B2B International
B2B International

June 10, 2010

Taking us on a tour of his opulent Beijing hotel, Matthew Harrison this week explains why segmentation of a target market remains crucial.

I am writing this latest installment to Thursday Night Insight from my hotel in Beijing.  Beijing is a city I know well and I have become accustomed to its hospitality – the faultless service in restaurants, the branch of Subway that delivers my foot-long sandwich for free, and the animated army of traffic lieutenants who bark at passers-by if they so much as lean over the road when the pedestrian light is on red.  Sadly they don’t afford the same courtesy to the smoke-belching construction trucks that make it their business to run over pedestrians when the lights eventually change.

Variety being the spice of life and ‘adventurous’ being my middle name, I decided to sample a new hotel for this latest visit to our Chinese office.  The Japanese-run Jinglun has served me well over the years, but having been charged the equivalent of $10 for half a pint of warm Tsingtao during my last visit, I decided to venture further afield to the Jianguo Hotel – a lengthy 1-minute hike away and self-proclaimed Garden Hotel of Beijing – which for some reason was offering luxurious rooms at knock-down rates.

Upon my arrival I was immediately impressed, as I always am when Chinese hospitality is involved.  The politest man in the world took my case from the cab without asking.  I never saw him again, but by the time I arrived at room 739, my luggage would be waiting for me.  The garden theme was plain to see, the labyrinthine corridors snaking round a series of open-air ponds and trellised courtyards.  The sight of a French restaurant adjacent to an English pub at the corner of the foyer meant that I immediately assumed I was in heaven, even if the 3 photocopies of my visa, passport and credit card seemed an excessive way of granting me entry.

One of the five-strong gaggle of receptionists eventually gave me my room card, contained in a small cardboard booklet advertising the English pub, French restaurant and 3 other onsite establishments, including Shang Court Chinese Imperial Cuisine – or, as its catchy tagline reminded me, ‘The only luxurious restaurant with the imperial palace and feudal official mansion cuisine of the Shang Dynasty in Beijing’.  I made a mental note to return later and find out whether the food was as stodgy as the advertising.

I headed down 3 corridors, around 4 gardens, under 2 pagodas, through a pond, over a crocodile infested ravine, up 6 floors, down another corridor and into my room.  It was a sight to behold.  A huge plasma screen looked down on me imposingly.  A green velvet sedan-chair lazed seductively in front of the window.  Beneath 2 glass shelves stocked with Dragonseal 2008 vintage, the mini-bar hummed its sensuous hum, pouting its lips and beckoning me towards it with come-hither eyes and lovestrewn promises of Heineken straight from the can.

The room was as confusing as the hotel itself.  As if the boastful attention seeking of the plasma screen wasn’t bad enough, its brash identical twin was suspended just feet away.  I counted at least 4 waste paper baskets – why?  The bath had 3 taps, one less than the number of telephones dotted around the room.  5 mirrors vied for space with 6 cabinets, a desk, and a mysterious contraption that looked like a zimmer frame for a man with 3 legs.

20 hours after leaving home, I threw the 17 decorative cushions onto the floor and collapsed onto the king-sized bed, determined to let fatigue take its toll.  The minibar hummed with dejection whilst the Dragonseal glared its hateful blood-red disapproval.

But this room would not let me sleep.  It was just too much.  Too much attention, too much fuss for a half-asleep Englishman.  This beautiful hotel, this monument to sino-european chic, was not for me.  I began to long for the wide wildlife-free corridors and blanched, single-screen rooms of the Jinglun hotel.  The Jianguo was wasted on me. 

This hotel was forgetting the basics of segmentation, which divides a target market into groups with distinct needs, the supplier charging each segment a price aligned with the benefits received.  In selling me this room, the Jianguo made a crucial mistake – it provided me with a luxury offering at a bargain basement price.  The effective segmenter would have dealt with me in one of 3 ways:

  • Provided me with a more basic room, in line with my requirements and the price I was willing to pay.
  • Sought to upsell the luxurious room, highlighting its benefits and charging me extra for them.
  • Not done business with me at all.  Crucial to effective segmentation is to know who your customers are, and who your customers are not.  The only customers in a properly segmented market are those whose needs and budgets are aligned with the benefits they receive.  Resources and time are only spent on the segments that the supplier chooses to serve.

Segmentation should be regarded as a strategy, not a tactic.  Whilst it is tempting in the short term to ‘leave value on the table’ in order to ensure a sale and increase cashflow, in the long term this is just as self-defeating as raising costs too high.  High costs will eventually erode margins and alienate the target audience that is prepared to pay for the benefits you offer.