Client segments key to success of your business

 

A woman talks on her mobile phone. Safaricom operates in the mass market space in that it does not differentiate its products. FILE 

By Scott Bellows

In Summary

• Investors often fail to fully ascertain their potential customers.

Back in 1989, a breakaway film starring Kevin Costner hit cinemas around the world and instantly became a classic. The famous line from Field of Dreams: “If you build it, they will come”, highlighted the need to have faith in one’s dreams.

However, while the movie made great content for Hollywood, it offered little to no use in everyday life. A more realistic tagline might entail: “If you garnish client feedback and define your customer segments, they will come”.

So, given our revisionist Hollywood history and since you know from the past two weeks how to identify a social challenge and gauge client needs in the social entrepreneurship series in Business Talk in preparation for the Jamii Social Business Plan Competition, we delve into finding and defining your first startup customer segments.

Entrepreneurs often fail to fully ascertain their potential clients. Poor analysis causes catastrophes whereby entrepreneurs do the wrong thing for the wrong people.

Looking at Nairobi, different grocery stores now publicise that shoppers may go online, choose groceries, and receive the goods at home delivered by the supermarket.

The US tested exactly such a model between 1998 and 2001. Business schools around the world teach the rise and collapse of Webvan as the quintessential example of entrepreneurs getting the business basics wrong.

Investors, including this author who invested in the company, botched their diligence and provided Webvan with the equivalent of over Sh85 billion. The company went bankrupt in 2001 and investors lost everything.

What did we get wrong? Webvan infamously failed to segment and price its market properly, know that customers wanted to feel and touch produce for themselves, shoppers often only realise they want a product when they view it on a shelf, and sitting at home waiting all day for a home delivery becomes more inconvenient than actually heading to the store oneself.

So, let us utilise tools from Osterwalder and Pigneur’s phenomenal book Business Model Generation to segment your customers and avoid Webvan’s mistakes.

First, different customers hold different needs. In last week’s Business Talk, we delineated how to discover client needs. Now, bundle those needs into themes. Do you notice that different genders hold different needs?

More specifically, do different geographies, ages, income classes, social groups, ethnic groups contain different stated needs? What specific offer do the customers require in order to meet their needs?

In response, will you target a mass market? Safaricom, Coke, and Nokia operate in the mass market space in that they largely do not differentiate their products. The products fit all customers in general.

Alternatively, an entrepreneur may focus on a niche market. A very narrow and specific market targets specialised customers with unique needs. High-end Italian car manufacturer Lamborghini, for example, targets an extreme niche market.

Further, do you posses a product appealable to a massive client base with only slight alterations in order to sell to each segment?

You may segment your customers into different markets, like Barclays Bank of Kenya. Barclays offers products and even unique branches for the common, wealthy, and mega-rich customers. Each customer segment holds slightly different needs and problems