BMC Customer Segments

This post on BMC Customer Segments focuses on the importance of identifying and defining your target customer segments. To succeed, it is essential to recognize, select, and establish these segments. Refer to previous posts on BMC for more context and don’t forget to like our Facebook page here. Let’s continue… The primary objective of a business is to address specific problems or add value for target customer segments. These issues or value additions will vary among different groups. Although not uniform, they can be categorized into distinct groups, which will define your target customer segments in the BMC framework. Indeed, profit and wealth are among the goals of running a business, but they should not be the primary objective. Treating profit as the sole goal is a significant business mistake.

Why Focus on BMC Customer Segments?

In the BMC framework, it is crucial to define your customer segments. Identify which segments you aim to address with your solutions or value propositions and which ones you do not. Define where to target your products or services to achieve your primary business objectives. Understanding this is fundamental: your products or services are not meant for everyone! Unless you are providing a utility service like water or electricity, the scenario changes. Returning to BMC Customer Segments, these target groups may represent distinct segments if:

• The needs of the target segments are different, requiring varied value propositions;
• Different distribution channels are needed for each segment;
• Different customer relationship methods are required for each segment;
• Some segments offer higher profitability compared to others; and
• Some segments are willing to pay for aspects of the offering that others may not.

Who are we targeting with the value we create? And who are our most important customers?

Customer Segment Examples

Consider the following examples of customer segments. They may provide ideas for defining customer segments for your business:

Mass Market

The mass market refers to a business model without specific targeting. This model does not differentiate between customer segments. The value propositions, distribution channels, and customer relationships focus on customers with similar problems or needs. The primary target is a large group of customers. A close example is McDonald’s. Their target customers are those who are hungry and seek substantial quantities of food. Everyone, regardless of age, gets hungry. Thus, they introduce the Big Mac! Other examples of the Mass Market include businesses in the food industry (regardless of form), consumer electronics sector, beverage products like Coke & Pepsi, daily newspapers, and so on.

Niche Market

In contrast, a niche market business model addresses more specific or specialized needs. The value proposition, distribution channels, and customer relationships must cater to these specific requirements. For instance, while everyone gets hungry, not everyone desires a Big Mac with its large portion size. Some people are focused on dieting and losing weight. For them, a salad would be a better fit! And for children or those preferring smaller portions, there’s the Mac Jr. option! Other examples of niche markets include suppliers targeting only retailers, bulk fabric suppliers focusing on boutique owners, and ONEXOX telecommunication services catering to those seeking savings versus distributors aiming to generate income.

Segmented

A straightforward example of a segmented market is a bank. Banks have distinct customer segments and offer different services for each. For instance, they provide consumer/retail banking services and corporate banking services to separate customer groups. Banks also differentiate customers based on net worth, such as those with up to RM 100,000 or a select few with over RM 500,000. For high-net-worth individuals, priority banking services are offered, allowing them to bypass longer queues!

Diversified

The BMC book highlights Amazon.com as an example of a diversified business model. Initially targeting book enthusiasts, Amazon expanded its focus to include fashion, electronics, video, music, and virtually anything that can be sold. Today, Amazon also offers cloud computing services for customers looking to build their own online businesses.

Multi-sided Platforms

In a multi-sided platform model, organizations require two or more customer segments that depend on each other. For example, a credit card business needs both cardholders and merchants who accept credit card payments.

Which Customer Segments?

So, which customer segments should we target? Only we, as business owners, have the answer. It is our responsibility to define our customer segments. Remember, the examples above are just illustrations! Once we have defined our customer segments, we must also determine where they are located or gather. Find them!

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