You have a great product or service that you think will shake up the market. Or, maybe it’s an improvement to an existing product or service, or a premium version of it. You have a good understanding of the benefits it has and the value it can add to the person using it.
But how do you know who to target? This is where customer segments come in. Customer segments help you put your customer into different boxes so you can understand their needs better — and sell effectively.
Customer Segments: Definition
Customer segments are separate groups of customers who have specific traits. So, you categorise or segment your customers based on these traits or factors.
Some common customer segments include:
- Demographic segmentation: Based on age, gender, income, education, marital status etc
- Geographic segmentation: Based on region/country/city/town of residence
- Technographic segmentation: Based on use of technology (mobiles, laptops, apps, software)
- Behavioural segmentation: An individual’s natural tendencies or habits
- Psychographic segmentation: An individual’s personality, attitude, interests etc
- Needs-based segmentation: The needs, requirements and must-haves of the individual
- Values-based segmentation: The economic value of specific customers
Creating customer segments is an easy way of organising and managing your relationships with your customers. Segmentation also makes it easy to tailor and personalise the marketing message, product or service, sales and after-sales efforts of your brand, which, in the long run, helps retain customers and boosts conversions.
But at NewLedge, we like to define it a little differently.
The Customer Segment examines how well defined the market is, focusing on the established customer base managed by your organisation and how you respond to customer needs.
So we focus on how we can target customers based on their needs and the job they need to get done, using the Jobs To Be Done theory.
JTBD is a method to help product teams coordinate with marketing and sales teams. When applying JTBD, your first step involves defining the target Customer Segment as “a group of people + the job they are trying to get done.” Teachers (a group of people) who are trying to pass on lessons to their students who are trying to get a high (er) paying employment (the job to be done) constitute a market.
We apply the JTBD through to help you lead teams who can build, market and sell high-performing products. Company owners, managers and purchase decision-makers are going to ‘need to hire you’, to help them get their job done.
Understand the Job To Be Done with our template
Customer Segmentation: How To Do It
So there are a few standard analyses you have to run to figure out your customer segments.
- Identify your customers: Based on who you are selling to, on a broad basis. If you make eco-friendly menstrual cups, you have an idea of who your customer is: young women and women aged between 10 to 50.
- Group your customers: Based on the above points (demographics, geography, psychographics etc) group your customers so you know what matters to them.
- Create personas: A common practice is to create customer personas: a hypothetical persona that best describes that customer and their pain points.
- Craft the message: Once these personas are created, you identify the problem and craft your messaging to connect with the customer’s needs and offer a suitable solution.
Customer Segmentation, The NewLedge Way
At NewLedge, we don’t create hypothetical personas. We look at it via the Jobs To Be Done theory.
When you work on product-market fit, you need to speak to all customer types. You want to identify ways to help each of these customer segments get their job done better, faster and/or cheaper than your competitors. Using the Jobs To Be Done theory to figure this out will help you validate and develop strong relationships with your customer segment.
- Define the Core Functional Job-To-Be-Done: what is the job they are doing that causes them to
- put the product or service into their life?
- Context: what, where, when and why did the job occur? What is the context in which the job needs to be solved?
- Outcomes: What are the desired outcomes from solving the job?
- Function: What is the functional outcome and how can this be measured?
Let’s analyse customer segments through the effects of Enhancing Customer Segment Innovation.
This makes use of customer, market and competitive knowledge: the focus is on existing customers, in markets we are already in, and known competitors.
Through Enhancing Customer Segment Innovation, the goal is to strengthen ties with established customers through deepening customer relationships and establishing a Product-Market Fit.
Do you understand the Product-Market fit within the current and prospective customer base?
Have you developed the right relationships to retain and grow customers within that base?
Once you achieve that product-market fit, it’s time to sift through the data, like targeted market research, like user feedback, interviews, focus groups.
Customer Segments and Value Proposition
Value Propositions are NOT to be confused with features and benefits. They are a ‘statement of tangible benefits for the customer’.
They are NOT a description of the features/capabilities of your product. Think of it this way: you are using Google Maps to get to a destination on time. This is the urgent job you need to get done. Google Maps can have all of the buttons, bells and whistles their product designers can think of, but if you don’t get to your destination on time, or if you ‘struggle’ to get the job done, you will look to fire the product and hire a substitute.
At NewLedge, we help you get the job done faster, better and/or cheaper than other solutions in the market.
So to create an effective message for your customer segment, you need to ask yourself: how does your product help the customer get their job done better and/or cheaper? The tangible, real-world benefits of your product should help the customer overcome their struggles.
The product or service needs to make sense and be useful to the person you are catering to – the JOB BENEFICIARY.
In other words, who is benefiting from getting the job done? A job beneficiary is the reason a market exists: because someone benefits from getting the job done.
A CORE JOB EXECUTOR helps the job beneficiary get the job done.
The core job executor refers to the person who uses the product or service to get the core functional job done. For example, SimTech, one of the companies we worked closely with, was a medical device manufacturer. In the case of this medical device manufacturer, the core job executor of a surgical tool is the surgeon. The patient is the job beneficiary.
Obviously, the job beneficiary and core job executor aren’t the only customers to identify and speak to. These are the 4 customer avatars you need to cater to:
- The job beneficiary
- The core job executor
- The product lifecycle support team
- The purchase decision-maker
When you work on product-market fit, you need to speak to all the people in the product cycle.
Find the Right Fit with NewLedge
When you embark on an innovation project or are trying to introduce a new product, service or business to the market, you need to speak to your potential customers in a way that makes them feel you are solving their problem or addressing their needs in the most effective way.
Innovation can only happen when customer-product-market teams work together. Finding the right customer segment for your product and marketing it the right way is just one of the things we touch upon in the NewLedge for STEM 15-week online course in innovation implementation and commercialisation. Learn more about the course here.
How do you identify customer segments?
One of the simplest ways to identify customer segments, particularly if you are a startup, is to look at customer segmentation through the lens of the product/service and who it serves. Is your product a mass market product (like detergent) or a niche market product (soy-based infant formula for lactose intolerant children?). You may also look at a Multi-Sided Market which is specific to companies that have users of your product/service (for free) and clients who have an interest in reaching that set of users (this would be more B2B).
What are some examples of customer segments?
Customer segmentation examples include categorising your customers based on demographics (age, gender, income level, education level, marital status); based on geography or region; based on psychographics (based on personality, attitudes, interests); behavioural segmentation (based on frequent actions and tendencies), needs-based (when the product addresses the needs of the customer directly); value-based (when the product or service offers economic value to the customer segments).
Why do we need customer segmentation?
A customer segmentation strategy is important to create targeted marketing strategies and optimise them and improve customer experience and after-sales service.
What are the most important customer segments?
The most important customer segments are those which offer you the best value for your products and services. But some of the most common and widely used (and therefore important) customer segments are, Demographic, Geographic, Technographic, Behavioural, Psychographic, Needs-based and Values-based customer segments.