Customer Segments vs. Customer Personas
What’s the difference?
Whether you’re in the earliest stages of planning your business or you’re going through a relaunch of a company you’ve been running for years, it’s important to have a clear understanding of the market you’re hoping to serve and the people you’re trying to convert to clients. And all of that starts with determining your product or market fit. Once you have established that there is indeed a need for your services, then you’ll want to hone in on your customer segments and the customer personas within those segments. Here’s what you need to know to get started — and how it all works together for the betterment of your business.
Determining Product / Market Fit
Product/Market Fit is just a fancy way of saying you can find enough people with the pain point that will jump at the chance to pay for the solution you aim to provide. These are your people.
Figuring out how to find these people to get an accurate headcount can be daunting. If you start with trying to pinpoint a “market,” it’s going to be too broad and vague. If you start with defining a single customer persona, that will be too narrow to determine if there are enough of these customers to warrant launching a business created to serve their needs. The sweet spot you are looking for is a customer segment.
When we started Virtual Collective we thought our ideal customer was:
A small business owner who needed digital services.
Any guesses as to what might be wrong with THAT definition?
That describes a very broad, vague, vast portion of the market. What business owner doesn’t need digital services these days?
It wasn’t until we drilled down into our existing customers after we launched that we figured out that one small business owner was NOT the same as the other. What emerged were two distinct customers who each needed the same services, but they each needed to be communicated within very different ways. This impacted our ability to effectively market to either of them, and it indicated that we needed to do a little more research to help us find the customer segments within the small business owner market in which each of our unique customer personas existed.
And we needed more of them if we were going to stay in business.
How do you find these Mythical customers?
For this post, we are going to assume that you:
have identified a problem that needs to be solved
know there are enough people who WANT to solve this problem to be profitable
can find more of these people
have some consistent data points to track and measure
Customer Segments
vs. Customer Personas
Customer Segments are the community of customers or businesses within the larger market to whom you are aiming to sell your product or services. Segments help you to forecast overall market interest for a product or service.
Customer Personas help to understand the emotional and behavioral triggers behind individual customers within that market. We want to be careful not to get too finite into the customer persona before you conduct your actual market research.
Note: It’s always best to clarify your customer segment before you get too focused on your individual customers. You might make some inaccurate assumptions causing you to miss key factors within a segment that might even reveal a customer that you never anticipated.
There are at least four basic factors you need to identify about your customer segment: demographics, geographics, psychographics, and behavioral. These are all characteristics that are unique to your customer’s story. While there are a lot of methods that can be used during the customer discovery process, such as customer interviews, surveys, and focus groups, unfortunately, there are no shortcuts. It’s going to be up to you to figure out through trial and error what works best for your company and your customers.
Demographics are concrete facts. These are known truths about your customer that you can pull from customers directly through interviews or surveys, or you can use census reports, articles and past research.
Geographics are also concrete facts and can sometimes be rolled into your demographics if you have an online business and your customer segment isn’t specific to one location. You’ll want to drill into that later when marketing your business but for brick and mortar businesses, location is vital information at the beginning stage.
Psychographic and behavioral factors are more abstract. This information is not as black and white as demographics and geographics. You will need to extrapolate this information in creative ways through your customer interviews and by observing their online behavior and buying patterns.
This is the customer segment description we identified for Virtual Collective:
Do you think this is complete? Do you think this segment is defined based on our factors or are we missing anything?
If we added that last section, would we have a better understanding of what our customer is struggling with and how we can help them?
Yes. Now we have a problem for which we can provide a solution. You cannot effectively define your segment if you are looking at these factors hiding in independent silos.
It’s crucial to know whether you are providing a product or service in a B2B (Business to Business) or a B2C (Business to Customer) role. You may have both kinds of customers and need to determine where to focus your energies on first as you launch your business. Make sure to include this clarifying question whenever you are doing customer discovery.
NOTE: We recommend addressing both customer types in your interviews in order to define both customer segments during your initial research stage so you don’t have to do it all over again at a later date.
IN SUMMARY
Now that you know the order of things and, more importantly, why these steps matter, you are equipped to get started on identifying your Product/Market Fit, your Customer Segments, and Customer Personas. The more intimately you know your target customer, the more efficient you will be at marketing to those who want what you’re selling. And as all business owners know, time is absolutely money. Be smart with both!
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