The ultimate guide to restaurant customer segmentation

Here at Access Hospitality, we specialise in helping restaurants make the most of their customer data, and we help businesses of all sizes. We often see that even the most successful restaurants face challenges with customer segmentation, and even though they're already thriving, by turning the data into targeted campaigns that boost profits, customer segmentation can take things to the next level.

In this article, we'll show you what customer segmentation is, we'll dive into its benefits and cover different types of restaurant segments, so you can start implementing segmentation strategies right away.

What is restaurant customer segmentation?

Customer segmentation is the process of grouping your customers together based on similarities, such as their age, spending habits, favourite menu items, reasons for visiting your restaurant or any other relevant data point. By understanding these segments, you can tailor your marketing to meet their needs and resonate with each group more effectively.

There are different types of customers in restaurants and each customer is different from the next, so a one-size-fits-all approach simply won't cut it. Segmentation lets you deliver personalised experiences, such as sending targeted promotions like birthday treats for loyal customers or creating offers based on specific dietary preferences - which is what customers love and crave. According to a report by Zendesk, 90% of customers are willing to spend more on companies that personalise the service offered to them.

Happy and loyal clients are among the benefits you can expect with market segmentation, as it will help you learn about your customers more deeply. But it can also help with tailoring your marketing efforts and improving your marketing ROI. Customer segmentation takes the guesswork out of marketing and shows you precisely who your ideal diners are and where and how to reach them, so you can laser-focus your ad spend. It can also help identify top-selling items on your menu, uncover areas for improvement and upsell and cross-sell products.

1. Demographic segmentation

Demographic segmentation means grouping customers according to their shared characteristics, such as their age, gender, income, family status, education level or occupation. Think of it as the who's who of your customers, which is crucial for tailoring your marketing, menu, and overall experience to resonate with different groups.

For example, segmenting customers based on their age will provide insights into their spending habits, their life stage (student vs. established professional), preferred dining times, and even menu preferences. The income segment can suggest disposable income levels and will direct you to those who can afford your service.

2. Geographic segmentation

Geographic segmentation means dividing your customers based on where they live or work, which can include countries, regions, cities, neighbourhoods, and even postal codes and it's about understanding the unique needs and preferences of customers in different locations.

Segmenting by location will give you an idea of the neighbourhood affluence, local events or foot traffic patterns (for walk-ins), and regional preferences. For example, it can reveal taste variations – maybe a preference for spicier dishes in one area, and milder flavours in another. Neighbourhood demographics might also suggest the need for family-friendly options in suburban locations and a more sophisticated menu near upscale urban areas. Even something as specific as proximity to a major office building could highlight the potential for weekday lunch rushes.

3. Behavioural segmentation

Behavioural segmentation is based on how your customers interact with your restaurant and includes their purchase frequency, average spend, ordering habits (delivery, takeout or dine-in), visit timing preferences, and even loyalty program participation. Behavioural segmentation allows you to understand their actions and patterns.

For example, segmenting customers by visit frequency helps you identify your regulars versus your occasional visitors. Tracking average spend will reveal price sensitivity and allow you to tailor offers and upselling techniques accordingly. Knowing your peak takeout vs. dine-in periods will help with staffing and inventory decisions, while loyalty program data will highlight your most valuable, repeat customers.

4. Psychographic segmentation

This type of segmentation means grouping customers based on their lifestyles, values, interests, personalities, and attitudes and it's about getting inside their heads to understand what makes them tick.

Segmenting customers based on their values will help you cater to different needs. For example, you could reach health-conscious diners with a dedicated menu section, or attract those who prioritise sustainability with eco-friendly practices. Analysing attitudes about dining will reveal priorities like convenience, exclusivity, or social experiences which can influence your messaging or even service style.

Apart from these most common segments, there are other noteworthy types of segmentation for restaurants, such as:

• Needs-based segmentation - involves dividing customers based on their specific motivations, desires, and pain points and it seeks to understand why they choose you and what problems you solve for them
• Technographic segmentation - this type of segmentation groups customers based on their technology preferences, the device they're using, and their social media habits
• Occasion-based segmentation - segments by reasons customers visit (birthday, casual meal, business lunch, etc.)

Data-driven segmentation strategy

An effective and valid segmentation method for hospitality utilising existing customer data is the RFM model, which stands for recency, frequency and monetary to identify profitable groups of customers. This is a simple to implement segmentation method that gives you an informative high-level depiction of customers for marketing purposes by looking at these three quantifiable factors:

• Recency – How much time has elapsed since a customer’s last visit
• Frequency – How many times has the customer visited you over the customer's lifetime?
• Monetary – What is the total lifetime spend of the customer? Many companies find they have more data than they know what to do with.

Remember to have clear goals and objectives and start simply so you can get your marketing communications off the ground, measure the results of campaigns and add more, test and adapt as you move forward.

How to segment customers?

Marketing to your existing customers is one of the most important things you can do and though it seems like it can be overwhelming, taking one step at a time when segmenting customers, will set your business up for success.

Here's how to get started.

