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Channels, Customer Relationships and Revenue Models Presentation - GIST Bootcamp
- 3. Focus so far… Value Propositions
- 4. Now start asking Customers about Channels Where do you buy products today?
- 5. What is a Channel??
- 6. A Channel defines how your customers want to be reached !!!
- 7. What are the Channel Types??
- 9. Types of Product or Service Virtual or Physical
- 10. Types of Channels: Virtual or Physical
- 16. Distribution Complexity 16 Evangelists Service Technicians Direct Sales VARs Retail Web, Telesales Systems Integrators Mainframes Minis LANs PC Servers Desktop PCs Printers Keyboards Toner WANs Global Systems Solution Complexity MarketingComplexity
- 19. How are channels compensated? 19 Commission Percentage of sales price Discounted pre-purchase
- 20. Channel Economics Direct Sales 20 SG&A + R&D EndConsumer EU Discounts Your Revenue List Price Source: Mark Leslie, Stanford GSB Cost of Goods (Supply Chain) PROFIT
- 21. 21 Cost of Goods (Supply Chain) SG&A + R&D EU Discounts Reseller Source: Mark Leslie, Stanford GSB Cost of Goods (Supply Chain) EndConsumer Your Revenue List Price Channel Economics Resellers PROFIT
- 22. SG&A + R&D 22 EU Discounts Reseller Distributor Source: Mark Leslie, Stanford GSB Cost of Goods (Supply Chain) Channel Economics Distributor & Reseller Cost of Goods (Supply Chain) EndConsumer Your Revenue List Price PROFIT
- 23. We covered Direct Sales, and using Reseller / Distributors… When does the Channel look like a Customer??
- 24. We covered Direct Sales, and using Reseller / Distributors… When does the Channel look like a Customer?? Products embedded in others (OEM) Products resold by others (VARs, System Integrators) Who’s the customer?
- 25. Channel Economics: OEM or IP Licensing 25Your Product Becomes Your Customer’s Cost of Goods Reseller SG&A + R&D Cost of Goods (Supply Chain) EU Discounts Reseller Distributor Master Distributor SG&A + R&D Cost of Goods (Supply Chain) List Price Channel Economics OEM or IP Licensing EndConsumer Your Revenue List Price PROFIT PROFIT
- 26. How are channels motivated or incented? 26
- 27. How are channels motivated or incented? 27 Money! (what makes them the most) Training Marketing to the channel
- 28. An Example
- 29. Source: On Live, Los Angeles Times Publishers control market
- 30. Any Questions?
- 33. Step 1: Get
- 34. Customer Relationships Physical & Web Mobile Are Different © 2012 Steve Blank
- 35. Customer Relationships Physical Products – Get Customers © 2012 Steve Blank
- 37. What can we learn about how customers make decisions?
- 38. Customer Archetypes Drive Get / Keep / Grow • 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?
- 39. Customer Relationships Physical Products – Get Customers © 2012 Steve Blank CAC = Customer Acquisition Cost
- 40. Customer Acquisition Cost versus Sales Complexity Freemium No Touch Self- Service Light Touch Inside Sales High Touch Inside Sales Field Sales Field Sales with SE’s $0- $10 $50 – $200 $1,000 - $2,000 $3,000 - $8,000 $25,000 – $75,000 $75,000 – $200,000 Rough Estimates of Cost of Customer Acquisition (CAC) Source: David Skok Matrix Partners
- 41. Step 2: Keep
- 42. Customer Relationships Physical Products – Keep Customers © 2012 Steve Blank Customer Relationships Physical Products – Keep Customers
- 43. Customer Relationships Physical Products – Keep Customers © 2012 Steve Blank Attrition/Churn
- 44. Step 3: Grow
- 45. Customer Relationships Physical Products – Grow Customers © 2012 Steve Blank
- 46. Customer Relationships Physical Products – Get/Keep/Grow © 2012 Steve Blank LTV = Customer Lifetime Value
- 47. How will you Get, Keep, and Grow your customers?
- 49. Revenue Streams How do you Make Money?
- 50. The Two Key Questions • What’s my revenue model? • Within the revenue model – how do I price the product?
- 51. Revenue Model = the strategy the company uses to generate cash from each customer segment
- 52. Revenue Streams 1. How many will we sell? 2. Where/who is the money coming from? 3. How do we price the product? 4. Does this add up to a business worth doing?
- 53. Key Revenue Model Questions • What are my customers paying for? • What capacity do my customers have to pay? • How will you package your product ? • How will you price the offerings?
- 54. Pricing Model = the tactics you use to set the price in each customer segment
- 55. Common approaches to pricing Cost based Value based
- 56. Common approaches to pricing § Cost + markup § Typically not a strategic way to price § Driven by internal economics and not customer insight Cost based Value based § Based on buyer’s perception of value (e.g. time saved, new efficiency created, etc.) § Customers don’t necessarily feel that they want to pay this way
- 57. How to price the product? • Cost plus • Competitive pricing • Volume pricing • Value pricing • Portfolio pricing • “Razor/razor blade” model • Subscription • Time/Hourly Billing • Leasing (Pricing Models for physical products)
- 58. Payment Flow Leasing company Tenant Property Owners install meter send monthly water bill $9/month (2yrs) $200 one time water bill plus $2/month $2/month activities payments 1. Draw the diagram 2. Put in numbers
- 59. Market Type and Revenue
- 61. Existing Market Revenue Forecast
- 62. Resegmented Market Revenue Forecast
- 63. Other considerations • Distribution channel affects revenue streams • Market type affects revenue streams • Demand curve affects revenue streams • Consider lifetime value
- 64. “Direct” revenue models • Sales: Product, app, or service sales • Subscriptions: SAAS, games, monthly subscription • Freemium: use the product for free: upsell/conversion • Pay-per-use: revenue on a “per use” basis • Virtual goods: selling virtual goods • Advertising sales: unique and/or large audience
- 65. “Ancillary” revenue models • Referral revenue: pay for referring traffic/customers to other web or mobile sites or products. • Affiliate revenue: finder’s fees/commissions from other sites for directing customers to make purchases at the affiliated site • E-mail list rentals: rent your customer email lists to advertiser partners • Back-end offers: add-on sales items from other companies as part of their registration or purchase confirmation processes, or “sell” their existing traffic to a company that strives to monetize it and share the resulting revenu3
- 66. Asset Sale • Sale of ownership right to a physical product
- 67. Usage Fee • Usage of service. Fee is proportional to the usage of the service.
- 68. Subscription Fee • Fee for continuous access to a service
- 69. Renting • Fee for temporary access to a good or service
- 70. Licensing • Fee for use of some IP (including software)
- 71. Intermediation Fee • Often found in marketplaces of various types, a fee for bringing together two or more parties involved in a transaction
- 72. Advertising • Fee paid by brands and companies to get in front of potential customers