# Startups
Lean Canvas business model for startups: definition, example and customer segments
Red Rocket TeamOct 28, 20244 min read
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Lean Canvas business model – what is it? What are the customer segments in the Lean Canvas business plan? Example of Lean Canvas business modelEven the biggest success always starts with a small idea and something simple. Just remember such companies as Apple, Microsoft, Amazon, and other modern global business giants. All of them started their way long ago with a couple of square meters in a garage, a few hundred dollars, and brilliant ideas. Perhaps your idea can become just as interesting, attract the attention of the world community, and, as a result, bring you success by getting on the Forbes list.
However, when you are just starting to develop your idea or product, you should first think about ways to realize your own startup. This is why you definitely need to create a Lean Canvas business plan. Almost every aspiring entrepreneur is familiar with this model. This article will tell you more about what Lean Canvas is, how it works, and we have also prepared concrete examples for you.
Lean Canvas business model – what is it?
If you are in the process of developing a startup, most likely, you are only going to have one of two outcomes - a major success or a quick failure. The fact is that starting a business always comes with challenges, problems, and initial success. To survive this period and grow into a «sustainable» organization, you must be clear on your business plan and fully implement it. Lean Canvas is a smart solution to better understand your startup idea and its different characteristics to put this knowledge into action.
In fact, this is a unique model developed by Nigerian entrepreneur Ash Maurya years ago. To be honest, he used the legendary Business Canvas model as a basis, and he managed to adapt it perfectly for startup entrepreneurs. The startup Lean Canvas table reveals nine main blocks, and here are their titles:
- (01)Customer segments.
- (02)Value propositions.
- (03)Channels.
- (04)Problem.
- (05)Solution.
- (06)Key metrics.
- (07)Revenue streams.
- (08)Unfair advantage.
- (09)Cost structure.
All these nine blocks are specially created so that the startup owner can gather as much valuable information about his startup as possible. It will help to understand all the most important questions that concern a new startup: what is offered to customers; what customer communication channels are used; whether there are partners; approximate cost, and much more.
When talking about business startups, it will be relevant to briefly discuss the topic of funding. Since not everyone has the necessary amount of money to realize their project, especially if it is an expensive niche. However, don't be disappointed because you can learn about the top 10 sources for startup funding that will help you start your own business even faster.
What are the customer segments in the Lean Canvas business plan?
As you may have realized by now, a completed Lean Canvas chart can help new entrepreneurs understand their own product from all angles and share it with other interested parties. Although it consists of nine separate blocks, the point about customer segments deserves special attention. Let us elaborate on what customer segments are and how you should fill this item in the table.
Do you know why any Lean Canvas table starts with customers? It's simple - you must clearly understand to whom you are going to sell your products or services. This is one of the most important points for the smooth functioning of any commercial company in 2024. To fill this block, you need to answer two questions about your company's potential customers.
Question 1: Who are your potential customers?
What needs to be done?
Determine who will buy the product and who will use it. For example, if you are making an app or service for companies, the manager is usually responsible for choosing and paying for it, and the employees are responsible for using the product.
Question 2: Who are the first users of your business?
What needs to be done?
Assemble a group of several members of your target audience. They will participate in the development and launch of the product: help test hypotheses, be the first to test what works, and give feedback.
Do you want to see a real example of Lean Canvas regarding customer segment block? All of you are well aware of a famous cosmetic brand that is very popular all over the world today. We are talking about Clinique, which has a strong image associated with freshness, cleanliness, sterility, and a therapeutic and preventive attitude toward skin care. The typical consumer is considered to be a young woman with oily skin. Obviously, for the best results, it is worthwhile to work on this point thoroughly, conduct research, and narrow down the circle of potential consumers. This will help you better understand which customers you should target in the future.
Example of Lean Canvas business model
It's no secret that the best way to get a good understanding of a topic is to look at a real example. Lean Canvas model is no exception, and for better understanding, you should see what all nine blocks look like in a real example. We want to tell you about each of the blocks of such a table and provide a concrete sample Lean Canvas model below.
1. Customer segments
As mentioned above, the customer segment block identifies unique classes of customers that your business targets to attract and attend to. In the process of identifying target customer segments, it may be useful to divide customers according to their needs, behavior patterns, or any other characteristic relevant to defining how they should be served.
