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mhr exam 2
| Question | Answer |
|---|---|
| what is step 12 | determine the customers decision making unit |
| dmu - champion | the person who advocates or pushes for a purchase |
| dmu - end user | the person who uses the product |
| dmu - primary economic buyer | person who controls the budget and pays |
| dmu - primary and secondary | ppl with depth of experience who can influence the decision |
| what strategic mode must a team use when performing primary market research to gather info about the dmu | inquiry mode (investigating) |
| when the champion or primary econ buyer is not the same person as the end user, what specific action must the team take to prepare for the sale | adjust what would appeal to them |
| what should teams consider regarding budgeting to influence the primary economic buyers authority or purchase | does this person need approval from anyone else to sign off from budget (think b2b) |
| if the dmu structure map is inconsistent and there are no energing patterns, what does this mean? 2 answers | 1. the customers do not match the persona 2. the market has not been segmented enough |
| why is the purchasing department considered an obstacle that needs to be neutralized rather than another part of a business you sell to | they handle the logistics of the purchase. they want to drive prices down and disqualify the order based on rules. |
| what strategic question should the team ask to determine who holds veto power within the org | who could stop this from happening easily |
| what does it mean to map out the decision making process and why is it important | this is the process where the potential customer converts into a paying customer. helps give an idea of strategic steps, designing the business model, setting the pricing framework, and estimating the lifetime value of a new customer |
| what key factors must be included for each phase in the customer acquisition process map | 1. who are the key dmu 2. what is their influence 3. what is their budget authority, amount and type 4. how long will each phase take, realistic |
| how do regulations and standards impact the acquisition process map | businesses must consider govt regulations that could prevent selling ability. mapping out the process helps mitigate this. these regulations can make a market too difficult to enter even if the sales cycle is short |
| what are the common basic components of the customer acquisition process | lead generation access to influencers pre purchase planning purchasing installation post installation |
| detail the significance of a customers budgeting/purchasing authority on the sales cycle | f the product price is below the limit, decision could be made easier. above could lead to more people being involved and a longer process. this increases the sales cycle time and the cost of customer acquisition. op budget short s cap budget long |
| what 4 dimensions need to be balanced when optimizing the dmu and the customer acquisition process map | cost of customer acquisition lifetime value of new customer risk, sales cycle competitive position |
| what are the strategic trade offs between a simpler vs a complicated sales process | simplier dtc --> smaller CoCA complicated --> b2b usually, increased lifetime value bc a third party is paying. increases risk that competitors copy the product or that the key dmus change unfavorably before closing |
| what is the critical conceptual difference between a sales funnel and revenue loop | sales funnel - makes the acquisition map an actionable tool. the sales funnel itsself revenue loop - highlights that successful highly satisfied customers create a positive feedback loop meaning leads go back to the top of the funnel |
| how does the advocacy stage of the sales funnel benefit the business msot directly | advocacy - where the business is intentional w its investments to encourage happy customers to advocate for a product - leads generated from this feedback loop are high quality bc alr qualitied - short sales cycle - low CoCA - less need f triggers |
| list and briefly define the three post purchase stages of the first draft sales funnel | purchase, customer - the deal closed, the customer pays loyalty, satisfied customer - customer success process begins to help w installation , ensure value advocacy, evangelist - happy customer advocates for the product , revenue loop completed |
| why is overcoming the status quo so difficult. what analogy is used | status quo means what the customer is already doing. its easier for a customer to stick to their habits than change and purchase a new product. newtons first law of physics. an object at rest stays at rest unless acted upon by an external force |
| what is a window of opportunity and why is it important relative to dmu | important time period when the target end user, economic buyer, or champion will be most receptive to considering a product. think FMOT champion is especially important since theyre the engine |
