Business Model Canvas: Customer Segments

Summary

In this video, Steve Morris introduces the concept of Customer Segments as part of the Business Model Canvas. He explains the importance of organizing customers into different groups based on their needs and how startups should focus on one key segment at a time to maximize efficiency. Steve also highlights the complexity of multi-sided markets, like social media platforms or grocery chains, where different customer groups need to be addressed. The video emphasizes selecting a primary segment and creating targeted value propositions for each side of the market. Practical advice is offered for startups to focus their resources effectively.

Takeaways

• 🔍 Customer segments help organize customers into different groups based on their unique needs or how they should be reached.
• 🍦 A simple example like the milkshake market shows how different segments have different needs and marketing strategies.
• 💡 Startups should focus on one customer segment initially due to limited resources, to ensure clarity in messaging and product features.
• 🎯 It's crucial to choose and focus on one segment first, as trying to address all segments early on is overwhelming and impractical for startups.
• 🚀 Over time, a startup can expand and address additional segments, which is appealing to investors when done progressively.
• 🧩 A multi-sided market means the business serves different types of customers, like Facebook users and advertisers, requiring distinct value propositions for each side.
• 🏪 Complex markets, such as grocery chains, may have multiple sides and value stages, each needing careful attention to provide value at every step.
• 📝 It's recommended to create separate business model canvases for each side of a multi-sided market, as each has unique requirements and propositions.
• ⚖️ When selecting a customer segment, prioritize based on factors like ease of access, product simplicity, or a compelling customer need.
• ✅ Deciding on one segment to focus on is better than indecision, and understanding whether your market is multi-sided is essential to cater effectively.

Q & A

What are customer segments in the context of the Business Model Canvas?

Customer segments are groupings of customers based on their distinct needs or the different channels required to reach them for marketing or sales purposes.

Why is it important for startups to focus on a single customer segment initially?

Startups usually have limited resources, so focusing on a single customer segment allows them to tailor their product features, marketing messages, and sales channels to that segment, increasing the chances of success.

What is the milkshake example mentioned in the video?

The milkshake example demonstrates how different customer segments in the same market can have different needs, leading to different product features and marketing strategies. A link to the video explaining this example is provided in the transcript.

What are multi-sided markets, and how do they affect customer segmentation?

A multi-sided market involves two or more fundamentally different types of customers. For example, social media platforms like Facebook cater to users who seek value from the platform and advertisers who provide the revenue.

Why is it necessary to create a business model canvas for each side of a multi-sided market?

Each side of a multi-sided market has different needs and value propositions. Developing a separate canvas for each side ensures that the value provided to all types of customers is clearly understood and addressed.

What challenges do multi-sided markets present for startups?

In multi-sided markets, startups need to manage and satisfy the needs of different customer types simultaneously. This can complicate product development, marketing, and distribution strategies.

How can a startup decide which customer segment to focus on first?

A startup might choose a segment based on factors like ease of reaching the segment, the simplicity of the product required for that market, or the urgency of the customers’ needs, leading to faster sales.

What should a startup do after identifying its first customer segment?

After choosing the first customer segment, the startup should evaluate whether the market is multi-sided and, if so, develop a business model canvas for each side.

Why is it not advisable for startups to target multiple customer segments at once?

Targeting multiple segments at once can lead to confusion in the market and spread resources too thin, making it harder to deliver clear messaging and focus on the specific needs of any one segment.

What are some factors to consider when listing customer segments on the Business Model Canvas?

When listing customer segments, consider how big the segments are, their specific needs, and how easy or difficult they are to reach. Prioritize which segment to focus on first, as this will influence the rest of the business model, particularly the value proposition.