Three Questions to Answer Have we found a product/market fit? Who are our customers and how do we reach them? Can we make money and grow the company? Customer Discovery Phase 4: Pivot or Proceed Measure Customer Activation Seeing measurable velocity in your rate of customer activation is important If your web/mobile startup isnt seeing strong early signs of customer activation (sign-ups, referrals, return visits, upsells), stop and explore changes to the business model Customer Discovery Phase 4: Pivot or Proceed Bad Solution Fit Symptom:Tons of acquisition, very little activation Your potential customers agree youve hit on a problem or a need they care about and they come to learn more When they arrive, they dont like your proposed solution Customer feedback is vital here Customer Discovery Phase 4: Pivot or Proceed In case of Bad Solution Fit Probe customers feelings about the product, site or app, find out what they liked or didnt like about it Probe the messaging Did the product not deliver on the message (as in Lose 20 pounds tomorrow Was it their lack of confidence in the product, a lack of evidence (claims, testimonials, diagrams, demos) or poor messaging? Customer Discovery Phase 4: Pivot or Proceed Gather 1-1 Feedback Gather as much 1-1 feedback from both activators and non-activators What led the activators to sign up? What was missing in the pitch for the non activators? How could the company change the minds of non-activators? Customer Discovery Phase 4: Pivot or Proceed Gain Insight Through Data Look beyond customer acquisition statistics and identify the activated users or buyers by source, so you know where to find lots of them Always look at the data for each customer segment or cohort separately Look for patterns Some customers will usually prove far easier to acquire than others Customer Discovery Phase 4: Pivot or Proceed Web/mobile Checkpoint Examples Every new customer invites 10 friends, half of whom sign up A third of our visitors will return to the site within a week A quarter of our visitors will refer an average of 1.5 friends within a week Average session duration will be 10 pages or minutes per visit Average order size will be $50 in the customers first month Customer Discovery Phase 4: Pivot or Proceed Customer Validation Phase 1: Get Ready to Sell Phase 2: Get Out of the Building Phase 3: Develop Positioning Phase 4: Verify Customer Validation The goal is to form a repeatable and scalable sales funnel Customer Validation Phase 1: Get Ready to Sell Product Positioning Assembling Acquire/Activate plans Building the high-fidelity MVP Building the metrics toolset Hiring/assigning a data chief Customer Validation Phase 2: Get out of the building Get out of the building both virtually and physically to see if your plans and tools to acquire customers actually attract customers who activate or buy Do more than a handful of real customers behave as the hypotheses suggest they will? Acquisition and activation activities are measured and optimized Customer Validation Phase 3: Develop Positioning Refine your Get program tactics Gather and organize customer behavior data Collect feedback about the MVP itself and the effectiveness of acquisition tools Finalize product positioning Customer Validation Phase 4: Verify Odds are overwhelming that the optimum business model wont be found on the first or second try in validation The moment customer validation is over is when: customers accept the minimum viable product you prove that customers exist you figure out how to reach them predictably you craft a scalable plan to engage and sell many more Customer Validation Phase 1: Get Ready to Sell Product Positioning: Simple message that graps customers hearts and wallets, not their heads and calculators It is not about product features You should be able to condense the entire value proposition into a single sentence It will drive all your marketing communication Customer Validation Phase 1: Get Ready to Sell Product Positioning Statement For (target end user) Who wants/needs (compelling reason to buy) The (product name) is a (product category) That provides (key benefit) Unlike (main competitor) The (product name) (key differentiatior) Customer Validation Phase 1: Get Ready to Sell Product Positioning Statement Example: Mobiledough is FOR busy executives who travel a lot WHO WANT/NEED to do expense reports accurately in the least possible time And Mobiledough IS AN easy-to-use tool for receipt tracking and expense tabulation THAT PROVIDES a detailed weekly expense report in under 10 minutes UNLIKE expense report packages, Mobiledough scans, sorts and totals receipts and presents a near- final report draft for review in 11 popular expense reporting formats Customer Validation Phase 1: Get Ready to Sell You should be able to condense the positioning statement to a single, catchy tagline: Your dough, on the go. Fast, accurate, online Track your expenses while