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
Session 1
Session 2
Session 3
Session 4
Customer
Discovery 1
Customer
Discovery 2
Customer
Validation 1
Customer
Validation 2
Canvas v1:
Value Proposition
Customer Segment
Canvas v2:
Channels
Cust Relationships
Canvas v4:
C.R.  Get
Revenue model v2
Cost structure v1
Get out of the bldg:
Interviewing
Themes:
Cust Decision Network
Day in the Life
Customer Ecosystem
Whitespace Grid
Canvas v3:
Cust Relationships
(Get-Keep-Grow)
Revenue Model
Cost Structure
Themes:
Finding Pivots
Min Viable Product
TAM/SAM/SOM
Interview objectives &
script
Interviews
“Day in the Life”
Validate/Pivot/Stop
Interviews
Cust decision network
Cust Ecosystem
Whitespace Grid
TAM/SAM/SOM
Exit criteria for
Discovery phase and
End Game for LLP
Next steps
Interviews
CR: Get
Min. viable product
Revenue model: pricing
Elements of cost structure
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
3
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-grow
for Physical Goods
S. Blank, B. Dorf – The Startup Owner’s Manual, 2012
Get Customers Funnel – Physical Goods
“Get Customers” Funnel
Get Customers:
Who needs to hear about you?
End User
Suppliers
Influencer /
Recommender
Channels
Economic Buyer
Government
Decision Maker
Partners
Demand Creation Feeds the Sales Funnel
Demand
Creation
PR
SEO
Blogs/Website
Product reviews
Advertising
Tradeshows
Cold calls
Acquisition
Paying
Customers
$
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 – Web/Mobile
“Get Customers” Funnel
Viral Loop
Demand Creation for the Web/Mobile Sales Funnel
Earned and
Paid Media
PR
“Get Customers” Funnel
Viral Mktg
SEO
SEM/PPC
Blogs/Website
Affiliate Mktg
Advertising
Tradeshows
Viral Loop
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
Channel
Web
 Direct Sales
 Products
Bits
 Subscription
 Upsell/Next Sell
Product
 Ancillary Sales:
Physical
•Referral revenue
•Affiliate revenue
•E-mail list rentals
•Back-end offers
Physical
 Direct Sales
 Products
 Subscription
 Add-on services
 Upsell/Next Sell
 Referrals
 Direct Sales
 Products
 Service
 Upsell/Next Sell
 Referrals
 Leasing
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 Models
Asset 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 based
Value based
 Cost + markup
 Typically not a strategic way to price
 Driven by internal economics and not
customer insight
 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 considerations
consider 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?
Pricing Models - Physical
•
•
•
•
•
•
•
•
•
Product-based pricing
Competitive pricing
Volume pricing
Value pricing
Portfolio pricing
The “razor/razor blade” model
Subscription
Time/Hourly Billing
Leasing
36
Competition as an influence
Nature of
Market
How they will
react?
• Pure competition
• Oligopoloy
• Monopoloy
 What is their product?
 What are their costs and prices?
 “What pricing will make them
feel the worst?”
How do we price the product?
Pricing Models – Web/Mobile/Cloud
•
•
•
•
•
•
Product-based pricing
Subscriptions
Freemium
Pay-per-use
Virtual goods
Advertising sales
38
Does it add up?
• 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?
39
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 Channels
Who is your customer?
Direct
Indirect
–
–
–
–
Licensing
OEM
VAR
Reseller
Distributor
43
Channel Economics
Direct Sales
Source: Mark Leslie, Stanford GSB
Profit + SG&A + R&D
Discounts
Cost of Goods
(Supply Chain)
EU
Revenue
44
End Consumer
List
price
Channel Economics
List Price
Source: Mark Leslie, Stanford GSB
Profit + SG&A +
R&D
List Price
Reseller
45
End Consumer
Cost of Goods
(Supply Chain)
Revenue
EU
Discounts
Distributor/Reseller Channel
Reseller
Discounts
Profit + SG&A + R&D
Distributor
Cost of Goods
(Supply Chain)
EU
Reseller Channel
End Consumer
Revenue
Channel Economics: OEM or IP Licensing
Cost of
Goods
(Supply
Chain)
Profit + SG&A
+ R&D
Reseller
Reseller
Your Product Becomes Your
Customer’s Cost of Goods
46
Source: Mark Leslie, Stanford GSB
End Consumer
Profit + SG&A +
R&D
Distributor
Cost of
Goods
(Supply
Chain)
Master
Distributor
Your Revenue
EU
Discounts
List
Price
How Are Channels Compensated?
– Commission
– Percentage of sales price
– Discounted pre-purchase
47
Book Publishing
•Percent of
Retail
Publisher
National
Wholesaler
Distributor
Retailer
35%
15%
10%
40%
$7.00
$3.00
$2.00
$8.00
Customer
$20.00
• 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
48
Book Publishing Economics
Publisher
National
Distributor
Wholesaler
Retailer
Customer
Allowances
Wholesale costs
Bills
Credit
guarantees
Markup
Payment
guarantees
Payment
guarantees
Return rights
Credits
Payments
49
key activities
value
proposition
customer
relationships
key
partners
customer
segments
Cost Structure
cost
structure
key
resources
revenue
streams
channels
50
images by JAM
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
Session 1
Session 2
Session 3
Session 4
Customer
Discovery 1
Customer
Discovery 2
Customer
Validation 1
Customer
Validation 2
Canvas v1:
Value Proposition
Customer Segment
Canvas v2:
Channels
Cust Relationships
Canvas v4:
C.R.  Get
Revenue model v2
Cost structure v1
Get out of the bldg:
Interviewing
Themes:
Cust Decision Network
Day in the Life
Customer Ecosystem
Whitespace Grid
Canvas v3:
Cust Relationships
(Get-Keep-Grow)
Revenue Model
Cost Structure
Themes:
Finding Pivots
Min Viable Product
TAM/SAM/SOM
Interview objectives &
script
Interviews
“Day in the Life”
Validate/Pivot/Stop
Interviews
Cust decision network
Cust Ecosystem
Whitespace Grid
TAM/SAM/SOM
Exit criteria for
Discovery phase and
End Game for LLP
Next steps
Interviews
CR: Get
Min. viable product
Revenue model: pricing
Elements of cost structure
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