Your Customer Archetypes Drive How You 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?
Startups don’t fail because they fail to make something.
Startups fail because they fail to make something someone
wants to buy from them.
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XYZ is a web application.
We want to sell XYZ for $500 / month.
We will find customers via ads & social media.
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Paid Demand @ $1500 / 1k Clicks
Organic Traffic @ $0.00
Google Adwords= $1.50 per Visitor
= $0.00 per Visitor
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Paid Demand = $1.50 / Visitor
Organic Traffic = $0.00 / Visitor
Suppose half of the visitors came from the ads …
… and half came from tweets, etc.
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sign up now! [email protected]
submit
Learn about XYZ!We can’t wait to tell you all
about XYZ! Give us your email and we’ll be in touch soon!
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submit
Learn about XYZ!We can’t wait to tell you all
about XYZ! Give us your email and we’ll be in touch soon!
Leads
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Cost per Visitor = $0.75Visitor to Raw Lead
3%Raw to Qualified Lead
20%
Qualified Lead Cost = 0.75
0.03 * 0.20= $125
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Cost per Visitor = $0.75Visitor to Raw Lead
3%
Raw to Qualified Lead
20%
Closed Deal Cost = 0.75
0.03 * 0.20 * 0.10= $1250
Qualified Lead to Closed Deal
10%
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Cost per Visitor = $0.75Visitor to Raw Lead
3%
Raw to Qualified Lead
20%
= $1250
Qualified Lead to Closed Deal
10%
Marketing Cost Sales Cost = ?
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VisitorsRaw Leads (RLC)
50 Qualified Leads (QLC)
10Closed Deals (CDC)
1
Sales Cost
Sales Cost = (1,667 * RLC) + (50 * QLC) + (10*CDC)
1,667
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VisitorsRaw Leads
50 Qualified Leads
10Closed Deals
1
Sales Cost
Sales Cost = (1,667 * $2.00) + (50 * $20. 00) + (10 * $200. 00)
1,667
= $3,334 + $1,000 + $2,000 = $6,334
$2.00
$20.00
$200.00
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3% 20%
$1,250 + $6,334
10%
Marketing Cost Sales Cost= $7,584CAC =
Customer Acquisition Cost (CAC)
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Average Revenue Per User (ARPU)
ARPU = Total Revenue
Customers
Lifetime Value of a Customer (LTV)
65
Average Revenue Per User (ARPU)
ARPU = Total Revenue
CustomersGross Margin =
Revenue - CostRevenue
Lifetime Value of a Customer (LTV)
68
Churn
at 1%month 1 2 3 4 5
100 99 98 97 96 …
at 3% 100 97 94 91 88 …
at 5% 100 95 90 86 81 …
at 10% 100 90 81 73 66 …
Churn# months =1
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LTV = 0.01
Suppose ARPU = $500 per month & Gross Margin = 40% & Churn = 1% per month
1%
$500 * 0.4 = $20,000
Lifetime Value of a Customer (LTV)
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$1,250 + $6,334Marketing Cost Sales Cost
= $7,584CAC =
LTV = 0.01$500 * 0.4
= $20,000ARPU Gross Margin
Churn
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$1,250 + $6,334Marketing Cost Sales Cost
= $7,584CAC =
LTV = 0.01$500 * 0.4
= $20,000ARPU Gross Margin
Churn
SUCCESS!
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$1,250 + $6,334Marketing Cost Sales Cost
= $7,584CAC =
LTV = 0.03$500 * 0.4
= $6,667ARPU Gross Margin
Churn
FAIL!
The Balancing Act
Viral effects Inbound Marketing Free or Freemium Open Source Free Trials
Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties
Touchless conversion Inside Sales Channels Strategic partnerships
CACLTV
The Balancing Act
Viral effects Inbound Marketing Free or Freemium Open Source Free Trials Touchless conversion Inside Sales Channels Strategic partnerships
Field Sales Outbound Marketing
Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties
High Churn Rates Low customer satisfaction
CACLTV
Value proposition product cost, mkt size/share, competition?
Customer Relationships customer acquisition costs, conversion rates, lifetime value?
Market Type revenue curves
Operating Costs basic operating costs of the business?
Channel Channel margin, promotion, shelf-space charges?
Revenue Streams average selling price, # of customers/year, achievable revenue? Burn Rate per month? When will the company run out of cash?
Metrics That Matter
Revenue GoalsWhat you want to see
0
17.5
35
52.5
70
April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7time
revenue
Revenue GoalsWhat you want to see
0
17.5
35
52.5
70
April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7time
revenued$dt
Revenue Goals… the real question is:
0
17.5
35
52.5
70
April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7time
revenued$dt
how many customers?