Presentation examples used in Class 2 - Market Size and

Hypothesis Testing

The Lean LaunchPad

07/02/12

Market Size

How Big is This Opportunity?

Market/Opportunity Analysis

How Big is It?: Market/Opportunity Analysis– Identify a Customer and Market Need– Size the Market– Competitors– Growth Potential

How Big is the Pie?Total Available Market

Total Available Market

• How many people would want/need

the product?

• How large is the market be (in $’s) if they all bought?

• How many units would that be?

How Do I Find Out?

• Industry Analysts – Gartner, Forrester

• Wall Street Analysts – Goldman, Morgan

How Big is My Slice?Served Available Market

• How many people need/can use product?

• How many people have the money to buy the product

• How large would the market be (in $’s) if they all bought?

• How many units would that be?

How Do I Find Out?• Talk to potential customers

Served Available

Market

TotalAvailableMarket

How Much Can I Eat?Target Market

• Who am I going to sell to in year 1, 2 & 3?

• How many customers is that?

• How large is the market be (in $’s) if they all bought?

• How many units would that be?

How Do I Find Out?• Talk to potential customers

• Identify and talk to channel partners

• Identify and talk to competitors

TotalAvailableMarket Target

Market

ServedAvailableMarket

Market Size: Summary

• Market Size Questions:– How big can this market be? – How much of it can we get?– Market growth rate– Market structure (Mature or in flux?)

• Most important: Talk to Customers and Sales Channel• Next important: Market size by competitive approximation

– Wall Street analyst reports are great• And : Market research firms Like Forester, Gartner

Market Size Examples

The Opportunity

Chemical Catalyst Market= $7 B

Hydrogen-ation Catalyst= $1.5 B

Pd/C Catalyst = $1.1 B

Global Catalyst Market = $29.5 B• Emissions• Refinery• Chemical

MARKET SIZE

Giant Markets > Meat: $160B / Snacks: $70B > Meat Snacks: $4B

Varying Growth Rates> Meat: + 5%> Snacks: + 15%> Jerky: + 5%

Mega Consumer Trends Converging

> Healthy, More Flavorful, Higher Quality

Snacks Driven by Innovation / News

Meat Snacks / Jerky Generally Sleepy> Limited Innovation> “Gut Stuffer” Image

Change Underway Driven by New Entrants

> All-Natural> 10% Growth Latest 52 Weeks Nielsen F/D/M

2009 US Snack Food

A m e r i ca ns L o v e to Ea t M e a t a nd S n a c k

Retail Sales

Source: US Package Facts

Sweet$35B

Salty$30B

Meat$4B

$50 Billion Dollar Protein Therapeutic Market

$1.4 Billion Dollar Cell Line Sales Market

$140 Million Dollar Target

TAM: $6 B/yr>100K systems

worldwide

SAM: $1.5B/yrAssumptions: 25K pivots w/ 1 sensor/acre

(125 sensors/pivot)

Target Market: $50-75M/yrAssumptions: 3-5% licensingRecurring consumable costs

would add to revenue

Nitrate Sensor Market

Market size - Landlords & Rental Units

Rental Real Estate is the Largest “Mom and Pop” business in America: The vast majority of properties are owned by a single individual that owns only one property.

Source: US census data

2.20

0.46 0.06

Units by Landlord Portfolio Size in USA (millions)

Small: 1 to 4

Medium: 5 to 49

Large: 50 or More

Small: 1 to 4 Medium: 5 to 49

Large: 50 or More

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% 92%

77%

32%

% of Units, by Landlord Portfolio Size, Owned by a Single Individual

50% of the “Small” landlords own just one unit.

The market size for metastatic cancer diagnostics in the U.S. is estimated to be $805M p.a.

