, you may even conduct personal interviews with guests if they are willing to participate – for an incentive of course. This will give you even more statistics to use for your marketing strategy. The major advantage with this is that you get a personal interaction with your guest and get a true feel for your customers.

Using market segmentation can be great for your business, but only if you handle it the right way. Creating a business plan based on your customers is a smart move and can lead to stable profit gain, but consider the conditions before you make a move. Once again, remember that nothing is permanent, and the most successful hotels are always restrategizing. Adaptation is important in a market that is always shifting.

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