Hi, welcome. Welcome to this lesson. So now we're going to be talking about customers in the business model canvas, who they are and why they're important. So the first thing that you need to think about is, Who are your customers? And that is really, who are you creating something of value for? Now, most of the time, the way that we think about it, customers are people who pay for something.

But in many of the modern business models that we use on the internet, this isn't necessarily true. Google, for example, has millions of us as customers using search engines. We don't pay for like the the search engines, but Google still creates value for us. So the first question you need to ask yourself is Who are you creating value for? The second question? The second question is Who are your most Important customers.

Now, a lot of my clients sort of come to me and say, Dennis, I'm targeting the mass market, or I'm targeting women, or I'm targeting me between 18 and 25, Millennials or something. And it's true. those groups of people could all be your customers, everybody in the group could be your customer. But realistically, certain segments of that group are going to be your most important customers. Yeah, people between 18 and 20, may buy 80% of your products a day that 20 to 25 may wrap by the remaining 20%. Yes, women, maybe the people who you're targeting, but it may be sort of married women who have a much higher conversion rate.

So it's important very important for you to be clear who your most important customers are. So what way, one way, when we start off, we need to be very clear. We need customers to make money. Now, that sounds really, really obvious. But it's amazing how many startups get focused on the process, the technology, the development, and they forget that they actually need customers. And it's also important to to understand that there are a lot of people out there who we do not want as customers.

Many people say the premium and Gucci or Tiffany's in jewelry, they do not want people are looking for bargains as customers. They want people who fundamentally do not care about the price of the good or they care about the price of the goods as a status symbol. Well, other people Ah, Samuel is a British jeweler that now bankrupt famously said that his customers are really good, please, I think he, he actually said, my jewelry is crap. And it like doesn't last as long as important sandwich, something similar. He was targeting in a very different place. And he didn't really want the very expensive customers.

And as it turned out, he didn't actually want any customers at all, but because everybody abandons him shortly after that. So be very clear, who you don't want as customers, and then work out who are going to who are the customers that are going to be in all your different segments, in most business models that I work on, is generally best that you're focusing on two or three segments. Yes, because as a startup, you've got limited resources, you've got more than anything else, you've got limited amounts of your own time, and focusing on different segments. takes a lot of time and pays a lot of coordination. It's far better to Laser focusing on one group and validate that. And if they don't work, move on to something else, rather than spreading your attention over lots of different segments.

There are models, of course, where this is the data that's wrong. So if you've got two sided marketplaces, again, let's use Google as an example where you've got the search people who your free customers, and then you've got your advertisers are actually subsidizing the people doing search, you've got two customer segments. And in that case, you need to put a lot of effort into developing both segments, but generally keep your segments as focused and as narrow and as few in number as possible. So when when you look at segments, there are a number of different types of segmenting customers. And just to be clear, when I say segmenting, what I mean is dividing a larger group of people up into smaller sections, who is easier for you to identify and Time. Now the first type of segment is going for the mass market, and where you're really not too worried about the differences between people, because pretty much everybody needs something similar.

So if you're an electricity supplier, you may segment the market into retail, and business, you may sort of segment business a little bit further. But fundamentally, if somebody is going to have they need electricity, and that's all you need to know, you're not doing any real differentiation there at all. And the opposite of that is when you're segmenting on the basis of niches. So for example, you may serve a segment men who do sports and then it might be men who are fishermen, that men who are fly fishermen and then men who are fly fishermen who do not use Carbon Fiber rods at sea. Yeah, and he slowly segmented and as he segment you're getting a narrower and narrower audience, he can give you a more more focused value proposition. So then you may have a segmented audience where you where you may say okay, I'm looking at women and every every group of women every every segment say that they say going through that their life cycle they're only slightly different products so for example let's look at makeup.

Teen makeup is slightly different to 20s makeup which is slightly different to mom's makeup which is slightly different to mature makeup which is slightly different to seniors makeup. The actual physical product is the same in many ways, but how you market it story that you're trying to tell the promise that you're making to each of those different audiences is quite different because they use makeup differently at different points of their lives. They have very different priorities. And so you can have a segmented strategy, like like that alternative. Alternatively, when you look at your customer base, you can see them as very diversified. So in some cases, I was talking with somebody yesterday, they're segmenting on the basis of health shop owners, research people who like to do recycling, and there was another segment, and on the face of it, to me, that didn't make a lot of sense, until we dug into what the value proposition was.