CanScan

U.S. population size

U.S. incidence of all cancers

% diagnosed with regional or distant cancers

Patients w/ regional or distant cancers

Cost of diagnosis and monitoring (annually)

Methodology: Value:

Cancers that spread to local or distant lymph nodes or organs

Weighted avg. patient cost p.a. for imaging procedures (2008)

x

=

=

x

U.S. Census Bureau estimate

Source:

ACS Cancer Facts & Figures 2011

NCI SEER 2011 data

JAMA. 2010; 303(16):1625-1631

x

Market size for metastatic cancer Dx / monitoring

=

Total U.S. population in 2012

Explanation:

313M

Treatment is typically given in the first year following diagnosis

0.512%

Total U.S. cancer incidence 1.6 M

39.4%

628,420

$1,285

$805M

20

Linear Lighting Market Size

20

Hypothesis TestingExamples

23

• Hypotheses to test

Hypothesis Test

There is strong Interest in facilitating rental maintenance support

Interviews (landlord and providers), web ad conversion

Service providers are willing to pay for lead generation through our site

Interviews (need to determine consensus willingness to pay)

There will be a higher response rate amongst tenants and landlords for an “exclusive” community

Interviews (tenant and landlord), survey (tenant), web ad conversion of different messages

Tenants are willing to pay a nominal fee ($1-2) for convenient rent/utility online payment service

Interviews (tenant), survey (tenant), web ad conversion.(Need at least 0.08% CPM conversion to be profitable)

Real Estate agents are willing to help push this offering to their customers

Interviews

Week 1 Week 3

Hypothesis• Existing prepaid cards add value

to a subset of the population – Underpenetrated

opportunity– We can find a better

channel to reach this customer segment and convert them

• Existing prepaid cards are flawed and can be improved

– We can do something clever to shake up the fee structure and/or build in a new feature (e.g., rewards)

• Solution = prepaid + loyalty card– Distributed at retail POS

Test

Interviewed supermarket executives, payment processors, private label card manufacturers, prepaid program managers, loyalty consultants, and data analytic firms

Results

User acquisition is critical user engagement is everything

Underpenetrated opportunity because people: Don’t understand the value

of the card Don’t know about the card Haven’t bought one yet

Potential customers are aware of and understand prepaid, but: Hate the fees Haven’t bought one yet

Week 3 Week 4

Hypothesis Test

Interviewed end users at Walmart, food banks, bus stops, payday lenders, their homes, and supermarkets

Interviewed execs at Green Dot, Rush Card, and NetSpend

Results

End Users see value: More likely to sign up for prepaid

via assisted POS sale Active vs. passive sale hypothesis

validated More likely to keep and reload cards

with ongoing cash rewards Higher retention via loyalty

hypothesis validated

Retailers see value: New revenue opportunity is

compelling Access to purchasing data outside

the store is compelling

Industry Trends Loyalty + prepaid programs are the

future

Industry execs like this idea a lot and are actively exploring it

• Existing prepaid cards add value to a subset of the population

– Underpenetrated opportunity

– We can find a better channel to reach this customer segment and convert them

• Existing prepaid cards are flawed and can be improved

– We can do something clever to shake up the fee structure and/or build in a new feature (e.g., rewards)

• Solution = prepaid + loyalty card– Distributed at retail POS

Week 4 Week 5

Hypothesis• Customer awareness and

education are key obstacles to customer acquisition and retention

• Channel: Assisted sale at POS trumps current passive j-hook sale

– Active sale enhances awareness & education

• Product: Combining prepaid + loyalty

– Cash rebates improve retention and incentive to reload

Test

$5 for 5 minutes campaign Speak to as many potential

customers as possible ask for an actual commitment

Results

20 preliminary signups

Built empathy around customer prepaid needs

Immediacy Security fears Fees Channels

Discovered other needs Job-seeking Saving for kids’ education

Understood observed behaviors High churn Lack of reloading Lack of regular usage

Loyalty component not required if you can service the true pain points

Team Deliverable by Tomorrow

• Hypotheses for each part of business model• Test for each of the hypotheses

– What  constitutes a pass/fail signal for the test (e.g. at what point would you say your hypotheses wasn’t even close to  correct?

• Plan to get out of the building to test the hypotheses

• Summarized in a 5 Minute PowerPoint Presentation– Business Model Canvas– Market Size– Getting out of the building plan

Don’t Over Think Your Hypotheses

Backup

IdeaBusiness ModelSize Opportunity

Customer Development