LLP-AP workshop 3 – Nov 22nd 2013
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LLP-AP workshop 3 – Nov 22nd 2013
Agenda• 8-8.15 Intro and themes for the day• 8.15-10.00
– Teams present on progress and plans• 10.00-11.00
– Key themes going forward• 11.00-12.00
– Out of the building…..
1
Lean Launchpad Roadmap
Customer Discovery 1
Canvas v1:Value PropositionCustomer Segment
Get out of the bldg:Interviewing
Customer Discovery 2
Canvas v2:ChannelsCust Relationships
Themes:Cust Decision NetworkDay in the LifeCustomer EcosystemWhitespace GridTAM/SAM/SOM
CustomerValidation 1
Canvas v3:Cust Relationships(Get-Keep-Grow)Revenue ModelCost Structure
Themes:Finding PivotsMin Viable Product
CustomerValidation 2
Canvas v4: C.R. GetRevenue model v2Cost structure v1
Exit criteria for Discovery phase andEnd Game for LLP
Next steps
Interview objectives & scriptInterviews“Day in the Life”Validate/Pivot/Stop
InterviewsCust decision networkCust EcosystemWhitespace GridTAM/SAM/SOM
InterviewsCR: GetMin. viable productRevenue model: pricingElements of cost structure
Session 1 Session 2 Session 3 Session 4
3
Customer Discovery: (where we left you end workshop 2)
• What are our customers top problems? – How much will they pay to solve them
• Does our product concept solve them? – Do customers agree? – How much will they pay
• Can we draw a day-in-the-life of a customer – before & after your product
• Can we draw the org chart of users & buyers
Presentations
• Notes on process
• Connecting process across teams
• Mentor input
• Circling back on incomplete themes
NewThemes: workshop 3
Customer Validation 1• Cust Relationships (Get-Keep-Grow)• Revenue Model• Cost Structure Themes:• Finding Pivots• Minimum Viable Product
CUSTOMER RELATIONSHIPS
How will customers hear about your product?How much will it cost to acquire a customer using these strategies?
What relationship type are you establishing with each segment? personal? automated? acquisitive?
Customer Relationship: Get–keep-growfor Physical Goods
S. Blank, B. Dorf – The Startup Owner’s Manual, 2012
Awar
enes
s
Con
side
ratio
n
Inte
rest
Purc
hase
Get Customers Funnel – Physical Goods
“Get Customers” Funnel
Get Customers: Who needs to hear about you?
Suppliers
Channels
Government
Partners
End User
Influencer / Recommender
Economic Buyer
Decision Maker
Demand Creation Feeds the Sales Funnel
PayingCustomers
$
Demand
Creation AcquisitionPR
SEO
Advertising
Blogs/Website
Product reviews
Cold calls
Tradeshows
EXAMPLE of GET for Physical
Product reviews
PR & Media
Advertising
Get-keep-grow for Web/Mobile products
S. Blank, B. Dorf – The Startup Owner’s Manual, 2012
“Get Customers” Funnel
Acq
uire
Act
ivat
e
Viral Loop
Get Customers Funnel – Web/Mobile
Earned and Paid Media
“Get Customers” FunnelPR
SEO
Advertising
Blogs/Website
Tradeshows
Acq
uire
Act
ivat
e
Viral Mktg
SEM/PPC
Affiliate Mktg
Viral Loop
Demand Creation for the Web/Mobile Sales Funnel
GET: issues to focus on now
• What do you have to understand?
REVENUE STREAMS
what are customers really willing to pay for? how? are you generating transactional or recurring
revenues?
