The Lean Startup: Customer Segments & Value

The problem-solution fit is obtained between the two most critical building blocks of the BMC: Customer Segments and Value Proposition. Customer segments are the people with the problem you are looking to solve, while your value proposition is the solution to their problem.  

According to Brant Cooper and Patrick Vlaskovits, authors of The Lean Entrepreneur, Customer Segments are made up of “A defined group of people who share the same problem or passion and speak the same language.” Often, a common mistake is to define your customer segment too broadly. For instance, let’s say you want to serve people who take a lot of photos and videos. Within this segment, there are photographers, teenagers, graphic designers, parents, etc. Therefore, it’s better to narrow this group down to common circumstances, such as parents with child ages 5 and under who live in metropolitan areas.

Your ability to understand the customer’s problem is directly related to the number of resources wasted. When defining a customer problem, many startups will begin with a solution idea first and then look for a problem that fits it. This approach is dangerous because it can blind you from understanding your customer’s actual problem. If your target customers really have the problems you propose, chances are they are already dealing with it somehow. Therefore, identifying the existing solution to the proposed customer problem will help you determine whether there’s a need to begin with.  

So how do know you’re dealing with a real customer problem? Simple. If a pain point is significant enough that the customer is aware of its existence and is willing to pay to solve it, then you have yourself a problem. You might have an amazing Idea, but if it doesn’t address a problem that consumers are willing to spend money to solve, then you don’t have a viable business. Which brings us to Value Proposition.

Customers buy not based on price, but rather perceived value. This perceived value may be in the form of fast service, quality, design, or customer service. However, if customers see little difference between you and your competitors, then chances are they will be buying based on price. Therefore, it is critical to find your product’s value proposition by defining your features and benefits.

As you develop your product’s Unique Value Proposition, it is important to recognize the difference between features and benefits. Features are what you will be including into your product, such as an airbag in a car; while benefits are what your customer will get from the feature, such as safety in an accident. Customers are more interested in benefits rather than features. Therefore, describing the benefits rather than the features is critical to your future marketing efforts.  

Before proceeding with your actual product, first validate your customers’ problems, as well as your proposed solution. This ability to validate the problem-solution fit will save you both time and money. As you document your Value Proposition, always keep in mind of the benefits behind each feature. Afterall, it’s only when these features and benefits provide your segment with the value that they’re willing to pay for, that you’re on the right track.    

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Foster, P., & Giacomassi, R. (2015). Test Your Business Idea (1st ed.). Galeton, PA: The Business Therapist.

Ries, E. (2011). The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. New York: Crown Business.