1. A MaRS Best Practice !
presented by Jon E Worren!

3. Memory at Work
!
• A Financially Sustainable Business Model!
• Important Business Model Metrics!
• Analytical Processes!
• Examples!
MaRS is a member of!
Pg 3!

4. “A startup is a temporary organization,
designed to search for a sustainable
business model.”!
Steve Blank!
Execu6on
Sustainable
Business
Model?
Search

5. A business model describes the value an
organization offers its customers and
illustrates the capabilities and resources
required to create, market and deliver this
value and to generate profitable, sustainable
revenue streams.

6. Day
Month
Year
No.
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each Customer Segment?
Which customer needs are we satisfying?
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
For whom are we creating value?
Who are our most important customers?
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
To view a copy of this license, visit http:/
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Pg 6

7.  Nijar Dawar: “Most
companies still look for
competitive advantage
where it used to be:
through activities related
to products and new
product creation”!
 Both cost and value
creation has shifted out of
the factory!
Pg 7!

8.  Rita McGrath: “It’s time to
go beyond the very
concept of sustainable
competitive advantage”!
 Organizations need to
forge a new path to
winning: capturing
opportunities fast,
exploiting them
decisively, and moving on
even before they are
exhausted!
Pg 8!

9. ACTIVITY
Identify Areas of Investigation
The Business Model Canvas
Key Partners
Key Activities
Designed for:
Designed by:
Value Propositions
Key Resources
Cost Structure
www.businessmodelgeneration.com
Customer Relationships
Channels
Last
week:
Channels
Revenue Streams
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
To view a copy of this license, visit http:/
/creativecommons.org/licenses/by-sa/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
On: / /
Iteration: No.
Customer Segments
This
week:
Customer
Rela6onships

10. CLTV > CAC!
Customer Lifetime Value exceeds Customer Acquisition Cost!
Pg 10

11. Let’s look at CLTV first….
CUSTOMER LIFETIME VALUE

12. Customer Lifetime Value (def.): !
Total profit a customer brings to your
company over their lifetime!
!
Marginal Unit Contribution (MUC): !
Sales price – Direct Variable Product Cost!
– Find Average MUC/Customer!
!
Pg 12!

13. Retention Rate (RR): !
Current retained Customer/Customers
from previous period (month or year)!
!
Customer Lifetime: 1/(1-RR)!
!
Pg 13!

14. MUC/Customer = $10,000 year!
RR = 80%!
CL = 5 years*!
LTV= 5 * $10,000 = $50,000!
Inside sales or field sales?!
!
* Examples ignores NPV calculation for simplicity
Pg 14!

15. MUC/Customer = $100 year!
RR = 80%!
CL = 5 years!
LTV= 5 * $100 = $500!
What does a $500 LTV mean for our
acquisition process?!
Pg 15!

16. MUC/Customer = $100 year!
RR = 50%!
CL = 2 years!
LTV= 2 * $100 = $200!
!
What does a $200 LTV mean for our
acquisition process? Relationship
strategy? Target Customer?!
Pg 16!

17. Monthly vs Annual!
– Important for recurring revenue!
– What do your customers prefer: Monthly or annual
billing!
– What is your retention rate/returning customer rate?!
Customer Types/Segments!
– Do you charge all customers the same or does it
vary by type or segment?!
Gross margin per customer!
– Does each new customer normally drive service,
support or installation cost?!
Pg 17!

18. !
CLTV should be 3-5 times CAC!
!
CAC should be earned back in less than
12 months!
Pg 18!

19. - Recurring revenue!
- Cross & upsell!
- Product line expansions !
- Lead gen for 3rd party!
- Scalable pricing!
- Low retention rate!
- Customer satisfaction!
Pg 19!

20. The other part of the equation….
CUSTOMER ACQUISITION COST

21.  May be calculated with or w/o fixed M&S
salaries (CAC1 vs CAC2)!
!
 May not be calculated with accuracy until a
number of sales have closed!
– Cycle times!
– Level of touch/automation required (Can you do it
touch less?)!
– Conversion rates!
Pg 21!