REVENUE MODEL =the strategy the company uses to generate cash from each customer segment YES, different segments will look different in revenue
Where is the money coming from?Revenue Model Choices
Bits
Physical
Product
Web Physical
Channel
Direct Sales Products Subscription Upsell/Next Sell
Ancillary Sales:• Referral revenue • Affiliate revenue• E-mail list rentals• Back-end offers
Direct Sales Products Service Upsell/Next Sell
Referrals Leasing
Direct Sales Products Subscription Add-on services Upsell/Next Sell
Referrals
Web/Mobile: “Direct” revenue models
• Sales: Product, app, or service sales• Subscriptions: SAAS, games, monthly subscription• Freemium: use the product for free:
upsell/conversion• Pay-per-use: revenue on a “per use” basis• Virtual goods: selling virtual goods• Advertising sales: unique and/or large audience
“Ancillary” revenue models
• Referral revenue: pay for referring traffic/customers to other web or mobile sites or products.
• Affiliate revenue: finder’s fees/commissions from other sites for directing customers to make purchases at the affiliated site
• E-mail list rentals: rent your customer email lists to advertiser partners
• Back-end offers: add-on sales items from other companies as part of their registration or purchase confirmation processes, or “sell” their existing traffic to a company that strives to monetize it and share the resulting revenue
Physical Revenue ModelsAsset Sale
• Sale of ownership right to a physical product
Usage Fee
• Usage of service. Fee is proportional to the usage of the service.
Subscription Fee
• Fee for continuous access to a service
Renting
• Fee for temporary access to a good or service
Licensing
• Fee for use of some IP (including software)
Intermediation Fee
• Often found in marketplaces of various types, a fee for bringing together two or more parties involved in a transaction
Advertising
• Fee paid by brands and companies to get in front of potential customers
PRICING MODEL =
the tactics you use to set the price in each customer segment
Other words we use in the place of price
• Fee• Commission• Subscription• Toll• Interest• Rent• Tax• Shipping
Common approaches to pricing Cost + markup Typically not a strategic way to price Driven by internal economics and not
customer insight
Cost based
Value based
Based on buyer’s perception of value (e.g. time saved, new efficiency created, etc.)
Customers don’t necessarily feel that they want to pay this way
Pricing Choices (1)consider pros and cons of each
• Cost-based pricing: based on a multiple of actual product cost. Typically priced for maximum revenue/profit versus volume
• Value pricing: based on the value delivered by the product rather than the cost itself
• Competitive pricing: positions the product vs. others in its competitive set, typically in existing markets
• Volume pricing: designed to encourage multiple purchases or users
Pricing Choices (2)consider pros and cons of each
• Portfolio pricing. Mix of high markups and some with low, depending on competition, lock-in, value delivered, and loyal customers
• “Razor/razor blade” model: part of the product is free or inexpensive; yet it pulls through repeat, highly profitable purchases on an ongoing basis
• Subscription: while now thought of a software strategy, the “Book of the Month Club” pioneered this for physical products
• Leasing: lowers the entry cost for customers. Provides constant earnings over a period of years
More pricing considerationsconsider pros and cons of each
• Freemium– 95:4:1 is typical but NOT guaranteed split
• Fixed List price• Negotiated price• Auction bids
– Up– down
• Dynamic pricing
Multi-side Markets and Revenue
• Single-sided markets that care about revenues
• Web-based Multi-sided markets may care about users first, revenues second
How do we price the product?Pricing Model Choices
How do we price the product?
36
• Product-based pricing• Competitive pricing• Volume pricing• Value pricing• Portfolio pricing• The “razor/razor blade” model• Subscription• Time/Hourly Billing• Leasing
Pricing Models - Physical
Competition as an influence
• Pure competition• Oligopoloy• Monopoloy
Nature of Market
How they will react?
What is their product? What are their costs and prices? “What pricing will make them
feel the worst?”
How do we price the product?
38
• Product-based pricing• Subscriptions• Freemium• Pay-per-use• Virtual goods• Advertising sales
Pricing Models – Web/Mobile/Cloud
Does it add up?
39
• Is the revenue adequate to cover costs in the short term;
• Are you confident the revenue will grow materially if not dramatically over time; and
• Does the profitability get better as the revenues get bigger?
