This document discusses customer creation strategies for startups. It outlines four key activities for customer creation: setting year one objectives, positioning, launch, and demand creation. It notes that customer creation strategies should differ depending on whether the startup is targeting an existing market, resegmenting an existing market, or entering a new market. The document also discusses using influence maps, sales roadmaps, and marketing metrics like the AARRR framework to track customer acquisition and retention.

1. Customer Development
Customer Validation Recap
Customer Creation Part 1
Steve Blank/Eric Ries
sblank@kandsranch.com
4/15/10 1

2. Agenda
! Customer Validation Review
! Case: Ecton
! Customer Creation, Part 1

3. Review:
Customer Validation
Customer Customer Customer Scale
Discovery Validation Creation Company
Pivot
• Develop a repeatable sales process
• Only earlyvangelists are crazy enough to buy

4. Early Sales

5. Sell:
Contact Visionaries
! Looking for people with problems
! They are few are far between
! They need to become your cheerleaders…
while paying you to do so

6. Sell: Turn Visionaries into
EarlyVangelists
! Very few are early customers
! Visionaries will emerge to buy an unfinished
product if it truly solves a painful problem
! A lack of these early purchasers is a red-flag
! Market Type effects ease of execution

7. Build the Organization Map
Dave Jones
CEO
Karen Rogers
VP Marketing
Neil Garrett Suzanne Kellogg
VP Database VP Merchandizing
Marketing
Our Potential
Customer
= in house competition
= issues to be addressed before a sale

8. One Step at A Time
Dave Jones
CEO
Ben White Karen Rogers
VP Sales VP Marketing
Joe Black Neil Garrett Suzanne Kellogg
Dir. Sales Operations VP Database VP Merchandizing
Marketing
Leslie Elders
Financial Modeling
Our Potential
Customer
= in house competition
= issues to be addressed before a sale

9. Organization Map
Dave Jones
CEO
Ben White Karen Rogers Roger Smith
VP Sales VP Marketing CIO
Joe Black Neil Garrett Suzanne Kellogg Phil Whitry
Dir. Sales Operations VP Database VP Merchandizing Director IT
Marketing
Leslie Elders Geoff Smith
Financial Modeling Financial Tools
Development
Our Potential
Customer
= in house competition
= issues to be addressed before a sale

10. The Influence Map
Functional Technical
High Executive 1
Low

11. The Influence Map
Functional Technical
High Executive 1 2 CIO or Division IT executive
Low

12. The Influence Map
Functional Technical
High Executive 1 2 CIO or Division IT executive
Low End Users 3

13. The Influence Map
Functional Technical
High Executive 1 2 CIO or Division IT executive
Low End Users 3 4 Corp. IT staff or Division IT

14. The Sales Roadmap:
Starts with Influence Map
Educate & Present
Solution
Operational Technical
High Execs CIO
End IT
Users
Low Staff

15. The Sales RoadMap:
Adds Access, Assessment & Strategy
Access Assess Strategy Educate & Present
Needs Solution
Finance
Product Operational Technical
Mgmt
High Execs CIO
Sales
Intro Account
Meetings Strategy
Corp. End IT
Mktg Users
Low Staff
Support
IT

16. The Sales RoadMap
Access Assess Strategy Educate & Present Sell, Sell, Sell, Sell
Needs Solution
Finance
Product Operational Technical
Mgmt
High Execs CIO
Sales Implement
Intro Account Proposal
Meetings Strategy Plan
Corp. End IT
Mktg Users
Low Staff
Support
IT

17. RoadMap becomes The Sales Pipeline
4. Understand
1. Prepare 2. Initial Meeting Existing Situation
• Hoovers, One • Ask tough questions a) Technology
Source, Web • Do Buy- In Demo
3. Qualify?
b) Organization
c) Competition
T
h
e
i
m
5. Custom Pitch
• Prepare! 6. Win Over IT 7. Define Problem 8. ROI Pitch
• Get NDA signed • Tech deep dive • Develop Action Plan • Prove the Value!
9. Exec Session
• Set expectations for
this meeting early on.
10. Solution 11. Formal Pricing 12. Negotiate
Session Proposal • Sales
• Detailed Tech discovery
• 13. Close!
• No surprises! • Finance
• Support

18. Sell: Sell/Refine Channel Roadmap
! Early channel partners need to be “Visionaries”
! Indirect channels/integrators have $ minimum
! Indirect channels/integrators just fulfill
! Market Type affects channel adoption