youre makin tracks Mobiledough. It just adds up, instantly, online Customer Validation Phase 1: Get Ready to Sell The positioning statement / tag-line should be emotionally compelling: Do customers heart rates go up after they hear it? Do they lean forward to hear more? Or do you get a blank stare? Is it understandable in the users language or unique in their minds? Does it save time or money or provide fun/love/glamour/status? Customer Validation Phase 1: Get Ready to Sell The positioning statement must pass the reality test (e.g. lose 30 pounds in a week, fall in love tonight), they should be credible Is your company a credible supplier for the product you are describing? If you are offering a product in an existing market, your unique selling proposition is about better, faster, or higher performance. If you are creating a new market or reframing an existing one, you need a transformational unique selling proposition Something people could never do before Customer Validation Phase 1: Get Ready to Sell Get: Acquire/Activate Customers In Customer Validation, we refine our get plans and build the acquisition and activation programs/tools You must attract customers to your site/app/product or they wont even know you exist Few reminders: You must figure out where your customers go when they are searching for a solution You must be vsible and inviting in as many of these places as possible You must earn their visits: With helpful, friendly info rather than hard-boiled sales pitches Customer Validation Phase 1: Get Ready to Sell The Acquire Plan and Tools: The Acquire plan helps you find tools that predictably deliver large numbers of good customers Develop weekly plan detailing: Who: Whos responsible for driving the program What: Describe the tactic and its parts Budget: Estimate of spending for the first round of testing Timing: Outline the steps needed to launch Why: Specific, measurable acquisition goals of each plan element Multi-sided or not: Do you have users, or users and payers? Customer Validation Phase 1: Get Ready to Sell The acquire plan and tactics will change repeatedly, since in customer validation they are basically a series of experiments Example Acquire Plan: Who: Two staffers are needed, one full-time and one half- time What: The tactics, chosen by the team, seem best-suited to maximizing leads and sales Budget: The startup has about $5k to spend for this Timing: 4 weeks Why: The goal is to get 30k-35k customers to download a free trial and to get 15% to convert to paying customers, this would achieve a CAC of 5$, as suggested in the plans revenue model hypothesis Customer Validation Phase 1: Get Ready to Sell In the Acquire Plan, based on your Customer Discovery experience Determine whom to acquire (i.e. which customers) What promotional tactics to use What to say and how to say it Dont be afraid to update or change the hypotheses based on the latest feedback They are still just best guesses confirmed by only a few customers Customer Validation Phase 1: Get Ready to Sell Things to remember: We are testing to figure out which tools work and cost effectively when they are launched during customer creation This is not a company or product launch Your primary goal is still learning, dont be afraid to test lots of alternatives Define success upfront for each test, using a pass/fail metric (e.g. one in five people will click) and monitor results Customer Validation Phase 1: Get Ready to Sell Things to remember: Define success upfront for each test Be interesting and welcoming, even fun/funny. Think like your customers: Be prominent and visible where you think theyll be searching for a solution like yours Instrument everything: Running tests without collecting data is a cardinal sin. Confront this upfront Dont start everything at once: Start SEO and PPC tests on Day Five, addand affiliate marketing programs 2-3 weeks later. Isolate individual program-by-program results will be easier to identify and measure Customer Validation Phase 1: Get Ready to Sell Things to remember: Dont spend more than $2k or if well-funded $10k to test any one thing (and this is Silicon Valley money): The startup usually cant afford it at this stage When a test seems to be working, ramp it up to make sure it stands the test of scale Beware of agencies for the most part Dont launch the acquire effort by itself: The rest of the incentive systems must be ready (Sign up today and get a box of chocolates) Customer Validation Phase 1: Get Ready to Sell For activation, the home or landing page must work hard: Why am I here? They want me to buy this new online multiplayer game What makes it special? Oh, heres a feature list and reasons to buy How do I know its any good? Heres a demo, list of endorsements, user quotes, etc. Where do I get more information? I see buttons pointing to free trials, more info, etc. Next? What does the company want me to do? Oh click here to try/buy/sign up Customer