Who are our most important customers?
what is Customer Segment anyway?
Welcome to our Tribe.
If you are reading this it means that you are curious as to know “what is Customer Segment?” Or you just stumbled on this.
Today, I want to discuss first elements of business which is the part of a series “Elements of successful business for modern age”
What is Customer Segment ?
The Customer Segment is the building block define the different group of people or organization an enterprise aims to reach and serve.
Customers comprises the heart of any business. Without customers(profitable), no company can survive for long. In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors or other attributes. A business may define one or several large or small Customers Segments. An organization must make a conscious decision about which segment to serve and which segment to ignore. Once this decision is made , business can be carefully design around a strong understanding of specific customer needs.
Customer group represent separate segments if:
- Their need require and justify a distinct offer.
- They are reached through different distribution channels.
- They required different types of relationships.
- They have substantially different profitabilites.
- They are willing to pay for different aspects of the offer.
For whom are we creating value? Who are our most important customers?
There are different types of customer segments. Here are some examples:
01 Mass Market
Business focused on mass markets don’t distinguish between different Customer Segments. The Value propositions, Distribution channels, and Customer Relationship all focus on one large group of customers with broadly similar needs and problems. This type of business is often found in the consumer electronics sector.
02 Niche Market
Business targeting niche market cater to specific, specialized Customer Segments. The Value propositions, Distribution channels, and Customer Relationship all tailored to the specific requirement of a niche market. Such business models are often found in supplier-buyer relationships. For example, many car part manufactures depend heavily on purchase from major automobile manufacture.
03 Segmented
Some business distinguish between market segment with slightly different needs and problems. Consider Micro Precision System, which specializes in providing outsourced micromechanical design and manufacturing solution. It serves three different Customer Segments — the watch industry, the medical industry, and the industrial automation sector — and offers each slightly different Value Proposistion.
04 Diversified
An Organization with a diversified Customer business serves two unrelated Customer Segment with different needs and problems. For example, in 2006 Amazon decided to diversify its retail business by selling cloud computing services: online storage space(amazon servers) and on-demand server usage. Thus it started catering to a total different Customer Segment — web companies — with totally different Value Proposition. The strategic rationale behind this diversification can be found in Amazon.com’s powerful IT infrastructure, which can be shared by its retail sales operations and the new cloud computing service unit.
05 Multi-sided platform (or multi-sided markets)
Some organizations serves two or more interdependent Customer Segments. A credit card company, for example, needs a large base of credit card holders and a large base of merchants who accepts those credit cards. Similarly, an enterprises offering free newspaper need a large reader base to attract advertisement. On the other hand, it also needs advertisers to finance production and distribution. Both segments are required to make this model work.
Hope you get something out of this medium post. I am continuing developing this series, so follow along for more knowledge.
Much love
PS. If you have suggestion, more questions or want to talk to me. Hit me up on Twitter or Instagram.
