Time to shake up market segmentation

11 April 2007
Time to shake up market segmentation

Pamela Carvell, chairwoman of the Hotel Marketing Association, says now is the time for hoteliers to revise how they use market segmentation

Market segmentation is a traditional marketing tool that hoteliers have used to track business by identifying and grouping their customers.

It works by placing customers into different categories or segments based on a number of criteria ranging from which country they live in, to how they work, and in many cases the price that they are prepared to pay for a hotel room.

While the notion seems eminently sensible that hoteliers wish to track and predict who their customers are, the whole process of market segmentation has become increasingly complex over recent years with some hotel companies using up to 86 different segments.

The rise of the internet as a booking medium means that hotels frequently receive reservations from business travellers with no information about the person who has booked.

When the customer arrives at reception having flown on a no-frills airline, wearing jeans and carrying a back-pack there is no way that staff can identify which market segment they represent.

So how accurate can the system be?

What about rack rate? Do many hotel companies use this segment anymore, which traditionally has represented customers paying full rate?

Many other industries manage very profitably without market segments. So it beggars the question can hotel companies use market segmentation as a marketing device in this day and age?

The Hotel Marketing Association debated this very topic with a group of leading hoteliers recently and the overwhelming response that we received was yes most certainly.

However, it is clear that the hotel industry is not very good at defining or managing market segmentation and it is time for a shake up.

Get rid of all those complicated segments and make it much simpler.

In these times when the brand is king, market segmentation does have a key role to play but it is up to the marketers to redefine it and move it forward.

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