Nsf online lecture 5 customer relationships

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Nsf online lecture 5 customer relationships

  1. NSF I-Corps The Lean LaunchPad Lecture 5 Customer RelationshipsHow Do You Get/Keep/Grow Customers? Version 6/13/12
  2. Customer RelationshipsHow do you Get, Keep and Grow Customers?
  3. © 2012 Steve Blank
  4. Customer RelationshipsPhysical & Web Mobile Are Different © 2012 Steve Blank
  5. Customer RelationshipsPhysical Products – Get Customers © 2012 Steve Blank
  6. Customer Archetypes Drive Get/Keep/Grow Lab Manager: Brian• What’s their role? – How this person is evaluated / promoted / compensated?• Who are they? – Buyer’s name – Position / title / age / sex• How do they buy? – Discretionary budget (name of budget and amount)• What matters to them? – What motivates them?• Who influences them? – What do they read/who do they listen to?
  7. Paid Demand Creation Activities “Paid” Media Demand Creation • Public Relations • Advertising • Trade Shows • Webinars • Email marketing • On-line SEM • Biz Dev
  8. Free Demand Creation Activities “Earned” Media Demand Creation • Publications in journals • Conference speeches/papers • Educational seminars • Public relations • Blogging / Sharable content • Social Media • Communities
  9. Customer RelationshipsPhysical Products – Get Customers © 2012 Steve Blank
  10. Customer RelationshipsPhysical Products – Get Customers CAC = Customer Acquisition Cost © 2012 Steve Blank
  11. Customer Acquisition Cost versus Sales Complexity No Touch Light Touch High Touch Field SalesFreemium Field Sales Self-Service Inside Sales Inside Sales with SE’s Rough Estimates of Cost of Customer Acquisition (CAC) $0- $50 – $1,000 - $3,000 - $25,000 – $75,000 – $10 $200 $2,000 $8,000 $75,000 $200,000 Source: David Skok Matrix Partners
  12. Customer RelationshipsPhysical Products – Keep Customers © 2012 Steve Blank
  13. Customer RelationshipsPhysical Products – Keep Customers Attrition/Churn © 2012 Steve Blank
  14. Customer RelationshipsPhysical Products – Grow Customers © 2012 Steve Blank
  15. Customer RelationshipsPhysical Products – Get/Keep/Grow LTV = Customer Lifetime Value © 2012 Steve Blank
  16. Customer RelationshipsWeb/Mobile Products– Get Customers © 2012 Steve Blank
  17. Web/Mobile Products– Get Customers CPM = cost per thousand hits © 2012 Steve Blank
  18. Web/Mobile Products– Get Customers CPA = Cost per Action © 2012 Steve Blank
  19. SaaSProducts– Get Customers Organic Traffic,SEM, Other Paid Sources Registered Visitors Raw Leads Qualified Leads Inside Sales Closed Deal © 2012 Steve Blank
  20. Web/Mobile Products– Keep Customers
  21. Our Example Marketing FunnelQuick Marketing Calculation 50% amount of traffic that is organic versus paid $1.50 cost per paid visitor (Google AdWords, etc.)$ 0.75 Cost per visitor (both paid and unpaid) 3% visitors convert to raw leads 20% number of raw leads that turn into qualified leads 1 qualified lead 5 raw leads required 167 visitors required $125 Cost of visitors (also = Cost per qualified lead) Source: David Skok Matrix Partners
  22. Our Example Marketing FunnelQuick Marketing Calculation 50% amount of traffic that is organic versus paid $1.50 cost per paid visitor (Google AdWords, etc.)$ 0.75 Cost per visitor (both paid and unpaid) 3% visitors convert to raw leads 20% number of raw leads that turn into qualified leads 1 qualified lead 5 raw leads required 167 Visitors required $125Cost per qualified lead Source: David Skok Matrix Partners
  23. Our Example Marketing FunnelCost per Qualified Lead $125Leads to closed deal 10Marketing Costs per closed deal $1,250 Source: David Skok Matrix Partners
  24. We Can Compute CAC and LTV Excludes people costsLead Gen costs per deal $ 1,250 (Cost per qualified lead x no of leads required per closed deal)Selling costs per deal $ 1,620 Excludes cost of sales management Excludes people costs in marketing, andTotal CAC $ 2,870 sales management. (CAC= Cost to Acquire a Customer) Calculated by dividing average monthlyTotal LTV $ 16,000 gross profit per customer (ARPU x Gross Margin ) by the churn rate This excludes people costs in marketing, and sales management costs Source: David Skok Matrix Partners
  25. Balancing CAC/LTV in a SaaS model LTV >3x CAC Months to recover CAC <12 months Required for Capital Efficiency Source: David Skok Matrix Partners