Validation Phase 1: Get Ready to Sell Developing the landing page: Content: Does the site present everything a customer needs to make the activation decision simply, in multiple places (ex. Does every page say join now)? Is it friendly informative and inviting? Look and feel: Does the appearance relate to the audience (ex. corporate for business apps, serious for financial sites, edgy for teen products)? Customer Validation Phase 1: Get Ready to Sell Developing the landing page: Functionality: Are their tools to quickly engage customers such as widgets, demos etc? Navigation/structure: How is information organized? How accsessible is it? How easy is it for users to complete high-valu tasks (ex. Ordering, searching etc.) Customer Validation Phase 1: Get Ready to Sell How to approach the Home/Landing Page: Tell me how I got here: Welcome and explain the site to avoid fast abandonment Reinforce the scent of the, ad, or tool that drove the customer to the page. Use similar verbiage, and look and feel Clear call to action: It should reflect positioning developed in Stage 1 of validation (ex. Buy now, sign up, attend a seminar. Customer Validation Phase 1: Get Ready to Sell The call to action should be used redundantly, in multiple places Clearly tell visitors what to do and why doing so delivers value to them The landing page should always: Explain what problem the product solves and why it is important Communicate ease of use Clearly explain how the product works Provide fast proof that it works (user quotes, competitive analysis, demos, etc). Customer Validation Phase 1: Get Ready to Sell Calls to action should stand out and be obvious to every visitor Highlight product features that make the most powerful pitch for activation or purchase Customer Validation Phase 1: Get Ready to Sell Guidelines for home/landing page content development: Encourage the user to experience the offer: Invite involvement, include try now textlinks Offer multiple calls to action, ranging from buy now, learn more, talk to someone Make most desired call to action more prominent Write short! Be specific: Your product-positioning statement should be well understood, tell users why they should buy Customer Validation Phase 1: Get Ready to Sell Be sure to provide information that establishes credibility: Product detail and information about the solution Customer resources and support Company background Current news and events Company contact info: postal, phone, and Companys privacy policy Phase 1: Get Ready to Sell Customer Validation Phase 1: Get Ready to Sell The Look and Feel: Keep it clean and simple, avoid distractions from the call to action Pick one promotional message and drive it the hardest (ex. free trial download, special introductory pricing this month) Leave plenty of white space (Dont use too much graphic) Customer Validation Phase 1: Get Ready to Sell The Look and Feel: Use visuals: Keep diagrams, charts, and graphics simple. Use animation carefully to add interest Use interactivity Use big buttons: Download, buy now, or sign up should be graphically interesting, sizable and easy to spot Customer Validation Phase 1: Get Ready to Sell Navigation: Its all about logical organization of information and shortest route to task completion Offer several routes to the call to action Confusing navigation is your enemy: Too many options leads to higher abandon rates Customer Validation Phase 1: Get Ready to Sell Use tools to invite customer engagement: Enter your age / answer three questions to learn how little this insurance costs Click here to see Facebook friends photos on our site Find young single women in your neighborhood right now Whats your favorite golf ball? Click here for deep discounts and free shipping! Customer Validation Phase 1: Get Ready to Sell Use a demo to engage users with the product and show off its features Make the demo more compelling than a Powerpoint When possible draw users into an actual functioning component of the product (put your data here or play this brief version The demo shoud end at the call to action Customer Validation Phase 1: Get Ready to Sell Offer free trials: With limited functionality or duration (try it free for two weeks) Follow up withs, offer tips, and provide reasons to buy Click to contact: Offer several ways for contacting the company Use animation: Interactive configurators, calculators, animated demos, microsites etc. to bring the product to life and engage the customer Customer Validation Phase 1: Get Ready to Sell Building a Metrics Toolset: Web/mobile businesses focus on data collection, analysis and optimization from the day they go live, till the day their doors close The products should be instrumented to measure every click on the website or app, its sources, and the action it causes Try it, measure it, tweak it Customer Validation Phase 1: Get Ready to Sell Two parts to building a metrics tool set: Determine which key business