Don't underestimate this unit. You can ask us why this is so. A clear understanding of your target audience will help you develop the right strategies to promote and market your products or services.
2. Value propositions
Value proposition block is about how your product or service is beneficial to each of the customer segments. Spell out the value of the product to the customer. To do this correctly, answer the question, «what makes your product better than the rest of the market»?
The answer to this question will help you formulate your unique selling proposition (USP). Think about what your product is better and why customers will want to pay for it. Test your hypotheses on a group of users.
3. Channels
The next unit of the Lean Canvas business plan we should tell you about is channels. Define how to sell and advertise your product. Describe all channels and sales methodology. How and where is the best place to talk about the product? The answer depends not only on the product but also on its audience. Blog ads, banners, TV announcements - it doesn't matter. The most important thing is to tell about the product in the way that is best perceived by the target audience.
The channels you choose will also help you better determine which marketing approaches are worth using and how much they cost. You will find it useful to learn how to determine optimal marketing costs for startups.
4. Problem
Look at all the customer segments from the first block and formulate what needs the product to close. For example, you have invented a new social network for networking. Its main purpose is to introduce professionals from different fields to each other for common projects. Such a product closes the client's need to socialize and find professional connections.
Identify all existing competitors of the product. Any problem is already being solved by someone, but who - it is not always obvious. If your product is a taxi service, and you cover the customer's need for comfortable transportation, your competitors are similar services.
5. Solution
All lean canvas examples include a solution section. You have already defined the problem and the user's needs, and in this block, describe how you will solve it. How will the product solve the user's problem?
To answer this question correctly, don't just base it on your vision. Include research, interview the group of users you have gathered to test the product.
6. Key metrics
It doesn't matter what kind of product you create. Everything needs criteria by which you will evaluate the result. How do you know if your product is successful? Identify key metrics using the AAARRR marketing funnel. It takes into account the main stages a customer goes through when interacting with a product. Examples are new trial rate, conversion rate, repeat rate, referral rate, and churn rate, and other metrics.
7. Revenue streams
In this question, you need to consider the profitability of your startup. You need to answer the question, «how will the product make money»? If you are going to distribute the product for free, think about how you will make money from it in the future. A paid product, on the other hand, must have enough value to make the customer want to pay for it.
8. Unfair advantage
This block in the Lean Canvas business plan will help you to keep yourself from your competitors and make your product stand out even more. What is the specialty of your product? Think about what your product has that others don't. It should be a strong advantage that is hard to copy. For example, how can you promote the product better than others, or is your secret a team of talented programmers or a special feature?
9. Cost structure
The cost structure block synthesizes the most important factors that determine the formation of startup costs. These may include costs incurred in the development of the product, costs that facilitate production, costs that go into product sales and markets, costs incurred in the procurement and protection of intellectual property, and costs relating to employees and personnel. This way, businesses are able to manage their key cost drivers in a fashion that provides them with the highest potential to drive down costs.
Final thoughts
As you may have already realized, it is very important for any startup to identify its strengths, customers, problems, and solutions to those problems. We have provided you with a lean canvas model example, which consists of 9 important blocks. Moreover, now you know very well how to fill such a table by yourself.
You can use this model for yourself and your employees to better understand the company's philosophy and requirements. Another option to use it is to show it to potential investors. They will be able to see what you offer to customers, how you plan to promote your products, and how much money you need to invest in the project.
Frequently asked questions
1. What is existing alternatives in Lean Canvas?
It is good when a startup owner discovers in time what problems are to be faced. The most important thing is to accept these problems and be able to develop a list of existing alternatives for them. This is a small section in Lean Canvas where you need to talk about the best alternatives.
2. How is a Lean Canvas different from a Business Model Canvas?
Despite the similar names of these digital products, they are designed for different purposes. As you already know, Lean Canvas model was invented for entrepreneurs who are just developing their own startup. Talking about Business Model Canvas, we can say that it is a model that helps existing companies to optimize their business processes and increase efficiency.
3. Which channels are used most often in Lean Canvas?
Every business is unique and can reach its customers and capture their attention in a variety of ways using a range of channels. Of course, the specific channels depend on the niche, the specifics of the company and much more. However, statistics show that today, companies most often reach their target audience through social media.
