Transcript
With the Support of:
www.de-pe.com @depeteam
Antofagasta, Chile, June 2011
What’s the Idea and
How Large is the
Opportunity
Class 7
1
INDEX • Customer Development Process Review
– When to move out of Customer Discovery & Customer Validation
• Your business strategy – Identify your market
• How to size the market – Market Analysis Questions
– Top down vs. Bottom Up • Examples
PEOPLE Los emprendedores invitados
ayni Quechua {sust} : ayuda mutua
La Historia
Carolina Andrade
¿Quiénes somos?
ayni
La plataforma virtual (web) socialmente responsable que ofrece una selección única de accesorios exóticos
Somos un baúl de tesoros artesanales del mundo
Impacto Social
• Responsabilidad social - comercio justo
• Asociaciones con ONGs para promover programas de educación sanitaria
• Impacto tangible en comunidades de artesanos
11
Socios Claves • ONGs • Directorio • StartUp Chile
Actividades Claves • Diseño de una página web diferenciada • Cuidadosa selección de producto • Optimización de cadena de producción, alto involucramiento en proceso
Propuesta de Valor • Conectar al artesano con el consumidor final de una manera tangible • Ofrecer productos únicos y de moda y una experiencia de compra
Relación con Clientes • Página web • Redes sociales • Eventos deportivos
Segmento de Clientes • Consumidor socialmente responsable y afluente entre los 25 y 40 años en el mercado norteamericano
Estructura de Costos • Promoción • Página web • Inventario, flete y aduanas • Personal (marketing y operaciones)
Revenue Stream • Ventas en línea • Ventas a través de tiendas físicas
Recursos Claves • Capital • Diseñadores y programadores • Know-how de marketing y procesos
Canales • Página web • Boutiques o tiendas selectas • Flagship store
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Source: Business Model Canvas, © 2009 Alexander Osterwalder & Yves Pigneur
TIP
• Ejecución es mejor que parálisis: tomar decisiones con información incompleta y probar las ideas lo más pronto posible
Customer
Development
Process Review
The Goal
To determine if there are customers and a market for the vision that is developed by the founders and the product development team.
– Not to gather feature lists from perspective customers, nor is it to run lots of focus groups.
Find out who the customers for your product are & whether the problem you believe you are
solving is important to them
The Goal
Customer validation proves that you have found a set of repeatable customers and a market who
react positively to your product
The Goal
Create end user demand and scale that demand into the company’s sales channel.
Key Marketing Spending & Where you take investment.
The Goal
Transitioning the organization from one that is designed for learning and discovery to a well-
oiled machine engineered for execution.
The Goal
Where we
are at
Discovery & Validation
Tells you the following • Verifies your market • Locates your customers • Tests the perceived value of your product • Identifies the economic buyer
– who’s budget pays for your product - different from user in some cases)
• Establishes your pricing and channel strategy • Checks out yours sales cycle and process
Discovery & Validation
• Have we identified a problem a customer wants solved? • Does our product solve these customer needs? • If so, do we have a viable and profitable business model? • Have we learned enough to go out and sell?
?
Get out of the Building!!
Don’t be these guys
• Fastoffice, 1994
– Raised 8 million USD
– 18 months development
– Product: a device that would offer fax, voicemail, intelligent call forwarding, email, video and phone calls
Great Product, Raw Market
Product Price: $1395
Your Strategy
Existing Market
Resegmented Market
New Market
Customers Existing Existing New/New Usage
Customer Needs Performance 1. Cost, 2. Perceived
need Simplicity and convenience
Performance Better/faster
1. Good enough at the low end
2. Good enough for new niche
Low in “traditional attributes,”
improved by new customer metrics
Competition Existing,
Incumbents Existing Incumbents
Non-consumption / other startups
Risks Existing
Incumbents
1. Existing Incumbents,
2. Niche Strategy Fails Market Adoption
Market
sizing/estimations Estimating the number of buyers of a particular product, or users of a service
Market Sizing Analysis
Questions
1.What does the venture do “best”, and more importantly, “better” than others? –
2.Who will pay for the venture’s offerings, and are there enough such players ready to pay?
3.How much are potential customers currently paying for similar offerings/ needs?
Market Sizing Analysis
Questions
4. How much value is the venture delivering to customers, and how much will they be potentially ready to pay for its offerings?
5. Assign a number to the value you are delivering to customers. Is it critical. Is your offering saving them $100 or $20?
6. Do the economics work out in the target customer base?
Market Sizing Analysis
Questions
7. How much value or “wallet share” is the venture capturing out of the client’s budget?
8. Who is the venture’s REAL competition? • For Coke and Pepsi, more than each other,
their competition is with the homemade lassi, nimbu pani, juices and even drinking water.
Market Sizing
• Market Sales Potential (MSP) – Prospective Buyers (B) * Quantity Sold (Q) * Price (P)
• The main purpose of market sizing is used – To inform business viability,
• specifically go/no-go decisions,
– Key marketing decisions • pricing of the service or marketing tactics to increase usage.
– Preliminary estimate of the level of operational and technological capabilities required to service the expected market.
The Cost-Revenue Model
Revenue Cost
Price Quantity Fixed Variable X ) ( + ) • Price
discrimination
• Changes in
pricing
structure
• Viability of
pricing over
time
• Discounts or
couponing
• Competitor’s
pricing
• Customer
segmentation
— New/existing
— Loyal/
switchers
• Channel
restrictions or
temporary
disturbances
• Changing
consumer
demands
• Capital
equipment
• Land
• Buildings
• Labor
• Materials
• Energy
—
Profit
(
Market Sizing Methods
• Top-down Approach
– involves defining a “universe” target market and applying various filters that continually reduces the figure to an estimation of the total addressable market
There are a billion people in China; 70% of them do not have 20/20 vision; eyeglasses sell for $20 a pair;
our addressable market is therefore $14 billion.
