Defining Customer Segments

Module 2 1 light
Dr. Dan L. Shunk
Professor, Arizona State University
PIMSA Chair, CETYS Universidad
Adjunct Faculty, Milan Polytechnic
dan.shunk@asu.edu
USA (602) 965-6330 phone
USA (602) 965-8692 fax

The Business Model Canvas

A rationale for how the

organization creates
delivers and captures
value

Business Model Canvas Course Structure

KP - Key Partners
8
Who are your key Partners?
Who are our key Suppliers?
Which Key Resources are we acquiring
from partners?
Which key activities do partners perform?

KA - Key Activities
7
What Key Activties do our Value Propositions
require?
Our Distribution Channels?
Customer relationships?
Revenue Streams?

KR - Key
Resources
6
What Key Resources do our Value
Propositions require?
Our Distribution Channels? Customer
Relationships?

CS - Cost Structure
9
What are the most important costs inherent in our
business model?
Which Key Resources are the most expensive?
Which Key Activities are most expensive?

VP -Value
Proposition
2
What value do we deliver to the customer?
Which one of our customers problems are we
helping to solve?
What bundles of products & services are we
offering to each customer segment?
Which customer needs are we satisfying?

CR - Customer
Relationships
4
What type of relationship does each of our
Customer Segments expect us to establish and
maintain with them?
Which ones have we established?
How are they integrated into the rest of the
business model?

CH Channels
3
Through which channels do our customer
segments want to be reached?
How are we reaching them now?
How are our channels integrated?

REV Revenue
5
For what value are our customers really to pay?
For what do they currently pay?

CS - Customer
Segments
1
For whom are we creating value?
Who are our most important customers?

Building Block: Customer

Segments

Who do we create value for?

End consumer or business organization
Defining characteristics of customer segment
Local / Regional / National / International
Broad or narrow market niche?

A business model can target multiple customer

segments
4

1 - Customer Segments
Organization serves one or several
customer segments
This defines the different groups of
people or organizations an
enterprise aims to reach and
serve.
There are 5 different types of
customer segments:

Types of Customer Segments

1. Mass Market

One large group with broadly similar interests

2. Niche Market

Specific, specialized customers

3. Segmented

Different target markets with slightly different needs and

problems

4. Diversified

Serving two unrelated customer segments

5. Multi-sided Markets

Serving two or more interdependent customer segments, e.g. a

credit card company with large customer base and large supplier
base.

2 Value Proposition
Seeking to solve customer issues and make
the customer successful via value
propositions
Describes the bundle of products and
services that create value for a specific
customer segment

Defining and Communicating

Your Value Proposition
Perceived value Price
Why would customers be
willing to pay?
Which customer needs
and/or business problems
do you solve?
Is your value proposition
superior to every
alternative being
considered?

It Comes Down to the Value

Proposition
VALUE is the Generation The price of one glass of
water is following:
3 concept:
Evian ~ 5 per ounce
What is VALUE?
How do we achieve
Arrowhead ~ 3 per ounce
VALUE?
Tap Water ~ 0.1 per ounce
What are the
characteristics of
VALUE?
What drives VALUE?
9

What is Value?
Lost in the Desert!
Dying of thirst
No water anywhere
What is the Value
of a glass of water?

Later Found in the

Desert!
Offered a drink
Same glass of water
Now the Value of
another cup of
water!

Bus Boy at the Hotel

Clear tables to earn
spending money!
Glass of water left on
the table.
What is the Value of
this glass of water?

10

What is Value?
Customer-centric
Time-based
(Temporal!)
Context-based
Strategic
Basis for Future
Positioning in the
Supply Network

My Take-Aways:
Givens:
Cost
Time
Availability
Added:
Customer
Dynamics
Commonality
Understanding
Collaboration

Various Value Propositions

Newness
Performance
Customization
Getting the job done
Design
Brand / Status

Price
Cost Reduction
Risk Reduction
Accessibility
Convenience /
Usabilility

Questions for Developing a Value

Proposition for Business Customers
How do we help customers:

Increase revenues?
Decrease costs?
Increase profits?
Better respond to the needs of
their customers?
Improve productivity and cycle
times?
Improve quality?
Deliver superior customer
service?
Other?

