Lecture 11: Customer Creation - Part I


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In this lecture, Poornima will talk about how the first year goals in a startup need to center around customer creation, and the techniques for customer creation. She will also dig into building a Concierge MVP, and how to go about testing value proposition.

You can watch the lecture here: http://youtu.be/vPx_F9oV6JA

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Lecture 11: Customer Creation - Part I

  1. 1. Duke ECE 490L: How to Start New Ventures in Electrical and Computer Engineering Poornima Vijayashanker poornima@femgineer.com Jeff Glass jeff.glass@duke.edu Akshay Raut ar118@duke.edu 1
  2. 2. Review • Stories to Features • Usability Testing • Paper Prototyping • Interaction Testing Duke ECE 490L 2
  3. 3. Announcements • Questions on Lab 2? Duke ECE 490L 3
  4. 4. Review Session: Wednesday October 23, 2013 DUHatch Idea Summary 4
  5. 5. Agenda • Customer Creation • Concierge MVP • Exercise Duke ECE 490L 5
  6. 6. Market Research Customer Discovery Early Adopter Pricing Product Distribution Validation Customer Creation Business/Company Formation Mainstream Adopters Money for Marketing Duke ECE 490L 6
  7. 7. Customer Discovery Validation Customer Creation Business/Company Formation Early Adopter Pricing Product Distribution Duke ECE 490L 7
  8. 8. We’ve conducted interviews to test across various segments and usability tests to test product. Duke ECE 490L 8
  9. 9. Figured out market position: new, existing, resegmenting. Duke ECE 490L 9
  10. 10. Maybe outside factors that will limit growth. Duke ECE 490L 10
  11. 11. Customer creation marketing activities necessary for customers to learn about product and create a desire to buy it. Duke ECE 490L 11
  12. 12. “Get big fast!” Duke ECE 490L 12
  13. 13. Demand Creation v. Early Adopter Launch • Market adoption v. market share • Education • Not customer acquisition programs • Earlyvangelist find product and spread the word Duke ECE 490L 13
  14. 14. Customer Creation • Not about marketing department • Creation events • Marketing programs depend on market • Product launch • Advertising, PR, trade shows Duke ECE 490L 14
  15. 15. Market Share Cost of Entry Entry Strategy Monopoly >75% 3x Resegment/New Duopoloy >75% 3x Resegment/New Market Leader >41% 3x Resegment/New 1.7x Existing/ Resegment 1.7x Existing/ Resegment Unstable Market Open Market >26% <26% Table 5.2 from Four Steps to Epiphany Duke ECE 490L 15
  16. 16. Four Building Blocks of Customer Creation • Year 1 Objectives • Positioning: both the company and the product • Launch: both company and product • Demand creation: advertising, PR, trade shows Duke ECE 490L 16
  17. 17. What kind of company are we? Duke ECE 490L 17
  18. 18. How Customer Will Interact with Your Company • How do customers buy? • What are their needs? • What trade shows do they attend? Duke ECE 490L 18
  19. 19. Describe life to a customer without your product. Duke ECE 490L 19
  20. 20. Need to set a budget for customer creation. Duke ECE 490L 20
  21. 21. Company Positioning Product Positioning Company Launch Product Launch Demand Creation Activities Year One Objectives Existing Market Create, drive Product Existing basis Differentiation Credibility and demand into Differentiation of Market Share and credibility delivery the sales (features) competition channel New Market Vision and Defining new innovation in market, the Credibility and the new need, and the innovation market solution Market Customer education, education, standards drive early setting, and adopters into early adopters sales channel Market Adoption Educate users Redefining an Market about what’s Resegment Segmentation existing Segmentation, New basis of reframing and changed in delivery & via Low-End and market and market, drive competition new market innovation innovation product or Niche demand into share differentiation sales Table 5.3 from Four Steps to Epiphany Duke ECE 490L 21
  22. 22. First mover advantage. Duke ECE 490L 22
  23. 23. Case Study #1: Ford v. GM v. Toyota • 1921: Ford sold 900,000 Model T’s for 60% market share v. GM 61,000 Chevys at 6% market share • 10 year period Ford focused on cost reductions, while GM diversified and differentiated product line • 1931: GM had 31% market share v. Ford 28%. GM still has lead. • 1964: Toyota... • Today: Toyota is dominant American car company Duke ECE 490L 23
  24. 24. Not enough to be 1st to market, need to understand the type of market your company is going to enter. Duke ECE 490L 24
  25. 25. 1st year is all about customer creation. Duke ECE 490L 25
  26. 26. Serviceable market: subtract customer who bought competitor’s solution. Duke ECE 490L 26
  27. 27. They wanted a “whole product” (service, support, and other infrastructure). Duke ECE 490L 27
  28. 28. Given our pricing, how many customers can afford our product in year one? Duke ECE 490L 28
  29. 29. How many raw leads do you need? # of qualified prospects to close 1 order? Paying full price? Revenue Number for Year One Duke ECE 490L 29
  30. 30. Where would most qualified leads come from? Duke ECE 490L 30
