How-to Guide: Customer Segmentation for Restaurants

Customers 12 minute read 04 February 2021

To you, they’re all valued customers, and you want to welcome them all through your doors. They all get the same high-quality service and the hospitality that you show them is equal, right?

Treating your customers differently when marketing to them is a completely different concept, one that you may not be used to, but that could unlock serious potential.

By segmenting your audience, targeting your offering and positioning the restaurant correctly, you’ll find a much more predictable flow of customers.

Research appears to confirm this. It’s thought email campaigns sent to segmented audiences enjoy 14% higher open rates.

Consider this your ultimate guide to restaurant market segmentation.

Why segmentation comes before targeting and positioning

Let’s consider one of the most strategic methods for conducting any marketing campaign:

Segmentation-Graphic

Targeting a customer base is something every ambitious business owner does, and this is typically carried out via a number of channels such as booking engines, social media and email.

Positioning is all about deciding what type of message you’ll use to communicate whatever it is you want to say.

The only problem is you can’t do either of those things without first segmenting your audience. If you don’t, you’ll simply send the same message to every single person, via just one channel.

How many of those people will actually want to receive that message?

What is customer segmentation?

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Customer segmentation is simply the process of dividing your entire customer base into smaller groups based on similar demographics or traits.

It’s a bit like an Olympic team. There isn’t a country on the planet that would throw its entire team into the 400m relay, because only a small subset of them will actually be any good at it.

Instead, the team is broken up into groups in order to best utilise their talents. That’s what you need to do with your customer base if you’re to send them effective marketing messages which hit the right spot at the right time and via the most appropriate channel.

The best customer segmentation consists of the following traits:

It’s compatible: does it align with your goals, vision and values?

Get market segmentation right, and you could enjoy as much as a 760% increase in revenue. It’ll also help you create far more successful menus.

The 4 types of market segmentation (and what they mean)

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The good news is that, just like so many things in marketing, market segmentation is actually really straightforward.

In fact, there’s just four types of market segmentation to focus on, and they’re all entirely relevant to the hospitality industry.

1. Market segmentation 1: Demographics

This is all about the who, and it’s probably the most common type of market segmentation.

It includes the following non-identifiable character traits:

They can be combined, too. For instance, you may decide to target a specific offer at people who fall within a particular income bracket, age group and occupation.

2. Market segmentation 2: Psychographics

This is the why and focuses on your guests’ interests and personalities.

Psychographic segmentation gives you the opportunity to define your customer groups by their:

You can go much further, though, and this is where thorough research into your customer base is so important. The more you know about what makes them tick, the more you can expand on the list above and create incredibly valuable customer segments.

3. Market segmentation 3: Geographic

This, as you might guess, is the where. It’s arguably one of the most important market segmentation techniques for hospitality venues (like restaurants, cafes, hotels and retail) because it enables you to identify customers based on where they live and therefore how likely they are to visit you.

The most common data for geographic segmentation include:

Having this data to hand means you can far more accurately target customers on your doorstep and create separate campaigns to tempt those further afield.

4. Market segmentation 4: Behavioural

This is where market segmentation gets really exciting.

Behavioural segmentation is all about the how. It’s made possible if you understand your guests’ past habits when engaging with your venue.

For instance, you might be able to find out their spending habits, favourite dishes, frequency of visits and their degree of loyalty. That kind of information is gold dust and it’s why behavioural marketing is becoming more accessible than ever before.

Hospitality market segmentation best practices

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So, now we understand the nuts and bolts of market segmentation for restaurants, how do we ensure it helps you achieve your most important business goals?

The following best practices for restaurant market segmentation will help you divide your customer lists effectively and for the benefit of your marketing campaigns.

Know your customers. Where do they come from? What do they love, despise and yearn for? You need to know your customers like you do your best friends.

Always set goals. Every customer segment you create needs a solid goal behind it. For instance, do you want to get more bookings from that particular segment, or use it to expand your brand into another territory?

Don’t get mega specific. Segmentation is at its best when it’s high level. You should be able to explain each segment in three adjectives - i.e. if you have to say “customers who dine with us on Tuesdays, after 8pm and who are between the age of 23 and 31” the segment is way too specific.

Test, test, test. You won’t get this right first time. Every time you create a new market segment, you need to test it with messaging and various forms of communication to see if you’ve correctly identified a common group of people.

Go back to your segments. Market segments evolve over time; the people within them change, just as your business and the market itself does. This is why you need to revisit your segments to see if you need to adapt them to address any changes that have taken place within the target market.

Customer segments examples

Before we sign off, here are some customer segments example for restaurants to get you started. We’ve picked four which we think are the most relevant for 2021.

1. Price

This is about as simple as it gets. Restaurant, for example, should build menus and offers around customer segments based on the price they’re likely to pay?

For instance, office workers probably have a smaller budget for lunch compared to a family of four, so why hit them all with the same marketing messages?

2. Customer type

You probably have far more types of customer than you think. So, sit down and brainstorm all of the people you’ve come into contact with recently.

Look beyond leisure and business. Think about the generation in which they sit, what lifestyle they lead and the competing restaurants they’re likely to visit when they’re not at yours.

3. Service

The type of service you offer can - and should - be greatly influenced by your market segments.

For stance, if you have a large number of young affluent people visiting regularly, they’ll want a different service to the smaller number of retirees who pop in occasionally. Understanding when those two segments are likely to make an appearance is key to tuning your service to suit.

4. Product

One menu for all? Nah - why not offer the most appropriate products to the most appropriate market segments?

If we go back to the restaurant price example, those office workers are probably going to want something fast but satisfying, while the family of four will be far more interested in multiple courses and hearty stomach-fillers.

Before you go

We hope this guide to restaurant market segmentation serves you well, but the following guide is a great companion piece if you’re really serious about your marketing this year:

How Behavioural Marketing Could Transform Your Business

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