The Lean LaunchPad
Lecture 5: Customer Relationships
Steve Blank
Jon Feiber
Jon Burke
http://i245.stanford.edu/
Source: http://giffconstable.com/
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key activities
value
proposition
customer
relationships
key
partners
customer
segments
cost
structure
revenue
streams
key
resources
channels
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images by JAM
CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment?
personal? automated? acquisitive? Retentive??
We Call Customer Relationships
Demand Creation
• Get, Keep and Grow
• How will customers hear about your product?
• How much will it cost to acquire a customer using these
strategies?
• How does market type impact my demand creation strategy?
Customer Relationship Definition
Get
Keep
Grow
Get Customers
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Who needs to hear about you?
End User
Suppliers
Influencer /
Recommender
Channels
Economic Buyer
Government
Decision Maker
Partners
Demand Creation Getting Free Users
Demand
Creation
•
•
•
•
•
Search Engine Optimization (SEO)
Blogging / Sharable content
Social Media / Gaming Mechanics
Communities
Proven viral coefficient >1
Demand Creation Paying For Users
Demand
Creation
Public Relations
Demand Capture
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SEM
“Free” products (e.g. widgets)
Biz Dev
Affiliate Marketing
Market Education
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Webinars
Email marketing
Trade Shows
Analyst Reports
Direct Sales
TV / Radio
Get Customers Funnel - Physical
“Get Customers” Funnel
Demand Creation Feeds the Sales Funnel
Demand
Creation
Acquisition
Paying
Customers
$
Keep Customers
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Keep Customers Funnel - Physical
Earned and
Paid Media
Get Customers
Loyalty Programs
product updates
Keep Customers
Customer check-in calls
Customer satisfaction survey
Grow Customers
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Grow Customers Funnel - Physical
Earned and
Paid Media
Grow Customers
Get Customers
product updates
Loyalty Programs
Keep Customers
Customer check-in calls
customer satisfaction survey
Get Customers
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Get Customers Funnel – Web/Mobile
“Get Customers” Funnel
Viral Loop
Demand Creation Feeds the Sales Funnel
Earned and
Paid Media
PR
“Get Customers” Funnel
Viral Mktg
SEO
SEM/PPC
Blogs/Website
Affiliate Mktg
Advertising
Tradeshows
Viral Loop
Keep Customers
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Keep Customers Funnel - Web/Mobile
Earned and
Paid Media
“Get Customers”
Product updates
Affiliate Programs
Keep Customers
Viral
Loop
Blogs,
RSS,
emails
Contests,
events
Loyalty
Programs
Grow Customers
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Grow Customers Funnel - Web/Mobile
Earned and
Paid Media
Grow Customers
product updates
Affiliate Programs
Keep Customers
Contests,
events
Blogs,
Loyalty
RSS,
Programs
emails
Viral
Loop
• How many come through the
first step?
• How much does that cost?
• What is the conversion between
each level?
• How much in revenues can you
get out of each acquired
customer?
Demand Creation by Market Type
Existing
• Create, drive demand into your
sales channel
Resegmented
• Educate the market about what’s
changed
• Drive demand into channel
New
• Educate the market
• Identify/drive early adopters into your
sales channels
Clone
• Copy a business
Market Type
Existing
Resegmented
New
Customers
Known
Possibly Known
Unknown
Customer Needs
Performance
Better fit
Transformational
improvement
Competitors
Many
How does market type
Many if wrong,
few demand
if right
influence
None
creation?
Risk
Lack of branding,
sales and
distribution
ecosystem
Market and
product redefinition
Evangelism and
education cycle
Examples
Google
Southwest
Groupon
Market Type determines:
 Rate of customer adoption
 Sales and Marketing strategies
 Cash requirements
Team Deliverable by Next Week - Web
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Get a working web site and analytics up and running
–
–
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Actually engage in “search engine marketing” (SEM)
Spend $20 as a team to test customer acquisition cost.
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Ask your users to take action, such as signing up for a newsletter.
Use Google Analytics to measure the success of your campaigning.
Change messaging on site during the block to get costs lower, team that
gets the lowest delta costs wins.
If you assume virality
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Track where your visitors are coming from (marketing campaign, search
engine, etc.) and how their behavior differs
What were your hypotheses about your web site results?
show viral propagation of your product and the improvement of your viral
coefficient over several experiments
What is your assumed customer lifetime value?
•
Are there any proxy companies that would suggest that
this is a reasonable number?
