Okay, let's talk a little bit more about some of these terms we've been bandying about. Customer, market, value proposition, let's see how they all fit together. I guess the first question is what is a customer? And it would seem like it's obvious, a customer is someone who will buy your product. That is not the right definition. Wrong answer. A customer is not someone who will buy your product. A customer is someone whose needs you satisfy. The point here is that the customer doesn't exist for you. You exist for the customer. If you're lucky, you'll be able to offer something that that customer is going to want, but there's no guarantees. You have to win that customer over, and you have to win customers over one customer at a time. The interesting thing, the thing that helps us in our work of generating a business model is that customers generally come in segments. What's a customer segment? Well, a customer segment we can define as a group of customers with a common need or problem that you can satisfy, okay? So customer segments are people who need to get somewhere in a hurry. And you satisfy them with a product that delivers rapid transportation. That's a customer segment. What they have in common is their common need or problem. A market is a system of relationships where customer segments come to satisfy their needs and problems. Markets don't always exist. There might be a group of customers, there might be a customer segment that has a problem, but there might not yet be a market for satisfying that problem or need. Or there might not be a market for satisfying their problem or need in the way that you want to satisfy it. So in a market, what customers can do. It's a system where they can find out about the products and services that may meet their needs. It's a problem where they can decide which product or service they want to buy. Where they can actually buy the product or service, and take delivery of it. Markets are generally come after needs, after customer segments and after value prepositions. So, a customer segment is not the same thing as a market. For one thing, a market can possibly contain more than one customer segment. If you look at online search, which is an example we're going to talk about in greater detail in subsequent lectures, online search has two customer segments that it satisfies. It satisfies the people that are doing the search, and it satisfies the advertisers who pay for the search by advertising to the users. They're two different customer segments. They have different needs, they have different ways of buying, they have different ways of approaching the market. They're in a common marketplace. That marketplace is called the online search marketplace if you will. Another example might be business and personal purchasers of automobiles. They're both buying automobiles, they both go to the automobile store or lot, they're both in the same market. But they're completely different in terms of their needs, in terms of their desires, in terms of how they buy, in terms of how they pay. They're different customer segments. And then you can have another case where the customer segment actually spans more than one market. Imagine music lovers. Music lovers participate in the rock concert market, where promoters try to sell them tickets to go to rock performances by their beloved stars. They also participate in online music markets where they buy individual songs and albums and titles or stream them by a subscription service from artists that they like. Same customer segment, music lovers, different markets. So you can have more than one customer segment in one market. You can have a customer segment that spans more than one market. They're not exactly the same concept. We're after customer segments here. That's what we care about. We want to define a customer segment or two customer segments that are the sort of the key customer segments for the business idea that you have. And what we're going to do with those customers is offer them a value proposition. A value proposition is not just a fancy name for a product or service. First of all, it's not a given that every product or service adds value to a customer segment. That's something that you have to establish. You might think your product is the best thing since sliced bread, it might be sliced bread, but it won't be a value proposition until there's some customer segment that thinks that meets a need or problem that they have. This is a fundamental difficulty with entrepreneurs pitching products before they're ready. It's a customer need that your business satisfies or a customer problem that your business solves. That's the right way to think about value propositions. If you think about a value proposition as my product and what it does, you're going to get on the wrong side of customers. If you think about what can my product do to offer a value proposition to customers, then you're going to be on the right side. If you're lucky, the same product or service may be able to satisfy multiple customer segments, and we certainly hope so. Most entrepreneurs start out thinking that their product or service satisfies everybody, or at least a lot of people, and they're very reluctant to kind of pin it down to individual customer segments. But the reason to do that is because it's not going to be the same. Something that works with one customer segment is not going to work with another customer segment. In fact, each customer segment has to be understood on its own. And each customer segment ends up having its own business model. So the main points here are costumers are people who don't exist for you, you exist for them. You're offering them a value proposition which will solve a need or problem that they have. Not that you have, that they have. A customer segment that shares a common problem that you're solving with a value proposition is a customer segment. And a value proposition is a customer need in that segment, thanks.