22. - Field sales!
- Long cycles!
- Outbound marketing!
- Viral effects!
- Inbound marketing!
- Touchless conversion !
- Inside sales!
- Channels and partnerships!
Pg 22!

23. B2B example
 Trade Show !
– Direct cost: $5,000!
– Indirect: $5,000!
– Total: $10,000!
 Results!
– 200 contacts - leads!
– 12 ask for proposal!
– 188 “wants more
information”!
Key Questions
 Is this a good show for
leads?!
– Right types of businesses?!
– Right role/level of contacts?!
 How much should we invest
in attending this show?!
– All-in: Booth + full team +
sub-event?!
– Floor-team only?!
– Single rep?!
Pg 23!

24. The Plan
 Add contacts to CRM system!
 Clearly identify show as
“source”!
 Start nurture program!
Execution
 Email blast 1: 200 send/receive!
– Newsletter!
– Invite to webinar!
 Response!
– Objective 1: Demonstrate
value & build credibility!
– 80 opens (A/B test “subject”)!
– Objective 2: Convert to
paying customers!
– 40 sign-ups for webinar!
– Provide more information!
• Email blasts
• Webinars
• Direct calls
– 10 forwards!
 Webinar: 30 attendees!
 Direct Call – hottest prospects!
– 30 attendees!
– 10 that “missed”!
– 12 that received show
proposals!
Pg 24!

25. After the Call
8 new ask for proposals!
6 not interested!
38 “maybes”!
Cost Round 1
Email/newsletter: $750!
Webinar: $650!
Direct call: $2,000!
Total: $3,350!
Per lead: $85!
!
Pg 25!

26. Webinar II
E-mail/Newsletter
Email blast 1: 200 send/
receive!
– Newsletter!
– Invite to webinar II!
Webinar:!
– 25 attendees!
– 5 “no show”!
!
Response!
– 60 opens!
– 10 forwards!
– 30 sign-ups for webinar!
Pg 26!

27. Sales Email
Sales Promotion Newsletter!
– “Buy-now” incentives!
– No webinar!
– Links to products/ecommerce!
– Call to Action Link!
Phone Follow up!
– All trade show contacts!
– Webinar attendees!
– All with outstanding
proposals!
!
Results
20 request for proposals!
Plus 20 previous proposals !
Total 40 proposals!
Avg. proposal= $10,000!
Pipeline is $400,000!
Closing rate = 50%!
Conversion rate LeadCustomer 10%!
Cycle time: 10 weeks!
Pg 27!

28. Costs
Trade show: $10,000!
– $50/Lead!
Email-blasts*2: $1,500!
– $7.50/lead!
Webinar*2: $1,300!
– $6.50/Lead!
CAC
Total Cost: $22,400!
New customers: 20!
CAC: $1,120 ($11.2%)!
Conclusion: OK (less
than 15%)!
Direct calls: $9,500!
– Round 1: $2,000!
– Final: $7,500!
Pg 28!

29.  Get more/better leads: Increase trade show efficiency by contacting
prospects prior to show to schedule meetings!
 Coverage: Should we send more people/change trade show
attendance?!
 Collateral & Tools: Will different marketing material change
efficiency on the floor?!
 Buy Leads: Can leads of same quality be bought/rented at less than
$25?!
 Conversion rates/Nurture program: Run A/B tests if enough data!
– Increase open rates, sign-ups: test subject line, lay-out & sign-up!
– Change timing of webinar (reduce no-shows)!
– Change topic for webinar!
Pg 29!

30. Sample A
Email/NewsleBer
I
Sample B (Content/
Autom)
Email/NewsleBer
I
Webinar
I
Phone
I
Email/NewsleBer
II
Email/Free
Trial
Email/NewleBer
II
Upgrade
Promo
Sales
Promo6on
I
Webinar
II
Sales
Promo6on
email
Sample C (Experience/
Autom)
Sales
Promo6on
II
Upgrade
Promo
Closing
Call
Pg 30!