  26. What Investors are Looking ForA well balanced business model Monetization (LTV) Cost toAcquire aCustomer (CAC) Source: David Skok Matrix Partners
  27. The Balancing Act • Viral effects • Inbound Marketing • Free or Freemium • Open Source • Free Trials • Touchless conversion • Inside Sales • Channels • Strategic partnershipsCost to Acquire a Customer Monetization (CAC) (LifeTime Value LTV) • Scalable Pricing • Cross Sell/Upsell • Product line expansion • Lead Gen for 3rd parties Source: David Skok Matrix Partners
  28. The Balancing Act • Viral effects • Inbound Marketing • High Churn Rates • Free or Freemium • Open Source • Low customer • Free Trials satisfaction • Touchless conversion • Inside Sales • Channels • Strategic partnershipsCost to Acquire a Customer Monetization (CAC) (LifeTime Value LTV) • Field Sales • Scalable Pricing • Cross Sell/Upsell • Outbound • Product line expansion Marketing • Lead Gen for 3rd parties Source: David Skok Matrix Partners
  29. Customer RelationshipsWeb/Mobile Products– Keep Customers © 2012 Steve Blank
  30. How Churn affects LTV• Average customer lifetime in months =1 / Monthly Churn Source: David Skok Matrix Partners
  31. How Churn affects LifetimeMonths Lifetime vs Churn Rate 120 100 100 80 60 50 40 20 20 0 Monthly Churn 1% 2% 5% Source: David Skok Matrix Partners
  32. How Churn affects LTVLifetime Value Monthly Churn Source: David Skok Matrix Partners
  33. Impact of lowering Churn Cumulative Net Profit Net Profit $7,000,000$1,200,000 $6,000,000$1,000,000 $5,000,000 $4,000,000 $800,000 $3,000,000 $600,000 $2,000,000 $400,000 $1,000,000 $200,000 $- Month 1 Month 3 Month 5 Month 7 Month 9 Month 11 Month 13 Month 15 Month 17 Month 19 Month 21 Month 23 Month 25 Month 27 Month 29 Month 31 Month 33 Month 35 $(1,000,000) $- $(2,000,000)$(200,000) $(3,000,000)$(400,000) $(4,000,000) Churn 1.25% Churn 2.5% Churn 1.25% Churn 2.5%• Impact of lowering the churn rate is felt more heavily in the later years, as expected• It has a significant impact on the long term profitability of the business Source: David Skok Matrix Partners
  34. Churn• 1% to 2.5% churn per month is acceptable• Higher than that, you are filling a leaky bucket – Need to understand why you have low customer satisfaction and address the problem Source: David Skok Matrix Partners
  35. Customer RelationshipsWeb/Mobile Products– Grow Customers © 2012 Steve Blank
  36. Customer RelationshipsWeb/Mobile Products Get/Keep/Grow © 2012 Steve Blank
  37. Ag RobotCustomer Relationships Example
  38. Demand generation plan and budget• Word of mouth generation – 2 systems for “Demo day events” – 2 systems for customer demos – 4 x 30K each = $120,000• World Ag Expo Booth – 1 x 40x40 corner booth with demo – Hold press event breakfast – $ 15 K (booth, banners, hotels)• Magazine campaign – 3 ads in 2 magazines – Goal – get 2 articles on us – 2 x $ 10K + Ad agency = 30K• Total $165 K“You prove that it works and everything else is easy. Distribution is not thatcomplicated in farming.” – Wyatt Duncan, Integrated Crop Pest Control
  39. Medical DeviceCustomer Relationships Example
  40. Key OpinionLeaders (KOLs)
  41. Key OpinionLeaders (KOLs)
  42. Key OpinionLeaders (KOLs)
  43. Key OpinionLeaders (KOLs)
  44. Key OpinionLeaders (KOLs)
  45. Key OpinionLeaders (KOLs)
  46. Housing AppCustomer Relationship Example
  47. • We ran a Facebook ad to test actual willingness2 to pay for this service 49
  48. • To test willingness to pay we used three 2 identical ads with three different landing pages 50
  49. • To test willingness to pay we used three 2 identical ads with three different landing pages Ad Sign-ups Clicks Ad spend Free 0 23 $25 $1/household 0 25 $25 $1/user 0 24 $25 • Unfortunately, test results only proved users did not trust our site for payments • Facebook traffic on this campaign was on our page for 4 seconds on average • Roommate campaign had a 1:37 site time average • Outstanding question: can we win trust in other ways and then engage users to pay rent through us? 51
  50. • Customer archetype: Sara How she searches  Wants to be efficient (will use a broker if doing a search on her own is too painful)  Asks friends for recommendations What Matters to Sara  Wants to live in a fun place that is safe  Doesn’t want to overpay  Doesn’t have much time to hunt for a place  Live with someone she trusts (moving to DC) Influences  Where friends go out/live  Work location 52
