How to identify a target market for your hospitality business

Whether you’ve been in business for some time, or you're planning a new hospitality venture, identifying your target market for your restaurant, cafe, bar or accommodation business is a hugely beneficial exercise.

Once you know exactly who your ideal customers are, you can figure out the size of the potential market for your business. This will help you determine what level of sales and profit your business has the potential to achieve, which is essential for financial planning.

It also allows you to target your marketing and communications to your customers much more effectively. It’s more cost-effective to target a niche than to apply a mass marketing approach and hope that a small proportion of those you reach actually respond. The more relevant your communications are to the needs of a specific group of people, the more likely they will be to take the action you want them to. And that means your return on marketing investment will be much higher as a result.

For example, if your restaurant specialises in exclusive fine dining, you’re unlikely to want to target students. Similarly if you are opening an affordable, family-friendly burger-joint, you won’t want to waste your market budget reaching those who are looking for a more refined dining experience.

Using geodemographic segmentation to narrow your target market

It’s a bit of a mouthful, but geodemographic segmentation is simply a way of dividing up the population based on where they are and what traits they have. 

Geographic segmentation in hospitality

The ‘geo’ bit is obvious - where are your customers located? This might be everyone who lives within a certain radius of your premises. If you run a cafe or takeaway, that radius is likely to be relatively small, as these businesses are all about convenience. If it’s an exclusive restaurant with a unique offering, that radius will be larger as people will travel from further afield for the experience. If you’re providing accommodation, you’ll probably exclude everyone nearby and include people from further afield - will they be in New Zealand, or from overseas? Which regions or countries?

You’ll also need to consider people visiting the area. Will your restaurant, cafe or bar target tourists, or is it more aimed at locals? Do you have a busy roadside location that will target people passing through, and where will they be coming from and going to?

Demographic segmentation in hospitality

Demographics are things like age, gender, income, family structure and ethnicity. It’s relatively easy to group people in this way to establish the size of your potential market.

For example if you’re opening a trendy bar, you’re going to want to target a younger demographic, with relatively high incomes, and probably people who haven’t yet had a family.

If you’re opening a budget pizza restaurant, your target market is likely to be lower income earners with children at home. Or perhaps students and young adults who are flatting, rather than homeowners.

Combining geographic with demographic traits will let you create a segment (or multiple segments) of potential customers for your business. This will give you an idea of the size of your potential market, and help you improve your marketing effectiveness.

Establishing customer personas in the hospitality industry

A customer persona is a description of your ideal customer. It differs from a market segment because it really narrows down the precise nature of your ideal customer, to enable you to laser-target your marketing for best results.

You might have more than one customer persona for your business, but try to keep it to a handful, and create an accurate description of each one. Really focus on describing the traits and behaviours of a single person, rather than a group of people.

For example, your customer persona for an exclusive, high end, fine dining restaurant in Takapuna might be a middle-aged, high earning professional who lives on the North Shore. She’s a CEO or CFO, drives a luxury car and she’s a frequent traveller who always flies business class.

If you run a backpackers in Queenstown, your ideal customer might be a young Australian graduate on his OE. He takes on contract work as a fruit picker while he travels the country. He’s bought an old banger to drive so he’s on his own schedule and can stick around if he really enjoys a place. He loves adventure and wants to do all the high adrenaline activities like bungy jumping and jet boating.

There will be far more detail you can add about your own ideal customers, but when you develop a customer persona you’ll start to build a picture of a real, live person who you can speak to directly. You’ll get a sense of where they hang out, so you know where to reach them with your marketing. You'll start to understand the things that matter to them - their pain points and problems you can help solve.

When you know who your ideal customer is, you can personalise your marketing to them and talk to them much more directly. Highly relevant, one to one communications work far better than mass communications, so the more relevant and targeted you can make your communications, the more likely you are to get the desired result from your marketing.