Business Models 101: Customer Segmentation

In this part of our Business Model Course we will discuss the Customer Segmentation and Customer Relationship.

I have to repeat it on every page but starting something on your own, creating value for you, your family and the world is a totally recommendable thing to do. You want to create your company. This is GREAT. The world has been made by people like you. Entrepreneurs. Self-Made Men, Creators, Builders people that believed an obstacle is just another great challenge to overcome, to solve and put behind them as an achievement. 

The Customers Segments

Once you know what you want to do (value proposition), You have to find customers that want to buy what you do for them. If you chose the right idea and thought deeply about it then it should not be too difficult to find customers. Customers might or might not be part of your revenue stream (here a word we are going to discuss later), but they are the most important part of your business. Without customers, your business will have no income. Some say, if we had no customers we would also have no problems....

Do you go for mass market, niche market, segmented, diversified. These are questions you have to answer.

So in my case, my customers are people looking to solve issues they have with spreadsheets or people looking for already made templates, or people wanting to get support, advice and tools how to build a company. I am trying to answer as many questions and issues possible without just repeating what can already be easily found on the internet.

For our cupcake factory, customer segmentation could be to have direct customers coming to your shop, these would local people or just stopping by. Then you would have the internet order or phone order and finally, once you have become enough to raise franchises around the country, your could consider your franchisee as customers too (or partners).

The cupcake factory customers will come from all horizons, people looking for a present, preparing a birthday, a wedding, a baby shower (ahh so these could be new parents, so where do I find new parents, ahhh at the maternity of the hospital where I could place some ads or just stay there for a while and distribute pamphlets...)

customer relationship


Having a list of customer with as much details as possible about them is important.

Then it is to know what is common between your customers. Can you put them into groups that would help you to understand them better and then serve them better

At first when you have no customers yet, you will want to try to imagine what kind of customers you will have. Classify them into groups, with their needs, opportunities, interest in your product, etc....

Later, once your customers base has become bigger you can start doing statistics and sort them out according to these criteria or some new criteria you will have found out. Like how are they reacting to some type of advertisement your have done, how quality is important to them, how often they come, how often they complain or praise, how much they spend, how often, etc...

Big companies utilize what is called CRM Systems or Customer Relationship Management Systems. These are pretty complex and for a small business usually overkill. But once you reach more than 100 customers, it could become useful.

Here the questions you have to answer for the customer segment

  • For whom are we creating values with our products?

  • Who are our most important customers? 

  • Do we have a Pareto diagram (a 80%-20% repartition) of our customer?

  • What kind of market is it? Example: Mass market, segmented market, niche market, diversified market

The Customer relationship

The customer relationship is how you will communicate to your customers, it includes following points:

  • How do we establish relationship with our customers (Face to face, cold calls, support line, automated service, faq, forums, etc…)?

  • How are their expectations in terms of relationship from our customers?

  • How do we keep the relationship with our customers?

  • Costs to keep the relationship, do we know them?

Customer relationship starts when you first contact the potential customer (not yet a customer). Will you handle these unknown people as potential customer? Having a face to face business makes you think twice about how to treat other people. Do not see them as customers (because they are not) but see them all as human beings with needs and a greater goal which is search for happiness. And you can help them here. You can make them happy, if only temporarily, but still make them happy by making them feel good and love your product.

There is a study made by some scientist that showed that whatever action you are doing in live is lead by your brain's search for just follow the lead :-)

Previous: Introduction and Value Proposition

Next: the Channels


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