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Customer Segments10:54 with Pasan Premaratne
Customer segments are the different groups of customers who we deliver our value proposition to. There are different types of customer segments and we need to customize our value propositions dependning on who we're selling to.
In the earlier video, we looked at our value proposition. 0:00 Or in simpler terms, 0:03 the value that this project management software is going to offer. 0:04 The next section that we need to explore is our customer segments. 0:08 Put simply, a customer segment is a group of people or 0:12 organizations that you aim to reach and serve with your value proposition. 0:16 Your customers are the reason you are in business, and it is in your 0:20 best interest to serve them effectively, or else, you'll go out of business. 0:23 But in order to serve your customers to the best of your ability, 0:28 you need to identify who exactly your customers are and what they want from you. 0:31 In this section we are going to define our customer segments. 0:36 We're going to think carefully about the groups of people we want to try and 0:40 reach and then try and define them as precisely as possible. 0:43 But before we do that, let's go over a few different types of customer segments. 0:48 Understanding the common groupings of customers will help us think 0:53 about ways we can refine our value proposition. 0:56 One thing I want to point out is that this canvas is an evolving document. 1:00 If I discover information in this section that conflicts with something in 1:04 my value proposition, I definitely need to go back and make some changes. 1:08 Okay, so what are some of the different customer segments? 1:13 You could have one giant customer segment, otherwise known as a mass market. 1:16 Certain businesses don't focus on separate customer segments, 1:22 instead they treat everyone as one large segment. 1:25 This is common when the group has broadly similar needs and problems. 1:29 If your customer segment is a mass market, then you can focus your value proposition, 1:33 channels and relationships, all on serving the one group. 1:39 A PlayStation is a good example of a product that serves a mass market. 1:43 There's one main marketing message, one price point, and 1:48 one customer relationship strategy that applies to the entire market. 1:51 If you are targeting a niche market, or niche as some say, 1:56 then you are catering to a very specific and specialized group of customers. 1:59 Everything, including the value proposition, channels and 2:04 customer relationships, will be molded to fit the group's needs. 2:08 If you offer consulting services, you serve a niche market. 2:12 Your value proposition is very specific to a small subset of clients. 2:15 There are very few distribution channels. 2:20 And you have a very close and dedicated customer relationship. 2:22 If I was an iOS or 2:26 Android app consultant, I wouldn't offer the exact same service for every customer. 2:28 No, each and 2:33 every solution provided is geared around that specific customer's needs. 2:34 Another type of customer segment is a segmented market. 2:39 In a segmented market, you can have multiple customer segments, 2:43 each with slightly different needs and problems. 2:47 This might mean tweaking your value propositions, channels, and 2:50 revenue streams slightly for each segment. 2:53 If we think of Apple's, or any other computer maker's product list, 2:57 you'll notice that their everyday use desktop, laptops, gamer PCs, computers for 3:01 graphics intensive work, really powerful server machines, and so on. 3:07 Computer makers basically serve a segmented market, and the value 3:12 proposition, relationships, and channels are all different for each segment. 3:15 Next, your segments can be diversified. 3:20 Diversified markets have one thing in common with segmented markets. 3:23 You have more than one customer segment. 3:27 But the similarities stop there. 3:30 While in a segmented market your different customer segments are related and 3:32 have slightly different needs. 3:36 In a diversified market the customer segments are completely unrelated and 3:38 have very different problems and needs. 3:42 The best example of this is Amazon. 3:45 They serve two completely different and unrelated markets with their 3:48 online retail business, which serves pretty much everyone. 3:51 And their Cloud computing services, which are targeted at web companies. 3:55 When you're starting a company, 3:59 it is highly unlikely that you will have a diversified market. 4:01 This is more common in successful companies that branch out 4:04 into different markets once their main business model scales. 4:07 Finally, we have multi-sided markets. 4:11 In a multi-sided market, 4:13 there are two high-level customer segments that are interdependent. 4:15 There are two different value propositions, 4:19 customer relationships, key activities, and so on, for each customer segment. 4:21 But these value propositions can not work without the existence of the other. 4:26 This is what differentiates multi-sided markets from a diversified market. 4:31 If you look at Facebook's or 4:35 Google's business model, they have a multi-sided market. 4:37 For Facebook, one of their customer segments is the general 4:41 population who uses Facebook as a social network. 4:44 In this case, the value proposition is connections. 4:48 Memories through photos and all that good stuff. 4:51 Their second customer segment consists of advertisers. 4:54 The value proposition for this customer segment is access to a database of 4:57 millions of detailed customer records to whom they can advertise. 5:02 It may not seem like these segments are interdependent but 5:06 they most certainly are. 5:09 Without the advertisers, we couldn't use Facebook for free. 5:11 Without the users, advertisers won't have an incentive to use the platform. 5:14 This is how Google's model works as well. 5:19 We get to use all their products for 5:21 free because advertisers pay to get access to our search and browsing habits. 