19. Ecton
19

20. Today
Customer Creation
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot
• Creation comes after proof of sales
• Creation is a strategy not a tactic
• Creating customer value not noise

21. Agenda
! Customer Creation versus marketing
communications
! The 4 building blocks
! The role of Branding

22. Customer Creation Big Ideas
! Big Idea 1:
" Grow customers from few to many
! Big Idea 2:
Four Customer Creation activities:
" Year One objectives
" Positioning
" Launch
" Demand creation
! Big Idea 3:
Creation activities are different for each of
the three types of startups

23. Customer Creation
Year 1 Objectives
Year 1
Objectives
Existing Market
• Market share
Resegmenting
Existing Market • Market resegmenting
& new market share
New • Market adoption
Market

24. What Am I Selling (and to Who?)
Positioning

25. Positioning Happens Before
Demand Creation
Demand
Creation

26. The Business Model and
Sales & Marketing

27. “Business Model” vs. “Sales & Marketing”
What’s Our Strategy?: Business Model
– Target Customers?
– Which Sales Channel?
– Which vehicles to create Demand?
– What is our Pricing/Discounts?
How Do I Execute the Strategy?: Sales &
Marketing
– Sales Pipeline
– Marketing Metrics
– Go-to-Market Strategies (e.g., Pricing, Promotion)
– Demand Creation

28. Parts
$
Manufacturin
g
$ Purchase &
Distribution
Design
Assembly /
Manufacturing Users
Product $
Demand
$ Creation
$
$
3rd Party
Customers
Integration Resources

29. Marketing and The Sales Pipeline

30. Customers, Marketing and
the Sales Funnel
Positioning matters
Demand
Total Creation
Available
Served
Market
Available Acquisition
Market
Target Paying
Market Customers
$

31. Demand Creation Feeds
the Sales Funnel
Demand
Creation
Acquisition
Paying
Customers
$

32. Demand Creation
Example – Enterprise Software
Demand
Creation • Print Advertising
• Direct Mail
• Viral marketing
• E-mail marketing
• Blogs
• Communities
• SEM/SEO

33. Demand Creation
Example – Enterprise Software
Demand
Creation • Print Advertising
• Direct Mail
• Viral marketing
• E-mail marketing
• Blogs
• Communities
• SEM/SEO

34. Demand Creation
Example– Web Virtual World
Demand
Creation • Search Engine Marketing (SEM)
• Search Engine Optimization
(SEO)
• Viral marketing
• E-mail marketing
• Affiliate Marketing
• Bannering
• Communities

35. Demand Creation on the Web is
Different
• Search engine marketing (SEM) i.e. keyword advertising, paid search, etc.
– your ad in a search engine. Paid for on a per-click-basis (PPC - pay per click)
• Search engine optimization (SEO)
– free traffic by optimizing your website for readability by the search engines
• Viral marketing
– Spreads your message by your users/customer. i.e. Hotmail email tag line
• Affiliate management
– Partners that promote your product or service on their web own page. They earn money by selling
your product.
• Bannering i.e. skyscrapers, superbanners, content ads, flash layers, etc.
– you buy media space on other websites on a PPC (pay per click) or CPM (cost per million.)
Your banners displayed in predefined spaces.

36. Demand Creation on the Web
You Pay
For These
(SEM)
These are Free
(SEO)

37. Customer Acquisition Cost
How much do
Demand you have To get one
Creation to spend here customer here
Acquisition
Paying
Customers
$

38. The Sales Funnel
Acquisition
Paying
Customers
$

39. Distribution Channels
How Does the Product Reach the
Customer?
Acquisition
Paying
Customers
Distrib.
Channel $

40. Distribution Channels
Pick One
OEMs
System
Integrators
Direct
Sales Force
Value-Added Your
Your
Resellers (VARs) Customers
Company
Dealers
Distributors
Retail/Mass
Merchants/Online

41. The Sales Funnel
Enterprise Software
Qualified Lead
Leads First Sales Call
Demonstration
Feasibility
Paying
Customers
Proposal
Purchase Order
$

42. The Sales Funnel
Enterprise Software
Qualified Lead
Leads First Sales Call
Demonstration
Feasibility
Paying
Customers
Proposal
Purchase Order
$

43. The Sales Funnel
Web Funnel
Registered
Acquisition Log in
First Conversation
5 Conversations
Paying
Customers
Paid Once
Subscription
$
Revenue
Retention
Activation

