16 Feb Finding Your Business’s Customer Segments
Last week we developed our value propositions for our business model. The next step is defining your customer segments. Your value proposition should be tailored to your customer segment(s). The biggest failure in marketing is trying to please everybody all the time. I want to encourage you that everybody is NOT your customer. With my company Tricord Global, I realized my customer segment, on the investor side, all had to have something of a missions-minded heart, but also have investment resources–and the minimal investment is $10,000. Suddenly, my customer segment started getting narrow. This is a great place to be.
Start by asking yourself, who is benefiting from the value of my value proposition? Who are the important customers? You really need to start focusing on defining your customer segments to fully develop a strong business model. Here are the core issues you’ll be looking at when it comes to your customer segments:
- Demographics: Eg. age, gender, relationship status, living situation.
- Geography: Where are they located?
- Income level: What do they make?
- Where they buy: What kind of stores do they shop at? Online shopping?
- Psychographics: Eg. religion, political leanings, personality
- Price sensitivity: What is too costly? What is too low?
- Convenience requirement: Do they need service while at work? Does it need to be near their home?
- How they buy: Eg. Paypal, credit card, debit card, cash?
- Packaged or parts: How do they like to receive products?
Let me give you an example of customer segmentation. An oil company segmented its market audience, well operators, into these genres (this is an example from a Denver company that services oil drill rigs):
- Big Oil=10% (Large publicly-traded companies)
- Good Ol’ Boy=30% (Small-Midsize companies)
- The Wanna Be=15% (Potential, but haven’t reached it yet)
- The New Kid=15% (Young guys, just getting started)
- Innovative for a Reason=30% (Environmentally friendly).
The company identified these segments and broke them down into demographics and psychographics. And then this company picked one of these customer segments and tailored their value proposition specifically to that segment. Here is a sample of what their break down for a customer segment looks like:
The Good Ol’ Boy
- Small to midsize companies,
- Public or private
- Old family money
- Raised in the industry
- Work hard, play hard
- Choose business associates based on social networking
- Not necessarily formally educated, but very knowledgeable
- Measure success on net profit
Another example is for a mobile kitchen seller. They broke down their customer segments into:
- Up and comers: The future is around the corner.
- Advancers: I dream of my own restaurant.
- It’s just a job: Where is my paycheck?
- I could be a chef: I like to eat and I like to cook.
- Top Chefs: I serve the president.
- I am content: Been there, done that.
And after they went through identifying their customer segments and what their main motivations were, they broke down the issues to find out who they should focus on. (This is a real Denver company that has been hugely successful and you can see their food carts down on 16th street.)
Advancers: Business Independence
- Motivated and a self starter
- Have family responsibilities
- Should have graduated high school
- Attending an culinary school at night
- Always looking for advancement opportunities
- Dream of owning a chain of restaurants someday
After looking at their segments, they decided that their target audience is the Advancers, who are motivated by business independence. They geared their business towards that segment, and found success!
Sometimes you might have two value propositions that are targeted at two customer segments. But I recommend sticking with one when you start out.
Do you know your customer segment? Scroll down and leave a comment below letting me know!
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