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Business Model Canvas: Customer Segments
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Business Model Canvas: Customer Segments

Understanding Customer Segments in the Business Model Canvas

Introduction to Customer Segments

  • Steve Morris introduces the topic of customer segments as part of the Business Model Canvas, aimed at providing practical advice for first-time entrepreneurs.

Definition and Importance of Customer Segments

  • Customer segments are defined as groupings of customers based on differing needs or channels for marketing and sales.
  • The milkshake example illustrates how different customer segments can have unique needs that influence feature requirements and marketing messaging.
  • Early-stage startups should focus on one customer segment due to limited resources, avoiding confusion in branding messages across multiple segments.

Strategy for Focusing on a Single Segment

  • Startups are advised to concentrate on one segment initially, refining features and messaging before expanding to additional segments.
  • Investors prefer startups that demonstrate a focused approach rather than attempting to serve all market segments simultaneously.

Identifying Multi-Sided Markets

  • Entrepreneurs must recognize if they operate in a multi-sided market, which involves addressing fundamentally different types of customers.
  • An example is given with Facebook, where users (non-paying customers) and advertisers (paying customers) represent two distinct sides of the market.

Complexity in Market Structures

  • The grocery store example highlights potential complexity with multiple layers in distribution channels, indicating various customer interactions.
  • Understanding each side's value proposition is crucial; every participant must benefit from the business model.

Action Steps for Entrepreneurs

  • Entrepreneurs should analyze their market segments, assess their size, and select one segment to focus on first.
  • Choosing a segment may depend on factors like ease of access through distribution channels or urgency of need among potential customers.
  • After selecting a primary segment, consider whether there are multiple types of customers involved and develop separate canvases for each side if necessary.
Video description

This second video in our Business Model Canvas Explained series discusses how to complete the Business Model Canvas Customer Segments section. Understanding your customer segments is an important part of your business model design since the customer value proposition is often different for different segments. To focus your marketing, messaging and branding message, it's important to select one segment to focus on initially. For even more information on business models, see the Business Model Generation book (available on Amazon: https://amzn.to/2Qg3luL). The business model canvas template is an excellent tool for your team to use to develop your own unique business model. This StartupSOS channel provides practical, how-to advice for new entrepreneurs who plans to build a growth startup with investor funding.