| whats a trigger and why is it important in the window of opportunity | action a company takes within the WOO to help create a sense of urgency within the customer to take action. ex. discount, limited time offer, fomo, etc |
| why is TAM important and how does it relate to the beachhead market | quickly validate the existence and size of similar markets aka follow on markets that the business will try to tackle after they win the BHM - long term game plan to help w strategic plan and scalability |
| how is TAM for follow on markets calculated and whats a crucial aspect to consider ab its effect on BHM | tam is expressed in $/year in revenue if the company achieves 100% market share/ the calc should not district the team from targeting the BHM |
| why is calcing the BHM + follow on TAM important for attracting investors. whats the minimum threshold required | investors want to know exactly how big the opp can be. bigger number the better. need at least 20M a year. VC want up to over 1 billion |
| what is the first recommended direction for expansion into follow on markets and its primary advantage | upselling. selling additional products or applications to the same customer. think apple. or different flavors. benefit - business leverages exisiting investment and established channels |
| what is the second recommended direction for expansion into follow on markets and whats the main challenge | selling to adjacent markets. leverages success and learnings from BHM. requires product alterations to win new customer relationships. risk and can be expensive |
| which expansion option must entrpreneurers actively avoid and why | selling a new product to a new market. business isn't leveraging existing assets and lack market understanding |
| what metrics may complement or lead over revenue per year (standard) in the TAM calcuation for social enterprises | tons of c02 removed from atmosphere, lives saved |
| why is TAM for follow on markets calculated after the BHM | can learn more about strengths and weaknesses from BHM before taking on more risky markets. timing highlights that BHM must be won before trying to win other markets |
| whats the goal of setting a pricing framework | use quantified value proposition, business model, and other info to determine the first draft price point and framework. - can now calculate lifetime value of an acquired customer |
| whats a gold star rule for setting price, and what should you not rely on and why | need to set pricing based on the value the customer gets from the product rather than strictly basing on costs. costs based strategies can lead money on the table. Saas has low marginal cost so if prices were set on costs it wouldnt be asprofitable |
| what fraction of the customer value should a company aim to capture | 20%. think costco discount |
| how does a company's business model influence the % of value it can capture through pricing | it depends on the business model and associated risk subscriptions - higher bc customer can cancel at any time easier up front charge - lower bc customer pays in full, taking on more risk |
| how do dmu and the sales process inform key price points that are chosen | - show purchasing authority limits of ppl involved in the process to reduce friction points in the sales process |
| geoffrey moore framework - how do the pricing tolerances of the tech enthusiasts differ from the early majority | tech enthusiasts are the first buyers and are more price inelastic bc they are wtp a higher price for the product. early majority are more price sensitive |
| what is the recommended strategy for managing initial pricing compared to future pricing and why | price high initially. offer discounts - easier to drop the price than raise the price |
| why should pricing be flexible for early testers and lighthouse customers aka those that guide the companys product and strategy. what pricing should be avoided | both help improve the product and influence others to purchase it. serve as valuable case studies and references. avoid - do not discount ongoing products bc it communicates a low value |
| given that optimal pricing is uncertain, what should be avoided and is the saying to keep in mind | avoid analysis paralysis - doing nothing until the right decision is made. make best guess to maintain customer relationship whoever owns the customer relationship owns the gold |
| how significant is pricing in determining profitability | very important. global 1200 - 1 percent price increase 11 percent profit increase |
| what is unit economics and 2 top elements | numbers related to the profitability of an average customer or 1 unit. 1. lifetime value 2. cost of customer acquisition |
| what is lifetime value and how is it expressed | npv of profits from an average new customer over a 5 year period. $/customer |
| lifetime value calc | purchase val x freq x lifespan avg rev x gross margin % all / by churn rate |
| whats the relationship btw ltv and coca for business viability and why | ltv needs to exceed coca at some point to be profitability in the long run. goal is 3x greater than coca why - room for error. safe in risk and down states. overhead costs are covered (not included in ltv) |
