Step 1: Defining Your Customer Type

Each customer is either an Intermediary or a Final customer.

Intermediary customers are those who purchase the product for resale or who play the major role in recommending the final product purchase. Intermediaries are commonly termed "channel" customers. Intermediary customers include wholesalers, retailers, and, occasionally, brokers. These customers see that the product is sold and delivered to a Final customer.

The Final customer is the buyer who makes the final decision on what product to buy and from which supplier to buy it. A Final customer is either an end-user or an installer. Consumers make up the bulk of the end-users, though organizations such as companies, government entities, and other organizations, can also be end-users. The installer type of Final customer includes both contractors, who serve the ultimate end-user, as well as original equipment manufacturers, who buy products to install in their own final product.

From this description it follows that there are three potential customer/supplier interactions:

• Intermediary customers buying from the producer of the product

• Final customers buying from the producer of the product

• Final customers buying from the Intermediary of the product

We have organized our brainstorming ideas around characteristics of customer responses to the costs of each of these three customer/supplier interactions.

You may wish to use more than one customer/supplier interaction to brainstorm segmentation ideas. Final Customers purchase either from an Intermediary or from the producer of the product. Intermediary customers have needs that differ from those of the Final customer to whom they sell. Consequently, a product producer, selling through Intermediaries, would be likely to use both customer/supplier interaction sections of the Customer segmentation brainstorming outlines in order to develop comprehensive new segments.

To begin your brainstorming for new need-based segments, you would concentrate your attention on the customer who is most critical to your success. If both types of customer (i.e. both Final and Intermediary customer) appear equally important, then brainstorm segments for both separately, using the customer cost steps we outline in Describing Customer Costs.

For guidance on the important earlier step of segmenting customers by size, please see the Diagnose/Segments/Value of a Customer Relationship section of StrategyStreet.

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