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A segment is a shared, observable situation and the need it creates; test it for reach and a distinct response, and size it from the business's own inquiries.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will describe a customer segment by the situation its members share and the need that situation creates, test it for whether you can see it, reach it and change the offer for it, and size it from the business's own records.
You can read a business's cash, costs and contribution. Every one of those numbers depends on somebody deciding to buy. This course is about those somebodies: who they are, what they need, how they find the business and whether they come back. It starts with the word owners use most loosely, customer, and turns it into something a decision can rest on.
| Term | What it means |
|---|---|
| Customer segment | A group who share a situation and the need it creates, so one offer, message and place reach them all. |
| Situation | Something happening to someone that can be observed: moving out, opening a café. |
| Need | What the situation makes them want done, and by when. |
| Observable | Visible from what people do, not from guesses about what they think. |
| Reachable | Found through a place, a time or a person the business can get to. |
| Distinct | Answering the offer differently from everybody else. |
Ask a new owner who their customers are and you usually hear one of three answers. Everyone — true of every business and useless to every decision. An age band — 'women aged 30 to 50' — which describes people without saying what they need or when. Or the product — 'people who want our deep clean' — which is the question dressed up as its answer.
A segment that works starts from a situation. Bright Home Cleaning does not sell to 'households'. It sells, among others, to tenants who are leaving a rented apartment within two weeks and face a deposit inspection. That tells the owner a great deal: the need is urgent and has a deadline; the standard is set by somebody else, the landlord; the people can be found through property managers; and the message writes itself — the inspection, the date, the deposit back.
Hold every definition to three tests:
Another way: table
The same business, four answers to 'who is the customer?'.
| Description | Observable | Reachable | Changes the offer |
|---|---|---|---|
| Anyone who lives in a house or an apartment | yes | no | no |
| Women aged 30 to 50 | yes | partly | no |
| People who want the deep clean | no | no | no |
| Tenants moving out who face an inspection | yes | yes, through agents | yes |
Another way: steps
Name the situation. Write what is happening to the people, in words a stranger could check: moving out within two weeks, opening a café this spring, a bike broken before a Monday commute.
Name the need. What does the situation make them want done, and by when? A deadline is gold: it tells you when to reach them and what to promise.
Run the three tests. Observable, reachable, distinct. A definition that fails any one of them is not yet usable, however true it is.
Count it. Go to the business's own records and count the inquiries, bookings or orders that came from the situation, then divide by the total.
Check the answer. A good segment changes something you would do: where you look for people, what you say, what you offer, when. If you cannot name one thing it changes, go back to the situation. And the shares of all the segments you counted must add to a hundred, because every inquiry sits in exactly one row.
Observable, because a segment you cannot see you cannot count, and a segment you cannot count you cannot plan for. 'People who care about sustainability' may be a real group, but nothing in a quote request tells you who is in it.
Reachable, because the point of a segment is to get to its members more cheaply than to everyone. Tenants moving out are reachable through the agents who manage their leases; 'busy people' are reachable through nothing in particular.
Distinct, because the segment exists to change the offer. If move-out tenants wanted exactly what every other household wants, at the same time and for the same reason, there would be no point treating them separately.
Once a segment is defined, count it before building anything for it. The count comes from what the business already holds: inquiries, bookings, notes on the order pad. If 14 of Bright Home Cleaning's 40 quote requests last quarter came from move-out tenants, that segment is 35 percent of the demand the business can see — a real figure, about real people, in this town.
A count from records is small and local, and that is its strength: it is evidence, not a statistic about a market nobody has measured. It can also be carried forward, carefully. If the owner expects 60 requests next quarter and the mix holds, about 21 will come from move-out tenants, and if half of requests usually become jobs, about 10 or 11 of them will be booked. Each step is a multiplication, and each rests on an assumption the owner should be able to say out loud.
A business usually has several segments at once, and the count is how it decides which to serve deliberately first. It is not permission to ignore the others; the next lesson is about when saying no is the right call.
