Business Model Canvas - Building Blocks - 01 - Customer Segments

Customers: Organizations or People your business aims to reach and serve.

"For whom are we creating value? 

Who are our most important customers ? "

Notes:

• Without Customers no company can survive. Customers can be segmented (grouped):
• common needs - and require a different types of relationships
• common behaviors
• reached through common distribution channels
• based on profitability
• willingness to pay for different aspects of the offer.
• Conscious decision must be taken - which segments to serve and which segments to ignore.
• After this business model is carefully designed around strong understanding of specific customer needs.

Examples of different types of customer segments:

• Mass Market - These business models don't distinguish between customers.
• Example: consumer electronics sector. Samsung, LG
  
• Niche Market - They cater to specialized customer segments - all tailored to specific requirements of a niche market.
• Example: many car part manufactureres depend heavily on major automobile manufacturers.
• Segmented - Some business models distinguish between market segments with slightly different needs and problems.
• Example: HDFC Bank may distinguish between large group of customers possessing assets exceeding 1 crore rupees and smaller group of affluent clients exceeding 10 crore rupees. Both segments have similar but varying needs and problems. This has implications on other building blocks of HDFC Bank's business model, such as:
• Value Propositions
• Distribution Channels
• Customer Relationships and,
• Revenue Streams
• Diversified -Serves two unrelated Customer Segments with very different needs and problems.
• Example: In 2006, Amazon.com decided to diversify its retail business by selling "cloud computing" services: online storage space and on-demand server usage. This is a totally different customer segment : Web companies - with a totally different:
•  Value Propositions
• Multi-sided platforms (or multi-sided markets) -Some companies serve two or more interdependent customer segments.
• Example 1: A credit card company need large base of credit card holders and large base of merchants who accept those credit cards. State Bank of India
  
• Example 2: A newspaper company offering free news - need large base of readers and large base to attract advertisers. Both segments are needed for the business model to work.