1. Choose your focus

What you'll need to understand first is what type of customer segmentation your restaurant needs. For example, are you looking to boost your marketing ROI? If so, consider behavioural and needs-based data. Or maybe you'd like to understand how to increase customer loyalty in restaurants. For that, combine demographics, behavioural, and needs-based segment data.

2. Gather the data and build a customer database

In the next step, collect as much data about your customers as you can from sources like your POS system, website analytics, online reservations, loyalty programs, social media or any surveys you've ever sent to a customer to get an in-depth insight into that customer’s behaviour patterns.

If you have a hospitality CRM in place, it'll help you further by connecting all your customer data from different points in a single customer view (SCV). When you bring all your customer data sets together in a single customer view it enables you to understand when, where, with whom and most importantly why your customers visit your venue.

3. Identify patterns

Now it's time to analyse that data you've collected and look for recurring trends, such as customers who order similar dishes, visit your restaurant during similar hours, or share demographic traits. Or maybe there are regulars who consistently order the same thing? These are the patterns that you can group into segments.

When building your audience segments, consider some of the following questions that might determine the timing, content or call to action in your marketing communications:

• Who are your most loyal customers?
• Which locations do they visit?
• Who comes midweek and at the weekend?
• Who responds to offers?
• Who makes a reservation?
• Who comes in with family or friends?
• Who engages with your marketing communications or social channels?
• Who hasn’t visited recently?

4. Create segments

Once you have spotted these patterns, it's time to build your segments. Give your groups descriptive names that capture their essence - it's entirely up to you whether you want to get creative with it, just make sure the names resonate with you and will help you and your team easily remember what makes each segment unique. The goal here is to truly understand what each group craves from your restaurant.

Market your customer segments

After building your customer segments, it's time to put them to work, meaning creating a plan for each segment and making your communications with them customer-centric. The best outcome comes when you can create specific plans for each segment.

Craft your message

Now you’ve started segmenting your data, it’s time to look at the content of your marketing messaging. How do you create more personalised marketing communications that are more likely to resonate with your audience?

Here are a few ways you can create more personalised marketing communications:

• Images - Using relevant images for your audience segments is a great way to add personalisation to your emails or other communications, for example, using pictures of a happy family when targeting parents or a romantic couple when promoting an intimate dining experience.
• Content - This could mean including more relevant subjects for different audience segments. Your big-spending customers might be more interested in the new expensive wines added to your menu, or maybe it’s your under-30s audience who wants to know more about your sustainable business practices.
• Offers – Again, tailoring offers is a great way to ensure you offer relevant content that drives visits to your venue. You might think about running a few different offers to cater to your biggest or most profitable audience segments.
• Menu items – Do you have customers who appreciate your allergen-friendly options? Send them updates about your new gluten-free menu addition. Identify your higher-spending customers to tell them about your pricier items. Or maybe include some extravagant cocktail images for your Saturday night regulars.
• Customer’s name - Adding the customer’s name to the subject line of your communications can dramatically increase your open rate, according to Campaign Monitor, readers are 26% more likely to open emails with personalised subject lines.
• Location – If you have multiple sites then it’s important to make sure you consider your subscriber’s location, tailor content to their local venue and highlight the offers and amenities available to them.

Know your channels

You've got your segments, but how do you get them in front of the right eyes? The best way to reach your customers fast is through email. To reduce the manual task load, create automated communications in your CRM activities.

Once you set up automated communications, they will keep running indefinitely and can help you increase the return rate of first-time customers as well as reduce the churn of those who are visiting less frequently.

Make it timely

Find out the best time to send out your communication to learn when are different segments most likely to engage. Sending timely communication will help you maximise your open rates and conversions by reaching customers when they're most receptive to your offers, such as hitting those weekday lunch crowds with perfectly timed specials, or enticing weekend diners with offers just before their decision-making time.

Measure your results

Segmentation isn't a set-it-and-forget-it strategy and you'll need to keep track of the success of your campaigns. Regularly check on which offers resonate most with different segments, or if your targeted promotions lead to increased engagement or higher spending. Use these insights to refine your strategy and if needed, make necessary adjustments.

Ready to connect with your customers on a deeper level?

The average person in Britain is exposed to over 5,000 marketing messages every day, so getting the right message to the right customer at the right time is critical for effective customer engagement. But in such a competitive space, how do you identify the right time? How do you make sure you deliver an engaging message that will drive customers to visit?

In this article, we've explored what customer segmentation is, and why it matters, we also covered ways to turn those insights into personalised experiences that boost loyalty and profits. Now all that's left is for you to put those insights into action.

Hospitality CRM system, such as our own Acteol CRM, enables you to segment your database in a variety of ways, helping you to tailor your messaging and send the most effective communications. By collecting data from various sources like reservations, marketing activity, website, delivery, on-site Wi-Fi, social media, transactions, vouchers and loyalty programs, you can utilise different data sets to segment your audience and inform your marketing communications.

Our CRM system supports more than 70 integrations with the biggest hospitality platforms which not only lets you optimise your operations but access the data that can help create and perfect those customer segments.

If you'd like to start delving into your data to start your own targeted marketing campaigns, reach out to our team of CRM experts who are here to help you discover how to maximise revenue and make the most of your customer data.