CHANNELS (revisited)
Relook your channel choices in the context of Customer Relationship “GET” choices AND examine the revenue implications. How does the money flow?
Web Channels
41
Physical Channels
42
Types of ChannelsWho is your customer?
43
– OEM– VAR– Reseller– Distributor
Direct Indirect Licensing
Channel Economics
44
Profit + SG&A + R&D
End
Con
sum
er
EU
Dis
coun
ts
Revenue
List price
Source: Mark Leslie, Stanford GSB
Cost of Goods(Supply Chain)
Direct Sales
Channel Economics
45
Cost of Goods(Supply Chain) Profit + SG&A + R&D
End
Con
sum
er
EU
Dis
coun
ts
Reseller
Revenue List Price
Source: Mark Leslie, Stanford GSB
Profit + SG&A + R&D
End
Con
sum
er
EU
Dis
coun
ts
Reseller
Dis
trib
uto
r
Revenue List Price
Cost of Goods(Supply Chain)
Reseller Channel
Distributor/Reseller Channel
Channel Economics: OEM or IP Licensing
46
Your Product Becomes Your Customer’s Cost of Goods
Source: Mark Leslie, Stanford GSB
End
Con
sum
er
ResellerProfit + SG&A + R&D
Cost of Goods
(Supply Chain)
EU
Dis
coun
ts
Reseller
Dis
trib
utor
Mas
ter
Dis
trib
utor
Profit + SG&A + R&D
Cost of Goods(Supply Chain)
Your RevenueList
Price
How Are Channels Compensated?
47
– Commission– Percentage of sales price– Discounted pre-purchase
Book Publishing
48
•Percent of
Retail
• You get (approximately)- 35% of retail- the distributor gets 10%- the wholesaler gets 15% - the retailer gets 40%
- less any discount they offer the customer
Publisher National Wholesaler Distributor Retailer Customer
35% 15% 10% 40%
$7.00 $3.00 $2.00 $8.00 $20.00
Book Publishing Economics
49
Publisher National Distributor Wholesaler Retailer Customer
Wholesale costs
Markup
Allowances
Payment guarantees
Payments
Bills
Credit guarantees
Payment guarantees
Return rights
Credits
50images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
Cost Structure
Pivots: your status
• Customer segment• Customer need (pain you are solving)• Platform• Business model• Features
– zoom in (to minimum viable product)– zoom out (towards whole product)
MVP: where are you at?
Can you:-specify what to make and test?-From LLP discovery, what can you strip out?-What must you include?
10 inch
From a Jon Nakane 11/2013 presentation
From a Jon Nakane 11/2013 presentation
Lean Launchpad Roadmap
Customer Discovery 1
Canvas v1:Value PropositionCustomer Segment
Get out of the bldg:Interviewing
Customer Discovery 2
Canvas v2:ChannelsCust Relationships
Themes:Cust Decision NetworkDay in the LifeCustomer EcosystemWhitespace GridTAM/SAM/SOM
CustomerValidation 1
Canvas v3:Cust Relationships(Get-Keep-Grow)Revenue ModelCost Structure
Themes:Finding PivotsMin Viable Product
CustomerValidation 2
Canvas v4: C.R. GetRevenue model v2Cost structure v1
Exit criteria for Discovery phase andEnd Game for LLP
Next steps
Interview objectives & scriptInterviews“Day in the Life”Validate/Pivot/Stop
InterviewsCust decision networkCust EcosystemWhitespace GridTAM/SAM/SOM
InterviewsCR: GetMin. viable productRevenue model: pricingElements of cost structure
Session 1 Session 2 Session 3 Session 4
Next steps: from workshop 3 to 4
• Next hypotheses• Interviews• Customer Relationship: Get-keep-grow• Min. viable product (MVP)• Revenue model: pricing• Elements of cost structure• Canvas v4
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