Customer segments are the groups of people a business aims to serve.
Serving them effectively is key to building a successful business.
Common customer segments
- A Mass market segment has customers that can all be treated the same because they all have similar needs.
- A Niche market segment is a specific subset of the market that is targeted using marketing and products/services that are heavily tailored to them.
- A Segmented market segment has several types of customers that use the same or similar product/service in different ways.
- Diversified market segments are separate market segments with different marketing and products/services. Companies typically move into diversified market segments after scaling their first market segment.
- This typically occurs when a company is branching out into a new market after the first business scales.
- Multisided market segments are market segments where the user segments are dependent upon each other to receive value.
- For example, Facebook has users and ad marketers which dependend on each other. Ad marketers need users to see their ads, and users need ads to pay for the experience so they can browse for free.
Categories of customer attributes
Customer attributes are used to define customer segments. Broadly, there are 4 categories that customer attributes fall into:
Demographic: Tangible/physical characteristics of people, such as ethnicity, religion, age, income, or education level.
Psychographic: Intangible characteristics of how people think, such as their culture, attitude, personality, motivations, and lifestyle.
Geographic: Where people are. Includes specifics like the city, state, and country, as well as geographic characteristics like “urban” or “coastal” regions.
Behavioral: Purchase and decision history of what people actually do.
How members of a customer segment are differentiated
To differentiate customers between segments, consider these three factors:
Homogeneity: The customer attributes that are similarities among customers in the segment
Distinction: The customer attributes that are differentiators between customers in this and other segments
Reaction: Customers respond to the same marketing and offers
Determining customer segments for a product
- Who uses the product?
- What do they use the product for?
- When using the product, what are their pain points? What problems need to be solved?
- How do they solve those problems now?
- What is their Decision-making process?
- Who influencess them?
Define the Customer archetypes and Customer acquisition strategy for each archetype.