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Why Customer Segmentation Is Important For Restaurants

Saif Alnasur
Saif Alnasur

Mar 16, 2022 4:07:19 PM

A restaurant, like any business, is made up of many things. There’s staff, food, raw materials, and so much more. But what’s the most important part of a restaurant?

Is it the location, the ambiance, or the food? Or is it the staff or hi-tech equipment?

While all those things play an important role in running a restaurant, the most valuable part of a successful one is its customers.

You can have the best location with an excellent ambiance and delicious food, but none of that matters if you don’t have customers.

This is why it’s crucial for restaurant owners to know exactly who their customers are when they come to visit. The market is filled with many different types of customers, which of them is your restaurant made for? This question is the key to creating a successful customer management strategy.

If you think your restaurant is created for ‘everyone’, you are starting off on the wrong foot. People have varying preferences about where they like to eat - some prefer quiet, cozy spots, while others like busy, happening, spots. Some care a lot about the restaurant’s ambiance, while others don’t care much about it.

You can’t cater to every person in the market with one restaurant. It’s important to recognize exactly what your restaurant’s target customer segment looks like and understand their likes, dislikes, and preferences so that you can tailor your restaurant accordingly.

Once you find your target market, you can further segment them based on their preferences and behavior so that you can cater to each of them accordingly.

But what exactly is customer segmentation for restaurants? Let’s look at it in more detail.

What is Market Segmentation for Restaurants

Market segmentation refers to the process of identifying your target audience in the market and dividing them into segments based on factors like age, behavior, preferences, etc.

This allows restaurant owners to create specific profiles for their customer base to understand their preferences and what they are looking for in a restaurant so that they can cater to their needs better.

A restaurant’s target market can be segmented based on various factors. Here are some of the most common ones used in the industry:

  1. Demographics: This includes factors like age, gender, income, etc. This is a useful segmentation factor as people with similar traits are likely to have similar interests and buying habits. For instance, gen z customers all have similar interests and prefer restaurants that are “grammable”. 

  2. Psychographics: This includes factors like interests, beliefs, hobbies, etc. These factors allow restaurant owners to recognize people with similar interests to what their restaurant is offering. For example, A sports cafe can identify and segment people who love sports, making it easier to find their target customers.

  3. Behavioral: This segmentation is based on a customer’s buying journey and behavior and takes into consideration factors such as what they want, why they want it, what benefits they are looking for, and how they achieve their goals.

  4. Geographics: This segmentation is based on the customer’s home location. Identifying which geographical location you are targeting is important as it affects decisions like having a take-out menu or focusing on walk-in customers, or targeting locals vs. tourists. 

Together, these factors provide restaurant owners with a holistic view of their target customers. 

Let’s look at an example. 

Restaurant “Eat” is located in a residential district that is family-friendly, and also has a university nearby. With the restaurant’s prime focus being walk-in customers, they recognize their target audience as people who live close to the restaurant which includes: a. People with families living in the residential district, and b. Students from the nearby university.

Based on this, restaurant “Eat” divides its customers into three main segments: 

  1. Couples looking for a cozy, romantic place to eat at.
  2. Families with kids looking for kid-friendly restaurants.
  3. University students looking for a relaxing place to hang out with friends.

Identifying their target market and segmenting their customers based on different factors provided restaurant “Eat” with an in-depth overview of what their audience is looking for and allowed them to tailor their restaurant accordingly.

Now, the restaurant can add things like a play area for kids, secluded booths for couples, and a student discount for university students to attract their target market to the restaurant more effectively.

Benefits of Customer Segmentation for Restaurants

1. Understand your guests better

The only way to run a successful restaurant is to keep customers satisfied. To do that, you have to first understand what their needs and wants are, and what they are looking for in a restaurant. Market segmentation helps restaurant owners answer these questions by identifying who their customers are, what are their preferences, their interests, their spending habits, etc. This allows them to tailor their restaurant experience accordingly, making it easier to attract their ideal customers to the restaurant.

2. Focus your efforts towards the right things

Restaurant owners and managers have limited time and resources. Understanding their market’s preferences and interests allows them to dedicate those limited resources towards catering specifically to their customer’s needs. Without properly understanding their target market, restaurant owners are likely to waste time and money on things that are not important to their customers.

For instance, if your target market mainly consists of young college students, building a kids' play area will not be beneficial for your restaurant. Instead, offering student discounts and holding events like trivia nights will help you cater to their preferences better. The only way to understand their interests and tailor your restaurant accordingly is through customer segmentation.

3. Tailored and personalized marketing

Personalized marketing is the key to building customer loyalty and increasing return customers. People are no longer convinced by generic, blast messaging that does not relate to their preferences and interests. They’re looking for promotional messaging that caters specifically to their interests.

Segmentation allows restaurants to target their customers with tailored, specific messaging based on their behavior history which improves the effectiveness of their marketing campaigns.

For instance, restaurants can create a segment with customers who have previously ordered wine and invite them to a special wine night event, targeting them based on their behavior history and interests.

How a CRM System Can Help Restaurants With Customer Segmentation

Now that you know all about customer segmentation and its importance for restaurants, how do you actually do it for yours?

As a restaurant owner or manager who has a million other things to do, you can’t possibly collect and sift through guest data manually to segment customers based on different factors like age, preferences, etc. It will take up hours of your time that can be better used elsewhere.

CRM systems, like Eat App, help make this job easier for restaurant owners by automatically collecting and compiling detailed guest data including order history, preferences, number of visits, average spend per visit, etc. 

Eat App also allows restaurants to create customer segments based on these factors within the CRM system, making the whole process quick and streamlined. You can easily filter guests based on different factors to identify and create multiple customer segments in a matter of minutes.

Our system also makes it easier for restaurants to target their customer segments with personalized messaging by sending tailored emails directly through the CRM system. 

For instance, you can filter guests on the basis of the number of visits, create a segment for guests who have visited your restaurant 10+ times, and send them a special discount code to award their loyalty, all through Eat App’s CRM system (if possible, add a GIF of the whole process here)

Interested in trying Eat App’s CRM system for your restaurant? Start your free 14-day trial now.

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