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Business Case Glossary

Customer Segment

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What is it?

A customer segment is a precise way to answer the question: "Who is my customer?" and is defined by the following five distinct attributes:

  1. Customer Type
  2. Demographic Profile
  3. Customer Role
  4. Geographic Location
  5. Psychographic Profile

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Each of these are discussed in more detail below.

Customer Type

There are four broad categories or customers:

  • Internal = Individuals, teams, departments, etc. within your own organization.
  • Consumer = Individual people or households.
  • Commercial = Businesses and non-profit organizations.
  • Government = Municipal, county, state, or federal government departments, agencies, etc.

Demographic Profile

These are the quantifiable characteristics of a given customer population, and they vary by Customer Type, as follows:

For Internal Customers demographic characteristics might include:

<SmallList> <li>Title / Seniority</li> <li>Organizational Unit (e.g. department)</li> <li>Tenure</li> <li>Full-time vs. Part-time</li> <li>Employee vs. Contractor</li> <li>Salary</li> <li>Degrees and Certifications</li> <li>Gender</li> <li>Race / Ethnicity</li> <li>Etc.</li> </SmallList>

For Consumers demographic characteristics might include:

<SmallList> <li>Age</li> <li>Income</li> <li>Marital Status</li> <li>Size of Family</li> <li>Family Stage (e.g. Single, Newly Wed, Young Children, etc.)</li> <li>Gender</li> <li>Religion</li> <li>Race / Ethnicity</li> <li>Education</li> <li>Etc.</li> </SmallList>

For Commercial Customers demographic characteristics might include:

<SmallList> <li>Industry</li> <li>Number of Employees</li> <li>Annual Revenue</li> <li>Annual Profit</li> <li>Years in Business</li> <li>Business Lifecycle Stage (i.e. startup, growth, maturity, decline)</li> <li>Customer Served (e.g. Does the business primarily serve consumers, other businesses, or government agencies?)</li> <li>Etc.</li> </SmallList>

For Government Customers demographic characteristics might include:

<SmallList> <li>Jurisdiction (e.g. municipal, county, state, federal)</li> <li>Department / Agency (e.g. Department of Defense)</li> <li>Annual Budget</li> <li>Number of Employees</li> <li>Etc.</li> </SmallList>

Customer Role

Once you have defined the demographic profile of your target customer, you need to determine the specific role that your innovation was designed to serve. For example, imagine that the demographic profile of your target customer consists of large telecommunications service providers, you still need to clarify exactly which department / budget you are targeting. Is it marketing? Human resources? Operations? You can see how this dramatically clarifies who you are serving and the size of the opportunity.

One final note regarding Customer Role is that even if your innovation is designed for individual consumers, they are evaluating your innovation from the perspective of a particular role. E.g. they are making the decision as a parent, a sports enthusiast, a grocery shopper, a job-hunter, etc.

Geographic Location

This defines the geographic footprint of your service area or product distribution network. For example:

  • A specific town or city
  • The metropolitan region surrounding a city
  • A state
  • A region of a country (e.g. the mid-Atlantic region of the U.S.)
  • A country
  • Various countries / continents (e.g. Asia)
  • The entire world

Psychographic Profile or Customer Mindset

These are the attributes that define the unique mindset or behaviors of a particular customer segment. For example, if you were launching a line of t-shirts for teenage boys between the ages of 13 - 18, you would choose a very different design for boys that were part of the “skater” psychographic profile than boys that were part of the “preppy” psychographic profile.

CONSUMER MARKET PSYCHOGRAPHIC VARIABLES

In consumer markets, psychographic segmentation is typically based upon unique groupings of one or more of the following variables:

  • Interests (e.g. sports, politics, volunteering, etc.)
  • Attitude (e.g. compassion, respect for authority, etc.)
  • Opinions (e.g. technology is the solution, technology is the problem, etc.)

COMMERCIAL MARKET PSYCHOGRAPHIC VARIABLES

While less common, commercial markets may also be segmented psychographically. For example, the following categories often define meaningful differences in the psychographics of a commercial customer:

Ownership Structure

  • Publicly Traded
  • Privately Owned Partnership
  • Privatley Owned Family Business
  • Privately Owned with a Single (or dominant) Owner

Market Position

  • Market Leader
  • Niche Leader
  • Follower

Various Cultural Considerations such as . . .

  • How employees are valued
  • How customers are valued
  • How competitors are perceived
  • How the larger community / society is valued
  • How technology, innovation, and best practices are valued
  • Etc.
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