Team Deliverable by Next Week
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For non-web teams:
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Get prototype demo working.
Build demand creation budget and forecast.
What is your customer acquisition cost?
Did anything change about Value Proposition or Customers/Users?
What is your customer lifetime value? Channel incentives – does your
product or proposition extend or replace existing revenue for the channel?
What is the “cost” of your channel, and it’s efficiency vs. your selling price?
Everyone: Update you blog/wiki/journal
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What kind of initial feedback did you receive from your users?
What are the entry barriers?
Present and explain your marketing campaign. What worked best and why?
Examples
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implantable drug infusion pumps
with remote physician control
for chronic pain patients at home
“the right dose at the right time and place”
Christian Gutierrez (EL), Ellis Meng (PI), Carol Christopher (IM), Tuan Hoang (FE)
Chronic Pain v4
Trade shows
FDA
Foundations
Advocacy Groups
CMS (Medicare)
OEMs
Electronic health
record providers
Marketing Costs
Training
Patients
Formulary Acceptance
KOLs
Wireless
Developers
Faster relief
FS Team
IP
Proprietary
knowledge
Efficient patient
management and
Dosing flexibility
Clinical data
Clinicians
Support
Access to high-value
therapies and
pharmacoeconomics
Hospitals
pharmacoeconomics
Pain clinics
Institutions
Payors/ICA
Human
Resources
Product Dev Costs
Unit sales
Manufacturing Costs
Support Services
FDA/Clinical Trials
Bundled kits
Electronic records
Getting out
Clinicians
Institutions/patients
Dr. Stan Louie, Drug Formulation Expert (USC Pharmacy)
Dr. Giovanni Cucchiaro, Anesthesiologist (CHLA)
Dr. Diana Hull, Physician (Group Health in Washington state,
formerly at Kaiser California)
Thomas Hsu, Insurance Specialist (Network Medical
Management; a California ICA)
Two chronic pain patients
 Pump user and creator of support forum
 User of oral narcotics and patches
Regulatory
Dr. Frances Richmond (Director Regulatory Science Program,
USC)
Entrepreneurs/
Industry
Richard Hull (formerly at company selling Lapband)
Product flow/Channel
Electronic
Health
Records
Electronic
Records
Patients
Partners/
OEMS
Fluid Synchrony
Support Pump +
Services Controller
Hospitals
(Anesthesiologists
Neurosurgeons)
Pain Clinic
(Anesthesiologists
Neurosurgeons)
Bundled
Kits
Hospitals
Channels (Direct)
Pain Clinics
• Direct to institutions
• Some formularies involved in purchase
decisions
• Some doctors make purchase decision
directly
• Device company/Doctor relationship is key
• Heavily influenced by :
• Clinical study results
• Regulatory approval
• Reimbursement
Patient Care Flow (Now)
Partners/
OEMS
Fluid Synchrony
Support Pump +
Services Controller
Patient
Discharged
Surgery/Rx/
reprogramming
Hospitals
(Anesthesiologists
Neurosurgeons)
Scheduled
follow-up
Pain Clinic
(Anesthesiologists
Neurosurgeons)
Trial period/
Home setting
Weeks/months
Bundled
Kits
Key factors: Reimbursement , state regulations
Patient Care Flow (Proposed)
Electronic
Health
Records
Partners/
OEMS
Fluid Synchrony
Actionable feedback
to doctors/institutions
Electronic
Records
Support Pump +
Services Controller
Bundled
Kits
E-prescription / closing loop
Patient
Discharged
Surgery/Rx/
reprogramming
Hospitals
(Anesthesiologists
Neurosurgeons)
Scheduled
follow-up
Pain Clinic
(Anesthesiologists
Neurosurgeons)
Trial period/
Home setting
Weeks/months
Days
Key factors: Reimbursement , state regulations
Regulatory considerations
Trial size
Costs
PMA
510K
100’s of patients
20-100
Up to $100,000 per patient
$10-50 MM
Time
$1-10 MM
~ 3-4 yrs + post
~ 2-3 yrs
approval follow-on
• PMA approval with grouping of FDA approved drugs.