One person can sit in several segments: a tenant moving out may also be a parent with a new baby. The segment is defined by the situation that brings them to this offer at this moment, not by everything true of them. When an inquiry could be counted in two rows, decide by the situation that prompted it, write the rule down, and use the same rule every time, so the counts mean the same thing from one quarter to the next.
Counting a segment is only as good as the records behind it, and most small businesses do not write down why someone got in touch. A one-line habit fixes that. Next to every inquiry, booking or order, note the situation that prompted it, in the customer's own words where possible: 'moving out on the 30th', 'new café, opening in May', 'bike broke on the way home'.
After a month the notes can be sorted into a handful of situations, and after a quarter the counts are large enough to compare. A spreadsheet column, a notebook or a tag in the booking system all work, as long as the same situations are named the same way each time.
Two cautions keep the counts honest. Record the situation before the sale, not after, so the note is what the customer said rather than what the owner hoped. And keep the inquiries that did not become sales: a segment that asks often and rarely buys is telling you something about the offer, the price or the timing, and that is just as useful as a segment that buys every time. Ten seconds of note-taking per inquiry is what turns a hunch about customers into a count that a decision can rest on.
A good segment almost writes the advertisement. For move-out tenants: 'Moving out? Get your deposit back: inspection-ready cleaning, booked within 48 hours.' Every word comes from the situation and the need. Compare 'quality cleaning for every home', which could be any company's and speaks to no one in particular. If the message you write for a segment could be pasted onto a competitor's flyer unchanged, the segment is not doing its job yet.
A pool-cleaning company outside Austin, Texas, had always described its customers as 'homeowners with pools'. That was true and useless: every company in the county said the same, and its flyers went into every mailbox on every street with a pool.
The owner went back through a year of first calls and sorted them by what had prompted the call. Of 120 first calls, 42 came from people who had just bought a house with a pool and did not know how to look after it, 30 from regular customers of a competitor that had closed, and 48 from a mix of reasons. The new-buyer group was 35 percent of first calls, and it converted best: 30 of the 42 became regular customers, against about half of the rest.
The segment passed all three tests. New buyers were observable from county property records, reachable through the real-estate agents who sold the houses, and distinct: they needed teaching as much as cleaning. The company built a 'first summer with your pool' package with two lessons on chemicals and filters, and offered it through three agencies. In the next year first calls from new buyers rose from 42 to 61, and the flyer budget for the whole county was cut by half.
Researchers on how people choose products, among them Clayton Christensen at Harvard Business School, have long argued that people buy to make progress in a particular situation, and that grouping customers by age or income misses why they buy. The idea behind this lesson is the same: a situation and the need it creates explain a purchase far better than a description of the person, and they point straight at where and when to reach them.
A bigger segment is a better one. 'Everyone who drinks coffee' is huge and changes nothing about what Maya makes or where she sells it.
Demographics are a segment. An age and an income band may correlate with a need; on their own they say nothing about when or why someone buys.
The product defines the customer. 'People who want the new glaze' tells you only that you hope someone does.
A segment is a guess about motives. It is built from what people do and the situation they are in, both of which can be checked.
Test Maya's first description: 'people who love handmade pottery'.
$\text{observable: no; reachable: no; distinct need: no}$
She cannot see who loves pottery or reach them as a group.
Read her order records for a pattern.
$4 \text{ café orders, each within weeks of opening}$
An observation from her own orders, not a guess.
Name the situation behind the pattern.
$\text{a café about to open}$
Something that can be seen in planning notices and shop fits.
Name the need it creates.
$\text{cups and plates before opening day}$
The need has a deadline, so the offer can too.
Run the three tests on the new description.
$\text{observable, reachable, distinct}$
Reachable through the local business network.
Count last quarter's requests from move-out tenants.
$14 \text{ of } 40$
From the business's own quote log.
Find the segment's share.
$14 \div 40 \times 100 = 35$
Thirty-five percent of the demand it can see.
Carry the share to next quarter's expected requests.
$60 \times 0.35 = 21$
If the mix holds.
Take the half that usually become jobs.
$21 \div 2 = 10.5$
About ten or eleven jobs.
