Before you segment customers by needs, you should have a good understanding of your customer segmentation by size. The work the Company does to segment customers by size isolates the target Core customer groups that the Company must serve in order to reach its financial goals. It is these target customer segments, and only these segments, for whom the Company will identify new segments by customer need.

The objective of the Improve: Segments section of StrategyStreet is to help you develop new segments based on the needs of your customers. These new segments will inform your product and service innovation ideas. The segmentation work involves three steps: defining the customer type, describing customer costs and segmenting customers by need. The last step provides you with several thousand new segmentation ideas. To help you get a running start on this brainstorming task, we suggest you read our overview of the Perspective entitled “Customer Segmentation: Finding the Human Dimension.”


Define the customer for whom you are developing new segments.
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The segmentation of the target customer group by needs focuses on a particular type of customer/supplier relationship. There are three customer/supplier relationships:

An Intermediary customer buying from a product producer
An Intermediary customer is one who purchases the product for resale or who plays the major role in recommending the product purchase to the Final customer. Shortcut to Examples >>

A Final customer buying from a product producer
The Final customer is the one who makes the final decision on what product to buy and from which supplier to buy it. Some Final customers purchase directly from the producer of a product. Shortcut to Examples >>

A Final customer buying from an Intermediary
Most consumer products, and many industrial products, reach Final customers through Intermediaries. Shortcut to Examples >>


Describe the costs your key customers incur with their current products and services. Skip to Section >>

Each customer/supplier relationship incurs a typical set of costs with the Company’s product over the product’s entire life. The segmentation of customers by needs presumes a good understanding of the costs the customer incurs today. These costs are the starting point for the segmentation.

Intermediary customers incur four typical costs with the product over its entire life
These four costs are Obtain, Sell, Guarantee and Return

Final customers incur four typical costs with the product over its entire life
These four costs are Acquire, Use, Maintain and Dispose


Review the main options you have to segment your customers by need. Then explore high potential sub-segments in each of these options. Skip to Section >>

StrategyStreet helps you segment customers according to their needs. We find characteristics to find the segments. Characteristics are traits, which may be counted or estimated, associated with one group of customers within the total customer group. These characteristics allow us to identify these customer groups as separate from the general customer population.

These characteristics reflect the needs of human beings. Each human being has characteristics that are physical, emotional and intellectual. Accordingly, our segmentation of customers by needs leads with these three major categories of characteristics. Each of these three major categories of characteristics has many supporting characteristics that add to your depth of brainstorming.

This section offers you several thousand innovation ideas that have been used by management teams in over four hundred industries since 1984. We offer these innovation ideas by describing traits or characteristics of a segment. We, then, illustrate each trait with up to twenty examples of situations where companies have innovated their products and services to serve the segment.

Organizing the innovation ideas: Review how we have organized the innovation ideas for you.
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We suggest you use this section of the website as follows:

  1. Open the portion of the innovation outline of interest to you.
  2. Create innovation ideas to segment your customers by need, using only the outline.
  3. Use the examples supporting the outline item in order to expand your range of ideas.

<<Innovation Examples

Basic Strategy Guide Users Return To: Step 12

For a greater overall perspective on this subject, we recommend the following related items. Especially helpful is the perspective “Customer Segmentation: Finding the Human Dimension.”
Perspectives: Since 1985, we have conducted an ongoing in-depth study of companies and industries who face particularly competitive marketplaces. This section of the website enables you to apply the results of this extensive research to your business situation.
List of Customer Segments Perspectives
List of Competition Perspectives
Symptoms and Implications: This section allows you to check current developments in your industry in order to understand their implications for the future of your marketplace.
List of Customer Segments Symptoms and Implications
List of Competition Symptoms and Implications

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