31.  Optimize by cohort first if!
– Cohort is large enough!
– You have the bandwidth to manage test iterations in
parallel!
 Optimize process first if!
– Each cohort is too small to split!
– Your resources does not allow you to run various
processes in parallel!
Pg 31!

32. Trade show sample
Website signups
Rented Lead DB
Email/NewsleBer
I
Email/NewsleBer
I
Email/NewsleBer
I
Email/NewleBer
II
Email/NewleBer
II
Email/NewleBer
II
Sales
Promo6on
I
Sales
Promo6on
I
Sales
Promo6on
I
Closing
Call
Closing
Call
Closing
Call
Pg 32!

33. Trade show sample
Website signups
Rented Lead DB
Email/Free
Trial
Email/Free
Trial
Email/Free
Trial
Upgrade
Promo
Upgrade
Promo
Upgrade
Promo
Upgrade
Promo
Upgrade
Promo
Upgrade
Promo
Pg 33!

34.  Know what you are optimizing for!
 Use a tool that allows you to track cohorts and processes!
 Design!
Pg 34!

35. We understand that some of the original content from the
EAT24 case study may be perceived as offensive to some
readers and have sought to mitigate that by blocking out
certain elements of the case study, without impacting the
learnings that can be gleaned That does not mean that
MaRS condemns the actions of EAT24 in any way or
suggest!
Pg 35!

36. If you aim for an automated acquisition process, CRO is a must:
CONVERSION RATE OPTIMIZATION

37.  No VC funding – all bootstrapped!
 Needed to ensure every dollar spent yielded a return!
 Have been building a tongue-in-cheek identity (check
their blog!)!
 Noticed a number of porn stars were fans through
twitter!
 Wanted to test if porn sites could be a viable source of
leads!
37!

38. Does porn make people hungry?!
Pg 38

39. Pg 39!

40. Pg 40

41. Pg 41!

42.  Design banner ads to test out!
 Start by testing ad placement (homepage vs video landing pages)!
 Place ads in desired placement!
 Measure Click-through-rates (CTR) and Conversion (Orders)!
 Optimize by focusing ad spend on 3 top performing ads in terms
of conversion.!
 Read full case study here:
http://blog.eat24hours.com/how-to-advertise-on-a-porn-website/ !

43.  Ads with Monkeys, Cats and Dogs will be rejected by porn
sites!
 Ads on video landing pages experienced 5xCTR compared
to porn homepages (did A/B testing)!
 Porn banner ads experienced 3x impressions of Google
+Facebook+Twitter combined at 10$ of cost!
 Orders spiked when porn ads ran (no metrics provided)!
 90 % of porn-ad traffic was unique visitors (new audience)!
 Yet, new customer retention was 4x that of Facebook!
 “Chicago is the horniest city in the United States”!

44. Test
Plan:
What
to
improve?
Current
Performance
=
Baseline
Hypothesis:
What
changes
do
you
think
would
help?
Device
an
A/B
split
test
to
see
if
hypothesis
valid
Measure
the
results;
implement
learnings

45. RECOMMENDATIONS

46. 1. Customer Acquisition is the most important activity in
the business – it is everyone’s business.!
2. Build a strong culture for customer acquisition by
dedicating resources, time & recognition !
3. Understand what you want to achieve and how to
measure it!
4. Plan campaigns like experiments: Know what you are
testing for and make sure to measure results!
5. Master the process: Be consistent and disciplined
about executing, measuring and learning from tests!
6. Find the tools that can support you in managing
customer contacts, email delivery, funnel
measurement & management, building micro-sites
and landing pages, A/B testing, surveying.!

47. “If you torture data long enough,
it will confess”!
!Ronald Coase!
Pg 47

49.  Kellblog.com !
 Forentrepreneurs.com!
 CRO slides on startup-marketing.com !
 CLTV Calculator:
http://hbsp.harvard.edu/multimedia/flashtools/cltv/index.html!
 The EAT24 case study:
http://blog.eat24hours.com/how-to-advertise-on-a-porn-website/ !
Pg 49!