And we saw that the value proposition applied to these very different segments quite a quite quite quite effectively. The segments don't have much in common but They are tied together by by the promise what you're what you're what you're offering to them. Finally, one of the things that we're looking at is the the two segments segment where you need to learn different types of customer together to make the business model work. So for example, a bay is a two sided market, you need the sellers, and you need the buyers in with Google, you need searchers and advertisers with a with the Financial Times you need readers and advertisers. You have to Yeah, there are lots of different two sided markets like that and understanding the two different types of segments in each case. Sometimes even three is very, very important.

So for each segment, what is there are a number of things that you need to bear in mind. Generally, each segment will need and require Why a different offer from you? Yeah, if you're offering the same thing to every single group, every single group of customers have you really got one big segment that you're you're you're lumping in together you need to be clear that that they if they are different then you're almost certainly offering them a slightly different product or service in some way, shape or form. And different different segments will often have different channels that you reach them by. So for example, if you got segments that are our retail and industrial retail, you we will often have, say shop fronts or or non like e commerce store and you reach people like that whereas an industrial customer quite often you will have a sales page either inside sales a or a Field Sales Team.

Going out and reaching the customer is reaching your industrial customers like that. And as a result of these different channels and because of the segment, you'll also tend to have different relationships with with with the customers. luxury goods customers often require very high touch, very customized relationships where they're made to feel important, because one of the things about luxury goods is the high status and high status is having people flocking around you can bring you making you feel good. On the other hand, low value commodity goods often have a lot of automation with very, very low touch relationships. And you see what this in the banking industry slowly moving from the branch network with personal bankers to learn much more automated online relationships where is ready And you have the name of the person you do you do banking with or even meet the same person twice.

You also need to think about the different profitability of different segments. I mean, it's one of the big mistakes that I often see is on price and they they say, these are my segments, and that's fine. But they then don't think about what is the different cost to reach each of those statements? how profitable are they are the segments in their own right? Can you sell a product to one group at a premium? Or are you stuck trying to sell a product as a as a commodity?

If I need to ask questions, okay, really, do I want to be working with the lowest margin segment at all? That may be good reasons to but if you don't raise the question in your own mind, and then maybe decision, economic debate tying up lots of capital unnecessarily. And the final point on segments is a quite often people will be prepared to pay for different parts of of the offer. We see this a lot a online product where the different tiers people will pay for different sets of products and services. So the the base of the bronze tier you will get at and then at the silver tier, you'll get that plus basic customer support plus better this plus better that and plus these features, and then so on ever higher levels. So be considerate of what do you actually need to offer for each of these segments to for them to serve really feel satisfied by the value that you're offering.

So how did you Pretty much the way that I normally sit down and start with my customer segments is the very first iteration, I will put down the name of the segment, usually I will do a two to three word name of the segment. This gets in my head, this gets it on paper that that initial first stage of clarity, then there's a process behind that of going out and discovering, okay, what is this segment actually, like this goes into the marketing. They sit thinking about the demographics and the characteristics about that age, where they live, how much they sex, all these sorts of things. And also they decide psychographics of what do they really believe what motivates them? Why are they doing what they're doing? What is the problem?

How many They feel about the problem and understand that then go and start talking to people in the segment and understanding whether they will be a good fit for the for the value that you provide. And this helps validate your customer segments. And as with every other aspect of the business model, generally your first business model is a rough guess. As you go out, you get more information and you test it validated, you'll get more and more confidence. One of one of my first companies are still trading company, we, I think are on the 25th or 28th version of our business model canvas having gone through multiple changes in both customers and in many other parts of the business as the market changes as the environment changes as our offering changed and You should look at it in these ways, too. So today in this lesson, we've gone through a number of things and we've focused on who is your customer?

Yeah. And which customers are the most valuable to you. almost anyone can be a customer, but who is going to be the best for you? Okay, I hope you've enjoyed the lesson. Any questions that you've got, please send send an email or ask them in the in the comments below and also send us copies of your of your business model canvas and will be great to great to see them.