  31. 31. External Audit Questionnaire Recognition Have you heard of the company? Do you know what they do? Market Forces Are there other products int he market that are similar to the company’s? If so, how are the company’s products different? Which do you like best? Why? Customer Focus Are you familiar with the types of customers the company is calling out? Product Focus Do you know that the top three features of the company’s product are? Are these “must have” features? Positioning Have you heard the company describe its positioning? Do you believe it? Is it right? Have you heard the company describe its mission? Do you believe it? Is it right? Competition Who do you think the company will compete with in the first year? Sales and Distribution Is the company’s distribution strategy the right way to reach customers? Strength/Weaknesses What are the strengths of the company? Trends Figure 5.5 from Four Steps to Epiphany Duke ECE 490L What tech/product trends should the company worry about? Acquisition Information What do they think is the best way for the company to get product info to customers? 31
  32. 32. In customer validation phase you should have understood needs and who buys or influences markets. Duke ECE 490L 32
  33. 33. Messengers. Duke ECE 490L 33
  34. 34. Messengers: reach a few experts, evangelists, and connectors. Duke ECE 490L 34
  35. 35. Experts • Know industry and product in detail. • Others rely on their opinions. • Some may not proselytize product and will charge for advice or consulting. Duke ECE 490L 35
  36. 36. Evangelists • Cheerleaders and salespeople. • Typically paying customers • Some may not proselytize product and will charge for advice or consulting. Duke ECE 490L 36
  37. 37. Connectors • Maybe bloggers or write for magazine or newspaper column. • “Thought leaders” because of their ability to bridge across multiple worlds. • Need to have already established a relationship with them. Duke ECE 490L 37
  38. 38. Messages need to be memorable and sticky. Duke ECE 490L 38
  39. 39. Media Checklist Which media did my earlyvangelists tell me they rely on? Which media do I believe my potential mainstream customers rely on? Are they the same as the media that reach earlyvangelists? Which media do others in the influence map rely on? Table 5.7 from Four Steps to Epiphany Which medium offer the best return on investment? Duke ECE 490L 39
  40. 40. May have trouble getting traction. Duke ECE 490L 40
  41. 41. “Our app has been downloaded 10,000 times!” “We have 1M users!” “We were featured on TechCrunch.” Duke ECE 490L 41
  42. 42. Some time passes... Duke ECE 490L 42
  43. 43. Duke ECE 490L 43
  44. 44. Keep building! Duke ECE 490L 44
  45. 45. Duke ECE 490L 45
  46. 46. What happened? Duke ECE 490L 46
  47. 47. Validate early adopters and value proposition. Duke ECE 490L 47
  48. 48. MVP Fails 1. Don’t know who you’re early adopter is? 2. Don’t have a simple value proposition. Duke ECE 490L 48
  49. 49. Duke ECE 490L 49
  50. 50. Resist the urge to build before you validate! Duke ECE 490L 50
  51. 51. Concierge MVP. Duke ECE 490L 51
  52. 52. Concierge MVP experience is a product • Questions • Do consumers recognize they have the problem you are trying to solve? • If there was a solution, would they buy it? • Would they buy it from you? • Can you build the solution for that problem? • How can you build a simple version? • An Duke ECE 490L 52
  53. 53. Concierge MVP validates value proposition. Duke ECE 490L 53
  54. 54. Case Study #2: Food on the Table • Creates weekly meal plans and grocery lists, and hooks into grocery stores to find best deals for ingredients • Began with a single customer! • Interviewed customers are local super markets. • Signed up 1st customer and dropped off groceries weekly. • Collected $9.95 on each visit! Duke ECE 490L 54
  55. 55. Case Study #3: Dropbox • Built a prototype: no one believed it. • Validated concept through a video. Duke ECE 490L 55
  56. 56. Not the time to focus on growth! Duke ECE 490L 56
  57. 57. Customers care about a product solving their problems or servicing their needs. Duke ECE 490L 57
  58. 58. Who are your customers? Duke ECE 490L 58
  59. 59. Not just product, but entire experience! Duke ECE 490L 59
  60. 60. Can you bounce back? Duke ECE 490L 60
  61. 61. Case Study #4: BizeeBee • Initially a tool for ALL small business owners • 100+ email signups - no one came back! • I called EVERYONE • No clear early adopter or value proposition • Focused on yoga studios first Duke ECE 490L 61
  62. 62. Will I grow? Duke ECE 490L 62
  63. 63. Eventually! Duke ECE 490L 63
  64. 64. Case Study #5: Femgineer • Blog that became a business • Bootstrapped through customers • Concierge MVP Duke ECE 490L 64
  65. 65. Case Study #6: Zappos • e-commerce platform • Started with brick and mortar stores • Focused on one market: shoes • Simple site with same inventory that was in stores Duke ECE 490L 65
  66. 66. Case Study #7: AirBnB • Marketplace • Started with concierge MVP • Early adopters were people who crashed with friends & family • Simple value proposition to rent a bed, room, or apt for a short stay Duke ECE 490L 66
  67. 67. What about quality? Duke ECE 490L 67
  68. 68. Customers care about a product solving their problems or servicing their needs. Duke ECE 490L 68
  69. 69. If design is an issue that will be revealed in testing on early adopters. Duke ECE 490L 69
  70. 70. Throw away your work! Duke ECE 490L 70
  71. 71. Exercise! Duke ECE 490L 71
  72. 72. Review • Customer Creation • Concierge MVP • Exercise Duke ECE 490L 72