  51. Online DatingCustomer Relationships Example
  52. What We Did: Landing Page + Web App
  53. What We Found: High referral traffic 4 day progress report Overall Signup progress 1258 31 filled 5- 136 min survey 10.8%
  54. What we did: Targeted women, all couples Demand generation testHypothesis: Women-in-relationships are likelier to clickthrough, irrespective of distance statusTested for $30 Facebook click through & conversion from FBimpressions Ad-1 Ad-3 Ad-2 Ad-4
  55. What we found: women click more...................................but not clear who will pay! Couples will pay subscription if they find more Subscription model test 1 sharing during free trial valuable LDRs 1 Takeaway: “More 6 sharing” without Paid convenience will have to be free. SLRs 4 Good if free Women likelier to click through irrespective of Demand generation test II distance status Click LOCATION Impressions Through Men Women Women-in-rel rates 87140
  56. What we found: Clicks, no web app usage Demand generation testFunnel: “Couples” campaign $ 29.7 this week 304,286 0.01 c impressions 122 uniques 0.35 c/new 85 new 24.6% conversion 30 sign-up 0.99 c clicks but one used web app
  57. Online SalesCustomer Relationships Example
  58. Year 1 Web funnel Year 5 100 000 hits Referenced to our web site 300 000 hits 50% 70% Fill out savings calculator 20% 30% Send request to sales 30% 30% Reconnection with viable customer 80% 80% Visit to site 10% 20% Close saleTotal TotalRevenue1.44 million Revenue 18.14 million
  59. Mobile AppCustomer Relationships Example
  60. Success Depends on Virality> ChurnRatio of early stage viralityrate to churn rate = 2.00x
  61. Success Depends on Virality>ChurnRatio of early stage viralityrate to churn rate = 1.50x
  62. Success Depends on Virality>ChurnRatio of early stage viralityrate to churn rate = 1.0x
  63. Demand creation via website 1 2 3“Not a landing page” Doesn’t show theNo Indonesian version product
  64. Demand creation via website - results Clicks CTR100 74 2.00% 1.56% 68 1.25% 50 22 1.00% 0.59% 0 0.00% 1 2 3 1 2 3 People need to use the product CPC for us to maximize Conversions per click learning1.5 1.34 6.00% 4.05% 1 0.62 4.00% 2.94% 0.540.5 2.00% 0.00% 0 0.00% 1 2 3 1 2 3
  65. Software Reference ToolCustomer Relationships Example
  66. AdWords Testing
  67. AB Testing Results0% conversion 42% conversion 75% conversion 32% conversion• Original Peaya website has 66% conversion rate• Conversion defined as people clicking the download button on the landing page• Experiment still underway; too few data points for drawing conclusions
  68. Google &Facebook campaigns• Keywords: free endnote, reference manager, pdf manager, Itunes for digital content, I tunes, manage pdf, organize paper, paper manager, citation manager, paper citation, cite pdfs• 24 impressions, 2 clicks on googleadwords• Clicks on free endnote and organize paper• No Facebook response• 1 Post on ResearchGate drew 7 visitors
  69. We’re “a little” viral 12% of sign-ups from referrals 14 of 117 new registrations came from referrals by 3 people from Jan 1 to Feb 1. Referral bonus promoted in tutorial
  70. Collaboration doesn’t “pop”…. yet “Rate & Discuss” is least interesting tutorial screen so far However: 1) we can test different messages (ie “collaborate”) 2) experiment is slightly biased in ordering, we need further testing
  71. Customer Relationships Example
  72. Search KeywordsLesson Learned:Very little search traffic -> a “missionary” sales effort
  73. Highly Competitive KeywordsLesson Learned:AdWords (paid SEM) is not going to be an efficient channel with thesekeywords
  74. Medical DeviceCustomer Relationships Example
  75. ChannelIncentives VP All Institutions Out-patient care/ Per Service High Value home setting Revenue Model TherapiesHospitals Private Dosing flexibility Hospitals, specialty clinics Efficient patientPain Clinics management In-patient care/ Per Diem hospitalization Pharmacoeconomics Revenue Model HMO, ACO, Non- profit, University Hospitals
  76. Demand Creation Patients/Advocacy Groups Conferences / Trade magazines / PR Societies conferences $20k/event * 6 events $20k/event * 4 events Research JournalOne on one Meetings $150k/year travel Adoption Publications (Free) Budget ~ $300 k/year

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