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A prerequisite to creating a business plan is understanding your business model. In this video we're going to use a book called Business Model Generation as a starting point to explore our business model starting with our customer segments.
Book
- Business Model Generation by Alexander Osterwalder and Yves Pigneur
[Pasan Premaratne] To run through this exercise, we're going to borrow a model created by a wonderful group of people
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and put together in a book called Business Model Generation.
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Now, I'm a big fan of this process and I've used it in a few other videos because it's a relatively easy way
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for you to get acquainted with your business model.
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We're going to use it as a starting point to create all the business plans we want.
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All of business, big or small, old or new, can be broken down into a set of 9 distinct sections.
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Customer segments, value propositions, channels, customer relationships, revenue systems,
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key resources, key activities, key partnerships, and the cost structure.
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Exploring each section for your business or idea
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will help you generate all the information you need to know to create your business plans.
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Let's start with customer segments--In this section, we're going to think about
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who our potential customers are based on a certain set of characteristics.
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And then, note them down in as much detail as possible.
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Your customer segments are the different groups of people or organizations that you are going to reach out to and business with.
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We call this section customer segments because we can usually identify our customers in separate distinct groups
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that necessitate different strategies in terms of customer relationships, channels, and revenue streams.
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Grouping customers into segments involves looking on their relationships with other parts of our business model.
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For example, if you reach a certain group of customers through a different channel than normal,
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you should group them into a separate customer segment.
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Here are a few different ways we can group customers.
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If you modify your value proposition for some customers, there are different segment.
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Don't worry, we'll get into what a value proposition is in a bit.
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If you get to these customers through different channel than your usual customers different segment.
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If the revenue stream is different, different segment.
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Finally, if the customer relationship is different, we're going to put them in a different segment.
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When trying to define customer segments, start at a high level.
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You could have a mass market segment. In this situation, you don't really have a distinct customer segments with one large market.
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You only offer one flavor of your product or service and don't differentiate it much in terms of pricing, relationships, or channels.
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A good example of this is a Playstation or Xbox.
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They have a single marketing message, price point, and a channel for the entire customer base.
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You could have a niche market where you focus your business on a very specific customer segment.
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Everything is tailored to that specific segment including your distribution channels, revenue streams, and so on.
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Consultants are the best example of a niche market.
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They usually work in a specific section with an industry and with a small group of clients.
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You can have segmented markets where you have different customer segments
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with slightly different variations of the same problem.
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Apple has a large customer base of people who want to listen to music on the go.
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This market is then segmented into people who want a small form factor with the iPod Nano and Shuffle,
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large storage base with the iPod Classic and a touch screen device capable of running apps with the iPod Touch.
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Finally, you can have diversified markets. This is where a company serves 2 customer segments that are completely unrelated.
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Amazon has its retail store where you can buy almost anything.
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Then, they also have a completely separate cloud computing service that targets an entirely different market.
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Those are just few examples of the different types of customer segments you can have.
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Once you have figured out the high levels of who your customer segments are, you can dig deeper and start to define them properly.
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Understanding your market will allow you to better estimate the size of your target audience
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and figure out who your competitors are.
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