13

Questions for Developing a Value

Proposition for End Consuming Customers
How do we help customers:
Meet basic needs (i.e. food,
clothing shelter)?
Increase convenience to their
lifestyle?
Increase pleasure?
Decrease pain?
Maintain health and fitness?
Take care of family and friends?
Live economically?
Enhance tastes and preferences
for quality?
14

Aligning Your Solution to

Customer Needs and Wants
Better: (i.e. greater sensitivity, more accurate diagnostics,
enhanced clarity, higher reliability; improved experience etc.)
Faster: (i.e. reduce the time for customers to achieve desired
s
e
results, reduce cycle times etc.)
m
o
c
t
u
O
Cheaper: (i.e. reduce operating costs, ereduce
capital costs etc.)
r
m
o
t
s
u
Brave New World: (i.e.dWhat
C
new capabilities would your
e
r
product or service
Desimake available to customers that they never
had before?)
Differences along any of these dimensions must be large
enough to induce customer purchase decisions

15

Building Block:
Value Proposition
Voice of Authority: Carlos Perea

What unique set of

benefits do your
products and/or
services bring to
your target
customers?

https://
www.youtube.com/watch?v=re_2D
H7dVyk
+ How to Create a Unique Value
Prop
https://www.youtube.com/watch?
16

Mexicali Aerospace Industry

Gaps a VSAT Survey
Pareto Distribution of "Value*Gap"
14.0
12.0
10.0
Actual Value*Gap
8.0
6.0
4.0
2.0
-

Strategic Value Streams

17

3 - Channels
Delivering value to customers through
communications, distribution and sales
channels
How the company communicates with and
reaches its targeted customer segment to
deliver value.

Channel Phases
1. Awareness how raise awareness
2. Evaluation how help customers evaluate
our value proposition
3. Purchase how allow customers to
actually purchase specific products or
services
4. Delivery how deliver the value
5. After Sales how support post-purchase

4 Customer Relationships
Establishing and maintaining relationships
with each customer segment
There are many types of relationships:
Personal assistance - Communities
Dedicated personal assistance
Self-service
- Co-creation
Automated services

Elevating Your Strategic Position

Customer
Success
.....

Customer
Satisfaction
(a 1990s view
in every company I visit)

Options to Consider
*
*
*
*

Strategic Issue:
What will differentiate you
from your competition
in the 21st Century?

Customer Discovery Tips

Inventory your current industry contacts
Professors, class mates, advisors, colleagues,
friends
Develop more contacts when youve exhausted
your current list: trade shows, meetings, social
media, etc.

Create interview script

Practice your interview
Set Appointments

Ground Rules for Interviewing

Rule 1 Adopt a beginners mind Listen with a fresh pair of ears and avoid
interpretation.
Explore unexpected jobs, pains, and gains in particular.
Rule 2 Listen more than you talk
Your goal is to listen and learn, not to inform, impress, or convince your
customer of anything.
Avoid wasting time talking about your own beliefs, because its at the
expense of learning about your customer.
Rule 3 Get facts, not opinions
Dont ask, Would you...? Ask, When is the last time you have...?
Rule 4 Ask why to get real motivations
Ask, Why do you need to do?
Ask, Why is___important to you?
Ask, Why is___such a pain?

Ground Rules for Interviewing

Rule 5 The goal of customer insight interviews is not selling (even if a sale is
involved); its about learning
Dont ask, Would you buy our solution? Ask what are your decision
criteria when you make a purchase of?
Rule 6 Dont mention solutions (i.e., your prototype value proposition) too
early
Dont explain, Our solution does
Ask, What are the most important things you are struggling with?
Rule 7 Follow up
Get permission to keep your interviewees contact information to come
back for more questions and answers or testing prototypes.
Rule 8 Always open doors at the end
Ask, Who else should I talk to?

Exercise
Please select one customer segment of our
business development list
Please use Alexs worksheets and discuss
each of the sections
Be prepared to discuss in 20-30 minutes

25

What Did You Hear?

Your take-aways are very important
for these early modules.

26

An Introduction to the Customer

Development Process Steve Blank

http://startupweekend.wistia.com/projects
/zt618zz0r7
http://www.youtube.com/watch?v=rS
6fHW9pRek&list=PLyJQyREcOa170IKgo
CdcQnXGlWcSxhdim
27