• Clinical trials results used to obtain CMS (Medicare)
approval
• 510K restricts technology to predicate devices
• Can be more difficult to market against incumbents
• European CE mark is easier to attain (safety and
performance only)
Take-aways
• Channel is direct in this existing market
• Channel for e-health is more complex and evolving
• State-to-state regulations can impact incentives
• Can pose problems as electronic records systems vary
across the country
Next Steps
• Understand costs associated with reaching
doctors/institutions directly
• Understand structure of e-health channel
• Develop regulatory pathway (timelines and cost profile)
Chronic Pain v4
Trade shows
KOLs
Faster relief
Formulary Acceptance
Efficient patient
management and
Dosing flexibility
FDA
Foundations
FS Team
Training
Patients
Clinical data
Clinicians
Support
Advocacy Groups
OEMs
Wireless
Developers
Electronic health
record providers
Marketing Costs
IP
Proprietary
knowledge
Access to high-value
therapies and
pharmacoeconomics
Hospitals
pharmacoeconomics
Pain clinics
Institutions
Payors
Human
Resources
Product Dev Costs
Unit sales
Manufacturing Costs
Support Services
FDA/Clinical Trials
Bundled kits
Electronic records
“insero” = to plant
”gen” = gene
Manufacturing platform for
rapid, cost-effective, and scalable
production of therapeutics in tobacco
Lucas Arzola (EL)
Karen McDonald (PI)
Vasilis Voudouris (Mentor)
What We Know
We have a novel technology platform with numerous market
opportunities
Our working hypothesis – that we can scale up and commercialize our
platform for production of life-saving therapeutics
Jon Feiber – “Since you are a platform technology, it makes sense to
engage in ‘market discovery’ and ‘customer discovery’ at the same
time during the next weeks”
Challenging this hypothesis by speaking with as many experts and
customers as we can
This week: explored decision making and distribution channels in the
case of a pandemic
The Business Model Canvas
Tobacco Suppliers
Gene Synthesis
Companies
CMOs
- Purification
- Fill & Finish
- Packaging
- QA/QC
CROs
- Clinical Trials
FDA
R&D
Manufacturing
Regulatory Approval
Licensing
Marketing
Target Product – seasonal & pandemic flu vaccines
Speed
Cost-Effectiveness
Robustness
Scalability
Safety
Ease of Customization
U.S. Supply
Long-Term
Contracts with
Government and
Vaccine
Manufacturers
U.S. Government
- CDC
- HHS BARDA
- DOD DARPA
Foreign Governments
NGOs
Vaccine Manufacturers
-Established and
Emerging Biotech
IP – Patents, Trade
Secret
Manufacturing Facility
Distribution through
Government and
Pharma Companies
Capital Investments
Manufacturing Costs
Licensing Costs
Marketing
Contract Manufacturing
Fully Integrated Manufacturing (Sales)
Licensing (Royalties)
Getting Out of the Lab!
Cast a broad net by talking to many different experts and customers:
(1) Executives from large companies
Name
Title
Institution
Michael Girard
Sustainability Manager
Aerojet
Michael Jacobson
Director of Corporate Responsibility
Intel
Joseph Kieren
Director of Corporate Real Estate
AT&T
(2) Entrepreneurs and angel investors from Sacramento
Name
Title
Institution
Andrew Hargadon
Professor of Management
UC Davis
Wil Agatstein
Professor of Management
UC Davis
Larry Palley
Former General Manager
Intel
John Selep
Operations Manager
HP
Thomas Alberts
Consultant
SBDC
Cary Adams
Head of MedStart Program
SARTA
Getting Out of the Lab!
(3) Experts in the commercialization of biotech platform technologies
Name
Title
Institution
Greg McParland
Consultant
DSM Ventures
Fernando Garcia
Senior Director
Amyris
(4) Experts in vaccine manufacturing
Name
Title
Institution
Ann Arvin
PCAST Vaccinology Working Group
(Key Opinion Leader on Vaccines)
Stanford
Misa Sugui
Associate Scientist
MedImmune
Floro Cataniag
Laboratory Manager
MedImmune
Channels and Distribution
Conversation with Dr. Ann Arvin – Key Opinion Leader on vaccines
In the case of a pandemic:
 Vaccine manufacturers have to be producing vaccines for seasonal flu –
regulatory approval, QA, and validation need to be in place
 When a pandemic occurs, the government (BARDA) negotiates a manufacturing
contract with vaccine companies – number of doses, formulation, price, and time
are agreed upon
 CDC provides the elucidated strain to the manufacturer
 FDA considers the pandemic flu vaccine to be a variation of the seasonal flu
vaccine – new regulatory approval is not necessary
 Vaccine manufacturers work with the new strain to ramp up production as
quickly as they can – takes 4-6 months
 Sterility and quality testing is performed for the produced vaccines – some tests
are done in-house and some are done by outside laboratories
 Vaccine is released
Channels and Distribution
Getting the vaccines to the patients
 Vaccine manufacturers have contracts with wholesalers (i.e. McKesson Corp.)
