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The Customer Segments block sits at the heart of the Business Model Canvas because every other block—your value proposition, channels, revenue streams—depends on knowing who you're serving. You're being tested on your ability to recognize that different segment types require fundamentally different business strategies, not just different marketing messages. A mass market approach demands scale and efficiency; a multi-sided platform requires balancing competing interests. Understanding these distinctions helps you analyze why certain business models succeed or fail.
Don't just memorize the five segment types—know what strategic logic each one represents. When you see a case study or FRQ, ask yourself: What kind of customer relationship is this business building, and why does that shape everything else in their model? That analytical lens is what separates surface-level answers from sophisticated ones.
These segment types prioritize reaching large numbers of customers efficiently. The underlying principle is volume over specialization—success depends on broad appeal and operational efficiency rather than deep customization.
Compare: Mass Market vs. Segmented Market—both pursue scale, but mass market treats all customers identically while segmented market acknowledges meaningful differences within a broad audience. If asked to recommend a strategy for a company expanding its product line, segmented market logic applies.
These approaches sacrifice breadth for depth. The strategic logic is precision over reach—serving specific needs exceptionally well commands premium positioning and customer loyalty.
Compare: Niche Market vs. Segmented Market—both recognize customer differences, but niche focuses exclusively on one specialized group while segmented serves multiple groups within a broader category. Niche says "we only serve you"; segmented says "we serve everyone, but differently."
This approach spreads risk by serving fundamentally different customer groups, often with unrelated offerings. The strategic logic is diversification—reducing dependence on any single market.
Compare: Diversified Market vs. Segmented Market—segmented serves variations of similar customers (different car buyers), while diversified serves completely different markets (electronics and insurance). The key test: could the same sales team serve both segments?
Multi-sided platforms create value by connecting interdependent groups. The strategic logic is network effects—each side becomes more valuable as the other side grows.
Compare: Multi-sided Platform vs. Diversified Market—both serve multiple customer types, but platform segments are interdependent (riders need drivers, drivers need riders) while diversified segments are independent (electronics buyers don't care about insurance customers). This distinction is critical for analyzing platform business models.
| Concept | Best Examples |
|---|---|
| Volume over customization | Mass Market |
| Related segments, differentiated offerings | Segmented Market |
| Deep specialization, premium positioning | Niche Market |
| Unrelated segments, risk spreading | Diversified Market |
| Interdependent groups, network effects | Multi-sided Platform |
| High margins through focus | Niche Market |
| Subsidized pricing on one side | Multi-sided Platform |
| Operational complexity tradeoff | Diversified Market, Multi-sided Platform |
A streaming service offers ad-supported free access for viewers while charging advertisers for placement. Which segment type does this represent, and what makes the two customer groups interdependent?
Compare and contrast how a segmented market and a diversified market approach customer differences. What's the key distinction in how the segments relate to each other?
A company currently sells mass-market cleaning products and is considering launching a premium organic line for eco-conscious consumers. Which segment type would this shift represent, and what operational changes would it require?
Why do niche markets typically command higher margins than mass markets? What tradeoff does this involve?
If an FRQ presents a struggling two-sided platform (like a job board with few employers and few job seekers), what's the core strategic problem, and which side should the company prioritize attracting first?