Customer Segments: The Foundation of the Business Model Canvas
The “customer segments” field describes the different groups customers your company might have. By identifying customer segments, you can design your products to more specifically satisfy the needs of these customers. In this article, we will take a closer look at how you can create, or identify customer segments.
Hint
It is recommended to start with this field when filling in the Business Model Canvas.
What are customer segments?
“Customer segments are groups of customers who have similar needs, desires, behaviors, or characteristics and can be addressed in a similar way”.
A company can have multiple customer segments. Examples of customer segments could be specific age groups, geographic regions, etc…
Why customer segments?
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When you identify and describe different customer segments, it makes it easier for you to find out what needs and desires these groups have and how best to address them. This allows your company to better target your products and services to these needs. And that, of course, might increase your chance of success.
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When you have different customer groups it makes it easier for your marketing and sales teams to target these segments. For example teenagers need to be addressed in a completely different way then retired people.
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Customer segments also help to meet the needs and wants of each customer segment in a unique way and thereby stand out from the competition. Only in this way can the company be successful and achieve competitive advantages over others.
Example 1: Sports equipment
A sportswear manufacturer could have different customer segments, such as professional athletes, amateur athletes and recreational athletes. These customer segments have different needs and wants in terms of the type and quality of sportswear. Therefore, the manufacturer must develop different products to meet the needs of each customer segment.
Example 2: Young professionals who eat consciously.
Another example of customer segments could be young professionals aged 25-35 who live in a large city and have a high interest in healthy eating. A company that specializes in providing healthy meals could focus on this customer segment and develop a marketing strategy that targets the needs and interests of this group.
How to create customer segments?
But, how do you make customer segments now? Well, there are several methods:
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One way is to use demographics. Customers are divided into groups based on characteristics such as age, gender, income and education.
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Another method is geographic segmentation: Customers are divided into different groups based on where they live.
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Another one is psychographic segmentation, in which customers are grouped according to their attitudes, interests, and lifestyles.
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Or maybe you want to use Behavioral segmentation: That means, customers are grouped according to their buying patterns and usage patterns.
If none of those methods seem to fit, you can also use various market research techniques such as surveys, customer feedback, and data analysis to identify and analyze customer segments.
You need to decide on your own which methods fits best. The most appropriate method depends on your company. It is important that customer segments are distinct from other segments. That means there should be a clear separation. They should also be large enough to represent a relevant target group for the business model, but small enough to be addressed and served individually.
- So-called “buyer personas” can also help in the creation of customer segments
Buyer Personas
Buyer personas, or “buyer profiles”, are fictional characters that represent a company’s key characteristics, needs and behaviors. They are often used in marketing and product development to better understand and target a company’s audiences. Go to main article: Buyer Personas
Which customers are most profitable?
An important task for a company, especially at the beginning of its endeavour, is to find out which customer segments are most profitable and to focus on these groups. This enables the company to target its resources and tailor its products or services to the needs and wants of the customer groups that bring in the most money.
Tips for filling in
As mentioned earlier, it is recommended to start with the customer segments, as the other fields depend on these groups.
For example, the services you offer or your value proposition depend on the needs and desires of your customer segments. If you know your customer segments intimately, you can more specifically address their needs and tailor your offering accordingly.
The channels you use also depend on your customer segments. If you know where your target audience is and how best to reach them, you can select and target the appropriate distribution channels.
In addition, the relationships you build with your customers also depend on your customer segments. If you know who your customers are, you can build a closer and more lasting relationship with them.