| how does cost of capital rate influence the ltv calc. why is it high for startups | cost of capital is used to cal the pv - how much are future profits worth td. new startups it is high bc they lack a track record, credit, are illiquid bc they wont be profitable for years, less hard assets for collateral |
| whats a common mistake w ltv | need gross margin and cost of capital. need profit not revenue |
| what is gross margin and its role in ltv | price of product - production cost per unit dont include sales and marketing coca or overhead rd/admin |
| what are the 3 factors that act as levers to drive ltv | gross profit margin. how much profit per unit given costs customer retention rate - longer you keep a customer the higher the ltv. higher cumulative profits cost of capital - high cost os captial or interest means profits in the future = less value |
| revention rate vs next product purchase rate in ltv calc | rention rate - recurring revenue streams subscriptions 1 - churn rate churn rate - next product purchase rate 1 time rev streams |
| lessons from pets.com failiure regarding unit economics | did not analyze unit economics. the coca was high and ltv was low, not meeting the 3 to 1 ratio needed. this means there were low product margins and rention rates post free trail. |
| what prior analysis helps guide the selection of sales/rev motions and why is it important | ltv because it helps determine what decisions are econoically viable and affordable in the long term |
| what is channel market fit and why is continuously becoming the focus of success over product market fit | need to find the right channels for the market. pmf is necessary now but not enough. need to have strong gtm strategy |
| what is field sales and its needed ltv threshold | outside sales - calling on prospects in person. expensive. ltv of 50k or higher to be viable |
| customer success teams as a sales motion. why is it beneficial in driving rev | work w existing customers to portect value. makes a negative churn meaning customers stay for longer and help generate more leads |
| automated sales versus product led growth | automated - emails advertising big data product led growth plg - specialized automated sales where the product sells itself. ie slack, dropbox |
| whats the risk of channel resellers despite offering geographic coverage | they own the customer, not you meaning they own the gold. comapny may not fully understand consumers and lose a protion of profit margin to commissions |
| short term scalable strategy. whats the key focus of the scalabale revenue engine | demand creation, high touch period. founder led sales stage, missionary sales stage - think veda how the ceo uses connections |
| medium term strategy - how does strategy shift and which sales motions enter the picture or are emphasized | order fulfillment and client management to retain and increase ltv. lower cost motions to maintain customer interactions - inside sales, automated sales, plg, customer success |
| long term strategy - sales motions | more emphasis on fulfilling orders with minimal demand creation. same motions |
| when considering the gtm plan, what should be refined and updated | the sales funnel must be updated to a second draft. specify short medium and long terms. |
| what variable that determines business profitability is driven by the design of the scalable revenue engine | coca. used to compelte all important unit econ tests alongside ltv |
| whats the purpose of calc coca regarding business viability | simple but effective indicators of how attract and sustainable a scaled business will be. should be done prior to heavy invests made in the product developmet stage so money is not thrown out the window |
| what are major mitakes made regarding the estimation early on of the coca | usually underestimate the real and total costs. optiminist, fail to account for real life factors. |
| total marketing and sales expenses over time (TMSE t ) vs the install base support expense over time (IBSE t ) | tmse t is the total sales and marketing expensitures during a given time period ibse t is the cost of retention or maintaining and exisiting customer. includes customer success or other sales motions. ibse t - tmse t / new customers |
| what are the 4 factors related to customer acquisition that are overlooked leading to coca being lower than what happens | 1. not including all markeitng and sales costs ie. salaries, collaterial creation, website, trade show, whit epaper 2. underestimating sales cycle 3. forgetting those who forego and dont buy. did not convert must be included in coca 4. ignoring data |
| bottom up method - why is it ineffective for coca | 1. fails to incorporate all costs beyond just salary aka benefits, overhead, travel 2. false sense of accuracy created 3. assumes salespeople close 100% of deals. understanding costs associated w lost prospects |