metrics need to be measured Develop a dashboard to collect and monitor data 19 th Century retailer John Wanamaker: I know I am wasting half of my advertising budget. I only wish I knew which half Customer Validation Phase 1: Get Ready to Sell Key metrics to measure: How many? How fast? How much? How good? How many customers are acquired, how many are activated? How many are lost and where? How fast do they arrive and how fast do they activate? How much does each acquisition and activation cost? How good are the customers being acquired? Active users/spenders with high retention or no stickiness? Customer Validation Phase 1: Get Ready to Sell Acquisition metrics: Total number of visits by visitor type, time of day, and source, and page views per visit Paid and referred traffic conversion rates by source, cost per acquired/activated user Quantities and percentages of referred traffic by source Unique behaviors or actions of subsets or segments of customers Customer Validation Phase 1: Get Ready to Sell Activation metrics: Total number of activations Number/percentage of activations, tracked back to the source Cost per activation Number of visits, page views, referrals per activated user by source and by cost Customer Validation Phase 1: Get Ready to Sell Referral metrics: Important because recommendations from existing customers are the most cost-effective source of new customers Key referral metrics: Number and percentage of users referred Referral acceptance rate Which incentives motivate the most new users to refer others Cost per referral Customer Validation Phase 1: Get Ready to Sell Using a dashboard: Do not overdo it with metrics: A few metrics generally tell the overall health story of the business Resist the temptation to generate complex, overwhelming collections of data how many, how much, how fast Customer Validation Phase 1: Get Ready to Sell Hire a data analytics chief: A web/mobile company needs a dedicated data analytics chief after the founders have discovered the key acquisition and activation metrics The analytics chief will drive continuous improvement At first one of the founders may take on this role Customer Validation Phase 1: Get Ready to Sell Responsibilities of the data analytics chief: Online optimization of targeted campaigns, managing all aspects of customer behavior reporting, tracking, analysis and optimization Management of all internal research, sponsorship, lead generation and promotion programs Development, management, and administration of plans, budgets, and results of marketing programs Customer Validation Phase 2. Get Out of the Building and Sell Prepare optimization plans and tools Get Out of the Building activation tests Measure and optimize the results Customer Validation Phase 2. Get Out of the Building and Sell Prepare optimization plans and tools: If 6 percent of visitors activate at launch, can we increase it to 10 percent or more? When visitors abandon after two page views, can navigation increase it to three? If 5% of visitors post a comment, how can you encourage more to do so? If the average cost per activated user is $1, how can you lower it to $0.75 or $0.80? Can we improveopen rates from 22% to 30%? Customer Validation Phase 2. Get Out of the Building and Sell Before you start, you need the following: A hi-fidelity MVP: It must be live and the product should look finished (Even if the MVP isnt fully featured) This is important for most accurate measurement of get customers program results The Acquire plan and tools:s, AdWords, banners, viral programs The Activate plan and tools: Landing page and follow-up activities A dashboard: To monitor customers behavior. It should be working and providing you with real-time data on results of acquisition and activation programs Customer Validation Phase 2. Get Out of the Building and Sell Optimization efforts should focus on: Volume: Acquire as many visitors as possible and drive them to the product Cost: Steadily improve the cost per activated custoemr Conversion: Increase the number of visitors who activate and become customers or users Customer Validation Phase 2. Get Out of the Building and Sell Get customers optimization for e-commerce sites: Start by optimizing traffic and initial orders Move on to focus on average order size Repeat orders Customer referrals Customer Validation Phase 2. Get Out of the Building and Sell Get customers optimization for multi-sided markets (or ad supported sites): Focus first on total traffic, then on members or subscribers Daily active users (DAU) Minutes of engagement Repeat visits and referrals Then move to the other side to maximize ad revenue, CPM, and sales pipeline Customer Validation Phase 2. Get Out of the Building and Sell Get customers optimization for marketplaces: Similar to e-ccomerce Number of vendors Seller acquisition and retention Liquidity (how money of the items for sale actually get sold) Daily transactions Average