I’m hoping this post will help you realize how critical these are to your success in business. Because I didn’t take them seriously until recently.
What is a Customer Segment?
Customer segments are the community of customers or businesses that you are aiming to sell your product or services to. – Cleverism.com
In other words, it’s the type of people you want to provide value to.
It’s who you build your products for.
There are tons of ways customers can be segmented, including:
Intrinsic & Extrinsic motivations
If you don’t determine who you are going to sell to, your products and services will likely fall flat when you launch or try to sell them. You may make a few sales, but you won’t be able to speak their language, and you’ll likely run into a lot of churn, or people using you once or twice and then bailing.
Types of Customer Segments
Here are a few types of customer segments that help you narrow down who you’re going to be targeting.
1. Mass Market
Businesses who focus on mass markets don’t really have specific customer segments. They focus on extremely broad audiences with similar problems and needs. This would be something like a grill manufacturer or consumer electronics brand.
2. Niche Market
Business models targeting niche markets have very specific audiences. These are common in supplier-buyer relationships, most commonly the example given is auto parts manufacturers who are very dependent on auto manufacturers for sale of their products.
Businesses who have segmented customer targets have very small variations in their needs for a service. For example, a financial planner who targets a few segments:
Net worth individuals from $0-$100k
Net worth individuals from $100k-$150k
Net worth individuals from $150k-$250k
While their net worth varies, the needs they have might not be so different.
A company that has diversified customer segments is serving markets with quite different needs and wants. An example could be a company that serves both business to consumer (B2C) and business to business (B2B) markets.
Each has a wildly diverse set of needs, yet the company is able to serve both markets effectively.
5. Multi-Sided Platforms/Markets
Multi-sided markets are essentially one that relies on two sides of a transaction in order to be successful. This could be something like Etsy, which relies on both sellers to provide goods to sell, as well as buyers to actually purchase the items.
Since they rely on both in order to make money, if one side fell short, their profits would be harmed.
The canvas breaks out the pieces of a great value proposition and helps you work through them one by one.
The value proposition of your service is part of the Business Model Canvas, which is essentially a one-page business plan that helps you get extremely clear about who you serve, why, how you’re going to make money, and what kind of resources you need, etc.
The canvas helps us solve 2 of those pieces of the Business Model Canvas, but right now we are just focused on determining our customer segments.
Here is what the Value Proposition Canvas looks like.
Let’s start diving in and working our way through the target customer side of things (the big circle). We cover the rest of the canvas over here in the unique value proposition article.
What you want to do is figure out one target market you are going to go after for the purposes of this exercise.
Essentially, these are the things a customer is trying to get done. It could be a task, a problem they need to solve, or some type of need they are trying to satisfy.
There are four types of jobs they could be trying to solve:
Functional jobs – functional as in a task or specific problem
Social Jobs – looking good, building authority in front of their audience, achieving some kind level of status
Emotional jobs – security, aesthetics, feeling good about something
Basic needs – I look at these similar to Maslow’s Hierarchy of Needs. So these could be things like food, water, shelter, health, communication, sex, etc.
Building on the customer jobs you’ve identified already, try and determine what are the pains associated with accomplishing those jobs.
It helps to look at the before, during, and after of each as you will find different pains for each stage of the problem being solved.
For example, let’s say the customer job is running a marketing campaign to drive sales. Here are some of the pains they might experience along the way:
Before the Campaign
Uncertainty about what to expect
Worried the campaign will hurt their brand
Worried they might lose money, time, and effort
It could be the most money they’ve spent on any one campaign
During the Campaign
They might not know if it’s performing well
Not sure what the next steps are
It may have started off bad and they aren’t sure if the results will recover
They aren’t sure they’re reaching the right people
After the Campaign
They ended up wasting money
They aren’t happy with the results
A customer didn’t sell enough products/services
They’re not sure if the campaign actually helped
Customer gains are the benefits your customer is looking for, what they expect, or what they might be surprised by.
Customer gains could include saving time, money or effort, as well as some kind of outcome that just blows their previous idea of what they would get of the water.
This section is where you determine their expectations AND how you could go above and beyond their wildest dreams.
I’m going to build out a value proposition canvas for my business so you can see an example of what goes into it. Be nice, I’ll probably screw up a bit. 🙂 I always loved the live examples in class, I hope this helps!
Figuring Out Your Customer Segments
I went through this exercise for my own business to help show you what this would look like using a live example.
This is using my marketing consultancy geared towards a specific client type of mine, conference and event planners.
Here are the ideas I came up with for each area of the customer side of things.
Remember these are the tasks and problems your target customer is trying to solve.
Help attendees make the most of the event
Running their own Facebook ads (time, wasted money, effort – even if done by a virtual assistant or in-house team member)
Frustrating to learn and optimize
Transparency in results
Could ruin the reputation of the conference
Selling enough tickets
Upsetting sponsors/Not giving enough value
Sell extra tickets
Confidence in solution
Extra person on their team to help
Get extra tickets at very low costs
Additional reporting features
Tracking conversions when they couldn’t before
Make sponsors happy so they come back next year
Now you should have a good idea of who you are going to be targeting, and some of the pains and jobs they are trying to solve.