44. AARRR: Web Marketing Metrics
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!5=2.
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%=76";.
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46(07#%8% Emails &
!7'/2#% widgets
>73?#$%@++$% !C70(2'#$%
n
A'B#%=''"# %
Ret entio 53*2'#2#%
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+9#2'6%4:'*2#%8% +,-#./01203*#$%
;06'<-(#'"%='(2,/'#%
45366'/.' %
Website.com

45. The Sales Funnel
Web Funnel
Registered
Acquisition Log in
First Conversation
5 Conversations
Paying
Customers
Paid Once
Subscription
$
Revenue
Retention
Activation

46. 3D IM FUNNEL (30 DAY MOVING AVERAGE)
Analyze The Funnel Over Time
100%
Registered but didn't log in
Logged in but didn't have convo
Had one convo but not five
Had five convos but didn't pay
Paid
90%
Registered but didn’t login 52.9%
52.7%
80%
43.3% 42.5% 42.2% 43.7% 43.8%
44.7%
47.3% 46.4% 47.6%
48.5% 48.2% 49.2%
70%
Registered but didn't
60%
Login but no conversation
50% 16.1% 20.0%
15.4% 16.8%
15.5% 15.7%
16.4% 15.7%
13.8% 14.2%
14.9% 16.6%
Logged in but didn't have
40% convo 12.6%
19.1% 19.3%
20.3% 19.5% 19.5%
30% 16.9%
16.3%
16.6% 17.5% 13.2%
16.8% 15.1%
Had 1 conversation but not 5
Had one convo but not five 17.0% 18.1%
20%
Had five convos but didn't pay
20.7% 19.5% 20.9% 20.9% 21.2% 20.0% 19.7%
19.1% 18.1% 18.4% 19.3% 19.7%
10% 16.7% 16.3%
Had 5 conversations but didn’t pay
Paid 0% 1.5% 1.3% 1.2% 1.1% 1.3% 1.2% 1.0% 0.6% 0.9% 1.0% 1.2% 1.4% 1.0% 0.8%
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07

47. Cohort Analysis of the Funnel 30, 60, 90 DAY RETENTION
50% Retention of active
users who
registered 30-60
45% days ago
Retention of active
users who
40% registered 60-90
days ago
Retention of active
35% users who
registered 90-120
days ago
30%
25%
This plot measures retention by
calculating the fraction of 'active'
users who had a conversation in
20%
the preceding 30 days. Active
users are defined as having had
at least 5 conversations total.
15%
10%
5%
0%
1/1/06 1/31/06 3/2/06 4/1/06 5/1/06 5/31/06 6/30/06 7/30/06 8/29/06 9/28/06 10/28/06 11/27/06 12/27/06

48. Customer Creation Big Ideas
! Big Idea 1:
" Grow customers from few to many
! Big Idea 2:
Four Customer Creation activities:
" Year One objectives
" Positioning
" Launch
" Demand creation
! Big Idea 3:
Creation activities are different for each of the three
types of startups

49. Customer Creation Positioning
Year 1
Objectives Positioning
• Market share • Differentiation & credibility
Existing Market
• Product differentiation
• Market • Segmentation & innovation
Resegmenting resegmenting
Existing Market • Redefining existing market &
& new market
share product differentiation
• Market • Vision & innovation in new
adoption
New market
• Defining the new market, the
Market need & the solution
• Early adopters

50. Customer Creation
Customer Customer Customer
Discovery Validation Creation
Year One • Type of startup
Objectives • Distribution model
• Articulate problem &
Positioning product concept
• Understand customer
view of competitors
Launch • Day in the life
• Attend shows/conf’s
• Estimate mkt size.
Demand • Press, analysts,
Creation influencers list.
• How do customers make
buying decisions?

51. Customer Creation
Customer Customer Customer
Discovery Validation Creation
Year One • Revenue model
Objectives • Channel model
• Initial company &
Positioning product positioning
• Test w/early adopters
Launch • Company & product
launch strategy
• Test with early adopters
Demand • How do customers
Creation purchase?
• Understand analysts/
influencers view

52. Customer Creation
Customer Customer Customer
Discovery Validation Creation
Year One • Launch model
Objectives • Sales model
• Company/Product
Positioning positioning by PR
agency with audit
Launch • Launch/Introduce
• Launch type depends
on type of startup
Demand • Implement demand
Creation creation
• Type depends on
type of startup