transaction size Customer Validation Phase 2. Get Out of the Building and Sell Keys to Successful Optimization Strategy: Know exactly why you are testing: e.g. to see if we can improve registrations, to see if free shipping increases orders. Dont overtest: Test the important things. Run controlled experiments: e.g. A/B tests should be done concurrently, not on different days. Always keep lifetime value in mind: LTV => CAC Customer Validation Phase 2. Get Out of the Building and Sell Keys to Successful Optimization Strategy: When calculating LTV use a meaningful time frame: This customer will be worth X over 5 years is wrong, you may not even be around. Calculate how long it will take for the customer to repay your get customers cost. Dont tackle too many optimization metrics at once Founders should be intimately involved Customer Validation Phase 2. Get Out of the Building and Sell Optimization tools: A/B Tests Usability Tests Heat Maps Eye Tracking Customer Validation Phase 2. Get Out of the Building and Sell A/B Testing: Compares one web page versiton with another to see which produces the best results Most used method for testing key landing-page elements Identify the key elements of your landing page that drive activation, test them sequentially Maintain a clear control group Customer Validation Phase 2. Get Out of the Building and Sell Usability Tests: Invite customers to the office / find random customers at Starbucks Watch customers explore uninterrupted while watching over their shoulder Make notes about where they went and where they didnt Follow up to learn why they did what they did Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Problem: I have a website but nobody visits Solution: Find mores, Tweet more people, beg friends to invite their friends, create a funny YouTube video and try to viralize Consider changing the URL Pay experts to optimize your site for natural search Do something crazy: Guerilla marketing, promotions, events, hand out flyers on street corners, etc. Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Problem: Visitors come to my site/app but dont stay Diagnosis: Something isnt clicking with your value proposition and product positioning. Solution: Start testing alternate versions Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Solution: Start by changing your messaging If you are using AdWords, pause all programs and start over. Spend more per click, change geography or hours, buy different AdWords, test alternate ads Test alternative calls to action: Offer something for free Change the offer: Use free trials, or develop other reasons why people should sign up Include multiple calls to action: Try now for free, learn more.. Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Solution: Interview lots of customers face-to-face. Find out what they like/dont like Look at your acquisition tactics you are using and rank them based on productivity Start with the worst performing tactics and test alternatives Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Problem: People visit but dont click Solution: Start by talking to customers acquired but not activated, call them, not just Find the page where people abandon ship Start testing stronger calls to action and improve navigation on the critical page Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Solution Do heat mapping studies to see what people are looking at, move calls to action closer to their eyeballs Test bigger, smaller, or different calls to action Conduct usabillity testing Test different fonts, graphics, and buttons Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Problem: People are engaging, but not doing what you want Solution: Start with heat maps to see what people are actually doing when they are on your site Start A/B testing by first testing your calls to action Make sure users can easily sign up, post a comment, buy, etc. Customer Validation Phase 2. Get Out of the Building and Sell Common optimization problems/opportunities Solution: Make sure your instructions are clear and your users follow them Test if people remember your headline or sell points five minutes after visiting Make sure your companys positioning and promise, plus endorsements or happy user quotes are prominent on the site to give users comfort Customer Validation Phase 2. Get Out of the Building and Sell Optimizing Keep Efforts: Use Cohort Analysis: A cohort is a group of customers with common attributes The key cohort is the customer activation date New customers can stay for months, older customers may tire after 3-4 months, new customers may visit 10 times a week, staying 20 min/visit, older customers visit twice a week 10min/visit etc. Customer Validation Phase 2. Get Out of the Building and Sell Optimizing Keep Efforts: Use Cohort Analysis: Averages may be deceptive You may be losing 8% of your customers, but they may all be heavy users or spenders Another important cohort is users