5:23 So, which group do we fit in best? 5:28 In my example, I don't have interdependent segments. 5:31 And I'm not offering different value propositions. 5:34 So we can eliminate diversified and multi-sided markets right off the bat. 5:37 Since I want to make project management software specifically for 5:42 small teams, with an identical value proposition for 5:45 all groups, then that sounds like a niche market. 5:48 Now, you could consider this a mass market, 5:51 since it's quite a large market, but it's not the largest segment of the market. 5:53 Smaller groups are a subset of the larger market. 5:58 Therefore, we're going to treat it as a niche market. 6:01 With a niche market, we focus our business model to the needs of a subset, 6:04 not the needs of the general market. 6:09 This means, that when thinking about a hypothetical customer, 6:11 we need to capture the characteristics of our niche market specifically, and 6:15 not everyone who uses project management software. 6:19 We can get to know our segments better by defining customer archetypes or personas. 6:22 This kind of exercise is more often seen in the context of user experience. 6:28 But it is a very useful exercise to carry out in our project too. 6:32 There's a lot of study done on the different methods you can use to 6:37 achieve this task. 6:40 We're going to keep it fairly simple. 6:42 We'll start with a high-level view. 6:44 Who are the different kinds of people that could need our product or service? 6:46 What context will they be using our service in? 6:50 In this context, say it's their job role, what are the pain points? 6:53 What problems need to be solved? 6:57 What current methods do they use to solve those problems? 7:00 What is their usual decision making process? 7:03 And finally, who influences them? 7:06 Start by capturing demographic information. 7:08 Get to know who your customers are first. 7:11 You can use things like Google Trends and 7:14 Google Insights and ads to narrow this down. 7:16 You can even look at who your competitors are selling to. 7:20 Once you know who your segments are, get out and meet them. 7:23 Interview them and understand what they do and how they behave. 7:27 Continue to update your archetypes as you gain more information about them. 7:31 Write all these things down. 7:36 Why? 7:38 Because then you can craft the rest of your business model around it. 7:39 Using the highlights from your archetypes, 7:43 you can develop customer acquisition strategies and relationship guidelines. 7:45 For example, if one of the insights you gain was that the biggest pain point for 7:49 a typical customer was that they had a hard time communicating project time lines 7:53 with their clients, your acquisition messages can be framed around this. 7:58 If you know which blogs or trade publications they read, 8:02 you can advertise on those websites or each out to those bloggers. 8:05 How do your customers find new products? 8:10 And, where can you find your customers? 8:12 You can even take it further by looking in to what a day in the life of 8:15 your customer looks like. 8:18 All this information will give you valuable insights in to the type of 8:20 activities your customer partakes in. 8:23 And how you can use that to engage and 8:26 acquire your customer by highlighting relevant parts of your business model. 8:28 Once I have all this information, rather than giving a generic message like, 8:33 my project management software will make you more efficient. 8:38 If they're a software developer, I could say things like, 8:41 my project management software makes agile development a breeze. 8:44 You can view all your projects in one place, plan products in sprints, and 8:47 collaborate extremely efficiently. 8:52 If I tell them exactly how I'm solving their problems, 8:54 they're more likely to do business with me. 8:57 Once you have all these details down, write them down on your canvas, or 9:00 stick it up with Post-It notes. 9:03 All this information will be really useful later on. 9:05 Now remember, if you're having difficulty identifying your 9:09 different customer segments. 9:12 If the lines have blurred and you don't know if this group over here is 9:13 actually a different segment, the book offers these simple guidelines. 9:17 If you have to change your value proposition to meet their needs. 9:21 If you reach them through different distribution channels. 9:25 If they require different relationships, that is their acquisition, retention and 9:28 up-selling strategies are different. 9:33 If you're implementing a different revenue model. 9:35 Or if they have different levels of profitabilities. 9:37 And finally, if they're willing to pay for different aspects of your 9:40 different value proposition, then these are different customer segments. 9:43 Let's recap. 9:48 A customer segment is a group of people or 9:49 organizations that you aim to reach and serve with your value proposition. 9:51 There are different types of customer segments. 9:56 The main ones we talked about are, 9:58 mass market, where we treat all customers as if they're one segment. 10:01 A niche market, which is a very specific and specialized group of 10:05 customers that is a subset of a larger market with similar characteristics. 10:08 A segmented market, which is a market with multiple customer segments, 10:13 each with slightly different needs and problems. 10:17 Then there's a diversified market, which is a market with customer segments that 10:20 are completely unrelated and have very different problems and needs. 10:25 And finally, a multi-sided market, with interdependent customer segments. 10:29 Now, the goal of this section of the business model canvas is to 10:34 get you exploring your customer segments and 10:38 defining who your hypothetical customers are. 10:40 Once you have identified the type of segment, you develop your customer 10:45 archetypes to get a better sense of how you can gear your business model to them. 10:48
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