2.2. Customer Segments
Definitions
Customer Segmenting is the practice of dividing a customer base into groups of individuals that are similar in specific ways
To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on their different needs and attributes to ensure appropriate implementation of corporate strategy to meet the characteristics of selected groups of clients. The different types of customer segments include:
- There is no specific segmentation for a company that follows the mass market element as the organization displays a wide view of potential clients: e.g., car.
- Niche market: Customer segmentation based on specialized needs and characteristics of its clients: e.g., Rolex.
- A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income.
- A business serves multiple customer segments with different needs and characteristics.
- For a smooth day-to-day business operation, some companies will serve mutually dependent customer segments. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.
- Who are we solving the problem for?
- Who are the people that will value my value proposition?
- Are they another business?
- If so, what are the characteristics of those businesses?
- Or, are there other people?
- Does my value proposition appeal to men/women or both?
- Does it appeal to young adults aged 20 to 30 or teenagers?
- What are the characteristics of the people who are looking for my value proposition?
Another thing to gauge and understand is your market size, and how many people there are in the Customer Segment. This will help you understand your market from a micro and macro perspective. For purposes of using the canvas you should make sure you can answer these questions:
- A list of Personas, organised by Customer Segment if you have more than one segment. I recommend trying to prioritize them- Who would you pitch first if you could only pitch one? Who next? And so forth.
- If you’re spending a lot of time on this first item, that’s OK (and it’s probably good). The Canvas is a tool, not a strategy and not all the nine blocks are equal. The pairing of Customer Segments and Value Propositions is really the ‘independent variable’ that should be driving everything else in your business model.