Develop Innovations

Definition of target groups for business models

By 24. September 2015 No Comments

You can group customers according to multiple criteria to simplify the creation of a business model. In our consulting engagements most of our B2B focussed customers group according to size (order volume, employee count), industry and region.
In B2C engagements it is common to use demographic criteria like, age, gender, income or education.
Do you get any learnings out of this that helps excite customers with your offering or innovation?
Your customers get excited if you develop innovative business models that integrate with their world. To understand their world you need to look at the jobs those people need or want to get done.
If you understand those jobs correct you have already made the first step on your journey to innovation success. Those principles are not new. You look at the people from a behavioral perspective. You don’t ask who the customer is but question what they do and why they do it. You ask what the fundamental difference in their behavior is. This perspective helps you to group customer in a unique way.
In our projects we use a tool “Target Group Canvas” that helps with this definition.

The left part of the canvas provides space to collect customers and non-customers. Non-customers are potential customers that get served by our competition or neglect an offering. What prevents a customer from switching is often a lock-in strategy. We use the boxes between customer and non-customer to describe our own but also the lock-in strategy from our competitors.
In the middle section of the canvas we collect for customers and non-customers behavioral attributes as described before. Generic examples are

  • Price sensitivity
  • Purchasing pattern
  • Willingness to outsource
  • Preferred sales channels
  • Preferred purchasing channels
  • Degree of vertical integration
  • Expected customer experience
  • Willingness to invest
  • Level of expert know how
  • Etc.

In the right area of the canvas we provide a two dimensional matrix. The challenge is to define the best possible axes descriptions to achieve a maximum spread of the customer and non-customers within the matrix.
Let’s take the music industry as an example. In B2C music sales you will have customers that purchase music proactive, search in music sites on the web for artists, use apps like Shazam to recognise music, purchase CD’s or online music and organise them in a private archive.
Others will be happy if you provide a music stream that plays a certain genre or music similar to a specific song. The way music gets consumed and purchased can be defined by behavioral attributes.
How would you name the axes in the matrix to get a good spread for the customers? A possible solution for a first iteration would be to use one axis to describe how active the sourcing of the music will be or how passive. (‘iTunes vs radio station). The second axis could be what kind of music somebody likes to listen to. (Mainstream Music vs Underground Music). You can do multiple iterations to build a more depth profile of the target groups. A second iteration could be price sensitivity and purchasing channel.
When you have a clear understanding of the target group you can tailor a job to be done statement that reflects exactly their desires. This is a great starting point for building a business model that excites them.