| why is top down preferred for coca | aggregate all sales marketing exp over a given t and then divide all by total # of new customers within same t |
| how much coca trend over time | should decrease needs to be a fraction of ltv |
| time periods for coca short med long | short 1 yr med 2-3 long 4-5 |
| how to quickly decrease coca | increase # of units sold in a given t. market capacity and adoption rate can prevent this so make realistic forecasts |
| 4 strategic methods for long term decrease in coca | 1. automation 2. improve conversion rates 3. decreased sales cycle 4. focus on target and bhm |
| whats the biggest driver in decreasing coca and how is it measured | positive WOM. measured by net promoter score. shows customer advocacy |
| why is relying on direct sales problematic | expensive. |
| why are assumptions made before product development | price of poker aka continuing to pd continues togo up. need to make them before pd |
| what is the shift in mode when making key assumptions | from inquiry mode to advocacy mode aka building and promoting the product rather than understanding customer needs |
| negatives of skipping identifying key assumptions | use intuition or secondary research to inform assumptions but these could disregard a unique factor |
| key assumption vs lean startup minimum viable business product | assumptions are tested and identified. mvp tests these within the def of products |
| mvp mimum viable business product | systems test to confirm is customers are wtp. |
| key areas for assumptions | 1. personas value prop 2. gross margin and cost target accuracy 3. next 10 customer list aka lighthouse lunchpin customers 4. dmu |
| most val outcome of step 20 | team discussion |
| key principles for designing effective experiments | 1. simple low quikc quick 2. systematic creative 3. empircal unbiased data 4. decouple assumptions at least try to 5. based on the testable assumptions |
| methods to measure customer communitmend | prepay partially deposit letter of intent agree to a pilot |
| during testing which result provides more useful info and an example | experiment that invalidates assumption over confirming. etc. mixed results means marketing is not segmented enough |
| how to be truly certain it a market is sustainable | you only know it once its in market and ppl buy |
| what does a product need to be the minimum viable business product mvbp | 1. customer gets value 2. customer wtp 3. product can start feedback loop |
| why is the product being minimal important | startups cannot fund or spend crazy # of time. reduct investment, complexity. the challenge of removing features is paired w the endowment effect meaning tha tppl attach more value to ideas that they already own or have thought of |
| 2 important assumptions tested by the mvbp | 1. is meaningful value created 2. are they willing to pay for the product |
| whats the concierge concept | highly personalized hands on support in early stages. fale it til you make it to avoid investments until they know customers will pay. etc thrive hive testing the post card builder bc human teams fulfill them voer a suystem |
| stategic advantages of the conceirge approach | low costs, flexibility |
| how did the home team therapy ex demonstrate the important of a minimal mvbp | made it just an online vid for physcial therapy and a simple connection to a therapist. could test if patients would sign up and pay |
| what does it mean to combine the most important key assumptions into one product | first full systems test into a sumple products thats sold |
| thrivehive 3 ares of econ sustainabiltiy | 1. market acess - generating leads 2. sales process - selling to customer w unit econ that make sense 3. deliver value - deliver more than captured, aka low churn (high reention) high customer referrals |
| threshold for succes in bhm when yk u need to shift and expans | 1. strong psotiion in the market 2. de facto standard 3. dominant market share 20% or higher |
| staffing strategy related to market expansion using hunters and farmers | expanding - move the hunters aka those that like challenge of creating new markets to the new market repleace them in bhm w farmers who want to grow an existing market |
| what componenets must be addressed when developing a tech and prod roadmap | reprioritize adjacent markets how will u imporve product competitive positioning |
| how does the product plan address features that were intentionall not included in the mvbp | focusing on the bare minimum feature set. added based on persons needs |
| what balance is needed to ensure quality | feature focused and qulality focused releases |
| when selecting follow on market what r the 2 core requirments | 1 leverage the core bhm 2. be a logical next step |
| if u choose to sell a new product to the same bhm upselling aka . whats the focus of the product plan | identify the easiest things u can iplement in the plan that will increase value for the customer and the business |
| plans r nothing, planning is everthing | dont spend time on details, take action |
Created by:
tmanderson5