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PROBLEM AND CUSTOMER SEGMENTATION

• The importance of confirming that your project will fix a customer’s problem

• How to define your target market

• Who your customer segments are

• How to start to validate your problem

 
 

Webinar: Week Two

Problem and Customer Segmentation with Sean Collins, President and Co-Founder of Terrapin Geothermics

 
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overview

 

Businesses are borne out of a problem. This may be a problem experienced personally, a frustration with existing business, or a problem which has been viewed from afar. If you start a business telling the customer what their problem is, as opposed to being proactive in determining their problem, your business will ultimately fail.

Validating the demand for your product is the most important thing you can do. More important than features, your team, design, pricing, etc. Now, this is not to undermine the entire business process, however, if you are not solving a legitimate problem - however good your intentions are - the business will struggle to succeed. 

You are in the process of creating impactful businesses which serve a social and environmental purpose, but that doesn’t mean the project can ignore the realities of business.

Genius is in the idea. Impact, however, comes from action.
— Simon Sinek
 
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Define your customer segments and target market

So how will you know whether you are solving a legitimate problem? The trick is to test this with your customers, but this of course means that you will need to define who your customers are.

It is important not to think that everyone is your customer or you will design a product that a lot people kind of like. You want to do the opposite - you want to design a product that a few people love because if people love your product, they will promote it and help to drive growth.

You need to define your target market, the group of people who you think have a problem that you will be able to solve.

Exercise: Brainstorm all the different groups of people who you can think of who might be a customer of your product. Write a story for each group about how they experience the problem in their daily lives and how your solution can change their lives for the better. Identify which of these segments you think your idea would best serve.

 

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Problem identification

Once you have identified your target market, you need to observe and discuss with them the problem that they are currently facing. Figure out whether people in your target market tend to gather and where they tend to experience the problem you believe they have. Then go there and watch them experience their problem.

 

We’re going to go over interview techniques in greater detail next week but it’s worth starting to interact with your future customers right a way. So ask these people about they problem they are experiencing. Don’t jump straight in to offering your solution. Instead, just ask them open questions.

For example, if you are trying to solve the problem of people allowing food to go to waste you could ask whether your interviewee ever had to throw out food.


Exercise: What things did you believe were true have you had confirmed by observing and talking to your target customers? What unexpected things have you learned by talking to them?

 
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That’s all for this week but next week you will be continuing to engage with your customers so you might want to start setting up interviews with people who fall into your target market now.

 
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Based on the field research and market validation conducted by the founders, they realised the following:

Based on the field research and market validation conducted by the founders, they realised the following:

• Environmental law firms are a potential group of corporate customers for notebooks

• Restaurants that use paper menus and change their menus frequently are a potential group of corporate customers for a service to turn their paper waste into notebooks

• Conference companies are a potential supplier of paper for notebooks. Here, the founders go back to the brainstorming phase to come up with a list of groups of everyday consumers that would purchase upcycled notebooks in order to find more target markets.

 
 

EXERCISE: TARGET MARKETS

What have you noticed? How could you make their lives easier?
 

common terms:

 

customer - someone who pays for your product or service  

 

customer segment - a group of your customers that are distinct from other groups based on demographics or characteristics or behaviours

 

discussion guide - a script that outlines what you will say and the questions you will ask in an interview

 

field research - collecting information for a research project outside of the workplace or office setting

 

interviewer - the person who moderates the interview and asks the questions

 

interviewee - the person being interviewed and answers the questions

 

market validation - a series of interviews with people from your target market to refine your assumptions

 

pain point - something experiences by your target market to motivate them to buy your product

 

problem - could be the pain point or the overarching social or environmental problem you’d like to solve with your venture

 

target market - the group of customers your product or service is aimed at

 

user - someone who uses your product but might not necessarily be the one paying for it