Market Segmentation: The Pros & Cons for Your Hotel

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. 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 merely choosing a niche in the market in which to cater to your marketing. For example, a store might decide to specialize in children’s apparel and toys 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 seeking 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 develop 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 regard, 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. Then again, you can always re-strategize 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 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. They want to 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. This usually attracts a more diverse group of guests. By creating a marketing plan that favors a broader group rather than a niche, this hotel may be more consistent business-wise. This is because they are casting a wider net to “catch more fish.” Rather than specializing in one particular group, this hotel can cater to 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. 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 inherently invasive. All the information is available for you as long as you are using an appropriate source such as a social media site or your hotel survey forms.

If you haven’t been using social media to monitor your hotel activity, then you are missing out on a tool to get the data you need. 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. These people are most likely interested in learning more about your establishment or looking to leave a comment or review. You can get general information on many criteria. This could be info such as location, gender, and the ages of your customers. Public online forums like social media pages and review sites can also give you some insight into the variety of guests your hotel attracts. By reading the profile pages of these guests who leave reviews, you can determine the type of guests that have positive and negative things to say about your hotel. 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. 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 advantage of this is you get a personal interaction with guests and get an authentic 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 re-strategizing. Adaptation is vital in an ever-shifting market.