The Business Model Canvas (BMC) is an great tool that helps businesses design new or assess excisting business models. An important part of every businessmodel are the customers. Understanding customer segments is vital for any business that wants to connect effectively with its audience and deliver value. This is why we are writing a deep dive into customer segments Business Model Canvas.

What are customer segments?

Customer segments are distinct groups of individuals or organizations characterized by shared traits, needs, or behaviors that a business aims to reach and serve. Identifying these segments is crucial, as it enables companies to understand their customers better and address their specific requirements. By recognizing similarities within each segment, businesses can develop tailored products or services that effectively meet the unique demands of their diverse audience.

Why is it important to pay extra attention to the buildingblock customer segments Business Model Canvas?

Choosing the right customer segments is essential to business success. Here’s why it matters:

• Identify high-potential audiences: It’s not just about targeting everyone who could buy your product, but focusing on those with the highest potential to benefit from it.
• Target where demand is strongest: Focus on customer segments where the need or urgency for your solution is highest. These are the customers most likely to act and convert.
• Efficient resource allocation: By narrowing down your segments, you ensure your marketing efforts and resources are spent where they’ll have the most impact, leading to higher returns.
• Reach customers who can sustain your business: Choose segments that not only have immediate demand but can also provide long-term growth and profitability.
• Stand out from competitors: By targeting customer segments that your competitors overlook or under-serve, you can create a unique position in the market. Focusing on different audiences enhances your differentiation and strengthens your competitive advantage, allowing you to carve out a niche where your business can thrive without direct competition.
• Convince future customer groups: Focusing on a specific customer segment can help you build credibility and momentum. Once you’ve proven value to one group, it becomes easier to convince other segments that your solution works, opening up new opportunities for growth over time.

By refining your customer segments, you create a more focused strategy that not only drives immediate results but also sets the foundation for long-term competitive advantage and scalability.

Categories | Customer Segments Business Model Canvas

In the book Business Model Generation, customer segments are classified into different types, helping businesses clearly define their target audience. Here are the common categories:

1. Mass market

In the mass market segment, businesses target a broad audience with similar needs. For example, a gas station serves anyone who needs fuel, focusing on convenience and accessibility.

2. Niche market

Niche markets focus on specific, specialized segments of customers. For instance, a company that sells luxury watches caters to high-income individuals who appreciate fine craftsmanship.

3. Segmented market

In segmented markets, businesses divide their customers into groups based on different needs or characteristics. For example, a bank may offer different products for young adults, families, and retirees.

4. Diversified market

A diversified market serves multiple customer segments with different needs. For example, Amazon sells everything from books to electronics, catering to various customer groups.

5. Multi-sided market

In a multi-sided market, a business serves two or more interdependent customer segments. For example, a platform like Airbnb connects hosts with guests, benefiting both groups.

Besides these segment categories, it’s also crucial to differentiate whether a company targets consumers (B2C) or other businesses (B2B).

How to chose the right customer segments in the Business Model Canvas?

We use the following steps when choosing segments of a proposition.

Segment size: Evaluate both the current size of the segment and its future growth potential. Understanding these dynamics helps in forecasting demand and making informed decisions.

Segment potential: Assess the pain points of the segment and their willingness to pay. This insight helps identify the value your offering can provide and ensures it aligns with customer needs.

Accessibility: Consider the accessibility of the segment from a business perspective. Analyze how easily your company can reach and serve this group effectively.

Competitive focus: Identify which segments your competitors are targeting. This knowledge aids in differentiating your offering and finding unique opportunities in less saturated markets.

Tip: After an initial selection and indication of the attractiveness of a segment, it can be useful to perform a TAM SAM SOM calculation. This calculation gives you even better insight into the potential of a segment.

Tip: Be aware of the different roles within a customer segment

Being aware of the different customer roles is crucial while working on the customer segments Business Model Canvas building block. In some cases, 1 customer fulfills multiple roles. But the roles may also differ and the propositions of customer types within the same segment may also differ. The following customer types can be observed within a customer segment.

Decision maker: This person has the final say in purchasing decisions. Knowing their motivations is essential to influence the decision.

Economic buyer: This role can negotiate the deal but is often restricted by budget constraints. Sometimes, there may not be an economic buyer present.

Recommender: Individuals or groups that influence purchase decisions. They can either facilitate or hinder a deal, so it’s vital to identify and engage with them.

Influencer: Influencers impact decisions but have less power than recommenders. Understanding their opinions can help shape the narrative around your product.

End user: These are the people who will use your product daily. Their needs and motivations are crucial to address, even if they have little influence in the buying process.

Saboteur: Some individuals may try to block the purchase of your offering. Be aware of internal resistance, especially from those who fear changes to their work processes.

How are customer segments connected with the other Business Model Canvas building blocks?

Customer segments are linked to other building blocks of the Business Model Canvas. Understanding these connections helps businesses create a cohesive strategy. Here are some examples:

1. Value Propositions & Customer Segments Business Model Canvas

The value proposition is what draws customers to a business. Each customer segment requires a unique value proposition to address their specific needs.

• Students: A gym targeting students might offer affordable memberships, flexible hours, and student discounts to accommodate their budget and class schedules.
• Busy professionals: For busy professionals, the gym could emphasize quick, high-intensity workout classes and convenient access to amenities, helping them maximize their limited time for fitness.

2. Channels & Customer Segments Business Model Canvas

Channels are the ways a business delivers its value proposition to customers. The channels must align with the preferences of each customer segment. For instance:

• Students: Students might prefer online membership sign-ups and digital onboarding processes. A gym targeting students can leverage social media platforms like Instagram and TikTok to promote classes and events.
• Busy professionals: Busy professionals may appreciate in-person consultations for personalized fitness plans. Busy professionals might respond better to email newsletters highlighting new workouts and scheduling updates.

3. Customer Relationships & Customer Segments Business Model Canvas

Different customer segments may require different types of relationships. For example:

• Students: Students may prefer automated customer interactions and enjoy connecting with their peers in the gym community.
• Busy professionals: Busy professionals often appreciate a personal relationship with their trainers, who can guide them in achieving their fitness goals.

4. Revenue Streams & Customer Segments Business Model Canvas

The way a business earns money can depend on its customer segments. For example:

• Students: Students often have a lower budget, which makes them more price-sensitive. A gym targeting this segment could offer subscription plans with discounted rates or pay-per-visit options to accommodate their limited financial resources and encourage frequent visits.
• Busy professionals: In contrast, busy professionals may value convenience and personalized services more highly, leading to a preference for premium subscription models. This segment might be willing to pay more for exclusive perks, such as personalized training sessions or extended access to facilities, allowing them to maximize their time while achieving their fitness goals.

Discover our other Business Model Canvas deepdives!

We have created several deep dives on other building blocks of the Business Model Canvas. Discover them here:

• Key resources
• Customer relationships
• Cost structure

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