to distribute the vaccines – distribution is not a cost for the manufacturers, they
hand over the product
 In the case of a pandemic, vaccines are also distributed through local contracts
with the state health departments
 They distribute the vaccines to hospitals and clinics, where they can be
administered to the patients
Organizational Strategy
Conversation with Greg McParland – Former CEO of biotech
platform company: the virtual biotechnology company model
“Starting out and for as long as you can, you should be a virtual
company. You can have contracts to outsource the downstream part of the
process (purification, fill and finish, packaging, etc.) ”
“Keep your core technology and focus on using your manufacturing platform
for protein production”.
Common practice in biotechnology – almost every company has contracts with
CROs, CMOs, marketing and distribution arrangements, etc.
More flexibility – move quickly from failed avenues of research to more
promising projects
Startups partner with big pharma companies to complete clinical trials and take
product to market
“If you build it, they will come” – but only build the essential core
that lets you control your technology platform
More Feedback
Conversation with Dr. Ann Arvin – Key Opinion Leader on vaccines
 Pain point: Reliability issues with traditional egg platform - willingness to move
away to a different manufacturing platform
 Pain point: Current platforms are not fast enough, cannot have an impact in case
of a pandemic - sense of urgency in finding a manufacturing platform that can
produce vaccines faster and at a large scale
 Given this landscape, we still believe our technology can solve a significant
problem in the vaccine market
Conversation with Dr. Misa Sugui & Dr. Floro Cataniag – MedImmune
 Pain point: attenuated virus platform is harder to work with, safety measures are
more stringent – would prefer recombinant subunit vaccines
 Wish: a faster process for vaccine production (our technology can help with this)
 Wish: a faster process for clinical trials and for approval of new drugs (this we
can’t do anything about)
 MedImmune is a possible partner - always looking for new vaccine production
technologies and new products to incorporate in their pipeline
More Feedback
Conversation with Fernando Garcia – Amyris
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Biotech platform technology company
First target product: drug for malaria, partnered with Sanofi to commercialize
Change in strategy: they have transitioned into making biofuels
Why have they made this transition? We will follow up with one of the founders
of the company to find out
Next Steps
We believe we have a good feel for our value proposition
We need to better understand how we can sell to customers and
how to establish these relationships, how partners’ decisions
are made – meeting with Sanofi Head of External R&D
Keep searching for a business model that will allow us to
commercialize our technology – looking for meetings with
companies that distribute/sell flu vaccine antigens for
research and diagnostic use, trying to determine market
size
We need to talk to many more experts and customers…
Business Canvas
Interviews
Action
Motion
Customer Interaction Meetings:
1. Director of R&D of C/A partner
2. NETL Methane Hydrate RG
3. Ed Faust, Global Marketing, Siemens
4. Former GE Employee
5. Berkeley sensors group
6. Tim Fogarty, Director of IW Energy
Planned Customer Interaction
Meetings:
1. Jeff Farbacher, CEO Accutran
2. Ed Faust, Global Marketing,
Siemens
3. Charles Noll, Marcellus Shale
Coalition
Hypothesis Testing:
1. Ed Faust, Global Marketing, Siemens
Planned Hypothesis Testing:
1. Dr. Gilad Kusne, NIST
2. Ann Truschel, Corporate Insurance
Broker
3. Tim Fogarty, Director of IW Energy
Chemical,
Physical,
Thermal
….
Chemical
- Every significant market segment has
specific marketing agencies directed
towards selling them goods
Direct Marketing
Possible
Not Possible
[Too expensive]
Chemical,
Physical,
Thermal
….
Chemical
- Every significant market segment has
specific marketing agencies directed
towards selling them goods
Direct Marketing
Possible
Not Possible
[Too expensive]
Direct sales to plants typically is a very hard wayChemical,
to generate
Physical,
scalable business in the sensors market.
Thermal
….
Typically much better to bundle
product into offerings from larger
Chemical
sensors businesses
- Every significant market segment has
specific marketing agencies directed
towards selling them goods
Agrees with current approach to this first market!
Direct Marketing
Possible
Not Possible
[Too expensive]
Org. Chart – Current C/A Partner
CEO, CTO, CFO, etc. etc. etc.
Global Director of R&D
CEO,
Director of R&D
Director of Marketing
Director of Product
Service
Engineers, etc. etc.
etc.
Director of R&D