Check the shares of all the rows.
$35 + 40 + 25 = 100$
Every request sits in exactly one row.
Say what the plan rests on.
$\text{the mix and the booking rate}$
Both are assumptions the owner can name and check.
Sort 50 catering inquiries by the situation behind them.
$18, \ 12, \ 20$
Friday team lunches, leaving parties, everything else.
Find the share of Friday team lunches.
$18 \div 50 \times 100 = 36$
The largest named situation.
Find the share of leaving parties.
$12 \div 50 \times 100 = 24$
Smaller, but with a clear need.
Find the share of everything else.
$20 \div 50 \times 100 = 40$
Too mixed to act on as one group.
Check the shares add up.
$36 + 24 + 40 = 100$
Every inquiry counted once.
Test the largest named segment.
$\text{observable, reachable, distinct}$
Seen on the order pad, reached through office managers.
Decide what it changes.
$\text{a Thursday order deadline and a team menu}$
A segment that changes the offer is ready to serve.
The owner writes 'office workers'. Which test does it fail?
$\text{distinct}$
Every office worker eats lunch; the description changes nothing.
Read the order pad for a situation.
$\text{shared lunches for Friday team meetings}$
An observation from the business's own orders.
Write the segment and test it.
The owner of Northside Repairs has written four descriptions of who to aim the next month's effort at. Which one is a segment the business can act on?
Complete the worked solution: of the $40$ quote requests Bright Home Cleaning had last quarter, $36$ came from tenants moving out. The owner expects $60$ requests next quarter, and half of requests usually become jobs. Find the segment's share, the requests from it next quarter, and the jobs they would make.
Find the segment's share of the requests.
$(\text{segment requests}) \div 40 \times \text{a hundred} =$ p
A share of the demand the business can see.
Apply that share to next quarter's requests.
$(\text{share}) \times (\text{expected requests}) \div \text{a hundred} =$ n
If the mix holds, the segment keeps its share.
Take the half that usually become jobs.
$(\text{segment requests}) \div \text{two} =$ j
Requests are not yet jobs.
Say what the count rests on.
$\text{last quarter's records}$
A forecast from the business's own mix, not a promise about the town.
Monica is deciding who her market stall should serve better. Sort each description she wrote.
| A usable segment | Too wide to change anything | Starts from the product | |
|---|---|---|---|
| Shoppers who arrive before nine to buy vegetables for the week | |||
| Anyone who walks through the market | |||
| People who want our organic range | |||
| Parents buying fruit for school lunchboxes on a Saturday | |||
| Every family in town |
Dev at Northside Repairs kept notes to decide whether 'commuters who need a bike back before Monday' is a real segment. Mark every note that is an observation rather than a guess or a hope.
This task has no paper form; do it on a device.
Of the $40$ quote requests Bright Home Cleaning had last quarter, $34$ came from tenants moving out who needed to pass a deposit inspection. What percentage of the requests came from that segment?
Answer:
A lawn-care business in Ohio found that $30$ percent of its spring inquiries came from homeowners listing a house for sale who wanted the yard ready for photographs. It expects $150$ inquiries this spring, and one in five of those homeowners usually books. About how many jobs should it plan for from that segment?
Answer:
A dog-walking business has $10$ walkers and wants to fill its quiet midday slots. Which description of who to aim at would let the owner decide where to advertise and what to say?
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Neighborhood Kitchen sorted last month's $50$ catering inquiries by the situation behind them. Fill in each situation's share of the inquiries, as a percentage.
| Inquiries | Share, percent | |
|---|---|---|
| Friday team lunches | 8 | |
| Leaving parties | 9 | |
| Everything else | 33 |
You can turn 'everyone' or an age band into a segment defined by a situation and a need, and put a size on it from the records. Tell someone why 'people who want our product' is not a segment. Next: deciding who the business will not serve.
17. Your turn: Neighborhood Kitchen's catering, step 3
$\text{office teams of 8 to 20 ordering a shared Friday lunch}$
Observable, reachable through office managers, and it changes the menu.