In my last post, I introduced the tool called Business Model Canvas created by Alexander Osterwalder and Yves Pigneur and I also explained how this tool might help entrepreneurs and businessmen in the Internet industry to create new business models as they can use it to define and visualize it.
In the same way, I told my readers that my next posts were going to be used as jigsaw puzzle pieces in order to introduce and assemble step by step the different building blocks of this tool. In this post I will present the firs block of our Business Model Canvas.
To whom does our product or services generate value?
As you can imagine I will start to describe the upper left block of the business model canvas, which is dedicated to the groups of people that generate us income, in other words our customer segments. Understanding that our customers are the heart of our company, because we need them in order to survive, as entrepreneurs we must start by defining ad differentiating the different segments our company is willing to serve.
Our company might have one or many customer segments and might group them taking into account their needs, behaviors or any other attribute we consider important. It is important to mention that while we do this exercise segments that we are not interested to attend or cannot attend may appear. We can make the conscious decision of ignoring these segments.
When determining the customer segments in our business model it is important to differentiate one group of another. Among the reasons why we should divide a segment into different groups are:
- Their needs make it necessary to create them as a new segment
- This segment is reached by another distribution channel or the relationship established with this client is different
- This group generates a different profitability
- Each one is willing to pay for different elements of the value proposition
Why should I define different segments?
It is very important that entrepreneurs learn to differentiate among the different segment they are going to serve. Even though up to this point I haven’t talked about other building blocks, if we segment our customers it will be possible to offer then different value propositions, reach them by various channels or create different relationships with them. This is important taking into account that today it is easier to have unique relationships with clients, day after day we have new channels to reach them and they are becoming much more demanding and require new value propositions.
Having understood how to work and fill out the building block of Customer Segments y will describe the second building block: value proposition. However this will be the subject of the next post of this series.
Image taken from Flickr.com