So in the last video we provided an
overview of the Business Model
Canvas. Today we tackle the first
section of the canvas Sustomer
Segments.
Hi I'm Steve Morris and I use the
StartupSOS channel to provide
practical advice to first
time entrepreneurs and today our
topic: Customer Segments.
So what is a customer segment.
Well customer segments are simply
ways to organize
your customers into different
groupings, different groupings based
on the idea that they have a
slightly different need
or possibly they
need to be reached through a
different channel a different
channel for both marketing
to to create awareness
and to create leads and maybe a
different channel for sales to
actually collect orders.
Now when it comes to different needs
we have a very simple example
in a previous video the
milkshake example there's a link to
it up here that does a very
simple very effective job of
describing customer segments
and how different segments in
something as simple as a milkshake
market - Different customer segments
can have very different needs that
result in different feature
requirements and certainly different
messaging requirements on
the marketing side.
And that's what makes customer
segments so important for
a startup.
Realistically when you're an early
stage startup you have very few
resources you
can not send marketing
branding messages to a bunch of
different segments or you're going
to confuse the market.
You just don't have a big enough
budget so it generally makes
sense to really focus in on one
customer segment so you can really
focus in on the features
exactly for that segment
and really focus your messaging in
on that segment and focus your
sales channel in on exactly
that segment.
Nail that segment and then
go after the next segment
and the next segment.
So the ideas is
focus on a first segment
but over time you'll address more so
over time you're addressing
a big market which is certainly
what investors want to hear.
But most smart investors want to
hear that initially you are laser
focused on a first segment
instead of trying to boil
the ocean and be everything to
everybody which is pretty tough
for a startup to do.
So the overall moral of that story
is it's a really good idea
to choose one segment
as your first segment
to focus on.
So that's part of the
challenge in filling out that first
segment of the canvas is
to list the different customer
segments in your market, the
segments you'll eventually be
addressing, and then choose the
one that you want to address
first because frankly the rest of
the canvas, the value proposition
in particular, will depend
on focusing on that
one segment.
So you'll want to choose one.
Unfortunately customer segment is
even a little more complicated for a
lot of entrepreneurs because
you can also have a multi
sided market.
What does multi sided market mean.
Well it means that you're addressing
two or more fundamentally
different kinds of customers.
So simple example a social
media play let's say a Facebook.
There's at least two sides
to that market.
On the one hand are the users - the
users that are using the social
media site Facebook users who
aren't paying anything but have to
get value out of the site to show
up at the site in
order for the second part
of the business model to work.
The second customer segment which is
advertisers the ones who actually
are paying the revenue to Facebook.
So you have advertisers who pay
and users who don't pay but
need to be offered the value
that they're seeking on the site.
Two very different kinds of
customers.
Now that's just a two sided market.
Think of something like a grocery
store - you could be selling through
a wholesaler to distributors
to a whole
chain of stores down to an
individual store.
And then finally to the customer.
Wow, that's maybe a five sided
market at least.
So markets can get pretty
complicated. The challenge is
you need to be worried about every
side of those multi sided markets.
If you're Facebook you have to
provide the right value to both
the advertisers and to
the users.
Likewise when you're selling a food
product through a grocery
chain you need to
be aware of the value proposition at
each stage in that
value chain because everybody
needs to get a win through
the process.
So not only do you need to
understand customer segments and
choose one to focus on but
you need to understand how many
sides does your market have.
And my suggestion is develop
a canvas a business model canvas
for each side of
your market because each side
of your market really is
an entirely different value
proposition.
So your action steps for filling out
your canvas.
Take a look at the market segments
in your market.
Identify what they are
how big they are and decide
which one will you focus on
first. Now how do you decide
what you know to a great extent
there is no wrong answer.
Choosing one is better
than not choosing.
You might choose one because
it's easier to to reach
through a distribution channel.
You have access to or one that
requires a simpler version of the
product that you can get to market
first. Or maybe there's a segment
of your market that has
a more compelling need.
Its customers that are going to buy
faster maybe you addressed that
one. So there are a lot of different
rationales you can have for
choosing which segment.
But my suggestion is
choose one.
Once you've identified the segments,
chosen one segment, then ask that
question is this really
a multi sided market.
Are there different types of
customers that you have to deal
with. And if so start developing
a canvas for each side
of the market.
That wraps up this discussion of
customer segments.
Any questions. Please leave
a comment. I'd love to try to answer
questions you have.
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stay tuned because this is just
the first segment of 9
we have a lot more coming up
in this playlist
and a link to the playlist is
right below here.
That's it for today.
Thank you very much for watching.