by source: Do customers referred by Google stay longer than those referred by Yahoo/Facebook etc. Other cohorts: Free trial vs. payers etc. Customer Validation Phase 1: Get Ready to Sell Phase 2: Get Out of the Building Phase 3: Develop Positioning Phase 4: Verify Customer Validation Phase 3. Develop Positioning By now you should have more than 250 face-to-face customer interviews and thousands of online customer interactions You have real facts about why customers buy and real customers However thus far spending has been modest Before you scale, you need to be able to communicate what the product is and does, and why the customer should buy and use it Customer Validation Phase 3. Develop Positioning Matching positioning to market type: Existing market Compare the product to its competitors Describe how some feature or attribute of the product is better, faster = an incremental improvement The differentiation could also be in the distribution channel (pizza in 30 minutes, home delivery etc) Or in service (90-day money-back guarantee, lifetime warranty) Customer Validation Phase 3. Develop Positioning Matching positioning to market type: New market Its too early for customers to understand what the products features will do for them Describe the problem the product will solve and the benefits the customers will get from solving it = transformational improvement You have to communicate a vision and passion of what the product could become Customer Validation Phase 3. Develop Positioning Matching positioning to market type: New market What is it that your company is trying to change? Ex. When Airbnb first istarted, it had to communicate the idea of people wanting to rent out their homes to strangers Airbnb could not have just said rooms for $89 or sleep in a strangers bed, instead they talked about a sharing economy Customer Validation Phase 3. Develop Positioning Matching positioning to market type: Clone market If users are familiar with foreign sites, compare to them If not, treat as a new market Customer Validation Phase 3. Develop Positioning Matching positioning to market type: Re-segmenting a market Compare the product to its competitors If its low cost, describe price and feature set If a niche re-segmentation, describe how some feature or attribute of the product solves the problem customers have in a way comparable products do not Describe the benefits the customers will get from solcing their problem this new way Customer Validation Phase 4. Pivot or Proceed Key idea: Never use a PR agency The Customer Development team is clearly best- qualified to develop a first pass at what makes the company and the product unique You will only bring in experts during customer creation For now, you can develop positioning through an internal and external audit = asking simple questions (pg. 415 in the textbook) Customer Validation Phase 4. Pivot or Proceed Review the data: Results of your web get, keep, grow tests Details of your customer acquisition costs and viral coefficient, and the latest stats on page views per visit, visit frequency, user growth, and retention optimization User-testing results, showing the rate of improvement for activation, conversion, retention, and growth activities Customer Validation Phase 4. Pivot or Proceed Can the company acquire and activate a steadily-increasing number of customers at a cost in line with the cost structure? Are the customers being acquired demonstrate they will spend and stick with the company at rates that will deliver the revenue plan? Are customers referring other good quality customers, reducing the average acquisition cost? Customer Validation Phase 4. Pivot or Proceed In multi-sided markets: Are customers visiting often enough, participating actively enough, staying active long enough to attract enough revenue for the company to proceed? Customer Validation Phase 4. Pivot or Proceed A dozen numbers tell the story Value proposition: Estimated per-user cost of a user Market size Attainable market share Referrals or network effects Customer Validation Phase 4. Pivot or Proceed A dozen numbers tell the story Customer Relationships: Customer acquisition costs Prospect conversion and retention rates Viral coefficient: How many new customers or users will your current customers get you virally, for free? Customer Validation Phase 4. Pivot or Proceed A dozen numbers tell the story Cost structure: Other basic operating costs of the business Channel: Payment to app stores, marketplace sites, etc. Revenue: Average seling price, total achievable revenue, number of customers a year, how long or how oten customers will spend Burn rate: How much cash is/will the company burn a month? Customer Validation Phase 4. Pivot or Proceed A dozen numbers tell the story For multi-sided markets / ad-based businesses: Total active users Average page views per user per quarter Total page views per quarter Total CPMs to sell Customer Validation