Market Sizing Methods
• Bottom Up Approach
– Sizes a market using projections of individual clusters.
– First, identify the customer segments it intends to reach, and then make estimates of their size and growth.
Our retail location at Dongsnhuan in Beijing gets 2500 passersby each weekday. Average conversion rates for retail opticians are
0.8%, so we project selling 20 pairs of glasses a day. We can open 20 locations in a year, so by year's end our annual revenue run
rate will be $1.7 million.
Top Down
Approach
Top-down approach
Starts with an estimate of the overall
market and then evaluates the (limited) successive proportions
that it intends to reach.
Universe
Filter A
Filter N
Estimation of Total Addressable Market
Government plans to distribute social
payments to rural farmers through mobile
phones
• Universe = any adult in a rural area
– 20 million adults.
• Out of these, 20% are farmers.
• Payment only works for people with mobile phones, this equates to 70%
• 40% of these, qualify based on crop revenues.
20,000,000 adults * 20% farmers * 70% (mobile ) * 40% (qualify)
Market Potential 1,120,000
How many pairs of boxers are
sold in the UK each year?
36
0-10yrs old 7.5 potential buyers
No boxers users
10-20yrs old 3.25 mn potential buyers
75% wear boxers 3 million users
3 pairs/year
20-40yrs old 6.5 mn potential buyers
50% wear boxers 3.2 million users
4 pairs/year
40-80yrs old 13 mn potential buyers
50% wear boxers 6.5 million users
3 pairs/year
boxers million user
yrpairsusers mn
user
yrpairsusers mn men to soldboxers 41
/42.3
/35.9#
Bottom up
approach
Bottom Up Approach
The problem with a top down approach
• Includes different customer segments
• Ignores variables such as operational constraints
The bottom up forecast is more robust and both should be included when evaluating the size of your market.
Methodology
1. Our product/service will save (audience) a lot of money. – We estimate $X per year based on current spending for this
product/service.
2. An average customer will spend $X per year with us because they spend three times that now.
3. Using (example) sales as a proxy (such as copier sales) we think that our average sales rep can make 10 cold calls per day and develop 3 solid leads per week. – Of those, the rep can close 2 per month.
4. At a 2 per month closing rate per rep, that's $Z on an annual basis. – Here's a table of the cash flow based on this: (TABLE)
Methodology
5. Using our experience in (market) as an analog, we estimate that customers will stay with our product for 3.5 years.
6. If we time these cash flows correctly, we can hire 5 new reps per month. – Assuming 90 days to train them and a maximum of 15
reps, here's a table of what we will look like at a full up run rate.
7. Notice that at about 36 months our hit rate drops off and our development $ go back up. – By this time we anticipate competitive pressure and we
will use leads acquired per day and time from conversions to sales as an early warning metric.
Key Points
1. Make sure to ask the right question to size the market as accurately as possible
2. Estimates are only as good as the quality of the information
3. Willingness to purchase and competitor moves are highly subjective
4. Offer ranges rather than point estimates.
BOTTOM UP EXAMPLES
Example 1
• A typical customer will pay us $1,000/year
• We’ll hire five sales reps – Each rep will sell 10 per month
• We’ll lose a certain percentage of customers per year
• We’ll up-sell a certain percentage of customers
• With this math we’ll add approximately $600,000 in annual recurring revenue per year assuming customer dropoff and up-sell equal out
www.businessmodelgeneration.com
Cost structure Revenue streams
Key resources
Key
activities
Key
partners
Value
proposition
Costumer
relationships
Costumer
segments
Channels
Photostrips
on-site
Sponsors for
booth
Electronics
Manufacturers
Printer Supply
Companies
Live-
Stream
Photos
Booth
Electronics
Simple
Enclosure
Custom
SW
Makes
events
more fun
Branded
Memories
Follow
Events
Live
Deep
Brand
Interaction
Social Media
Direct
Marketing
Wedding
Sites
Word of
Mouth
Production
Companies
& Agencies
Transport by
Sales People
Events
Venues
Production
Companies &
Ad agencies
10% to close
the deal
10% to
execute the
deal Fixed Printer
Supply Cost Rental
Up-Sell
Booth Sale
Startup Metrics - StudioSnaps Adquisición - Reuniones
2 (67%) ; 1 (20%) ; .5 (10%)
Activación – Booking 1 (50%) ; 1 (100%) ; 1 (100%)
Retención (TBD)
Ingresos (100%)
Referidos 2 (200%) ; 1 (100%)
; 1 (100%)
Friend Network->Email Introduction: (3/mo.) ; Cold call (5/mo.) ; Cold E-mail (5/mo.)
13 total
Bookings obtained from meetings
Time will tell
Everyone pays & ½ up front
Referral Business
5.5 bookings / mo. 70% Simple Rentals – 450.000
30% Full Activation – 1.700.000
(.70*5.5* 450.000+.30*5.5* 1.700.000)*12 = 54.450.000 CLP/yr
www.studiosnaps.com
GROUP WORK A ensuciarse las manos
LA TAREA!
• HOY
– Presentaciones de la clase
– Trabajo grupal: Calcular tamano del mercado buttom up y top down.
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