Lean LaunchpadLecture 5: Customer Relationships

Aaron EdenCreated by Steve Blank

Weekly Topics

» 5/12 – What to Expect» 5/19 – First Pitches» 5/26 – Experiment Day» 6/2 –Value Propositions» 6/9 – Customers, Users, Payers» 6/16 – Distribution Channels » 6/23 – Customer Relationships » 6/30 – Revenue Models» 7/7 – Partners» 7/14 – Key Resources & Costs» 7/21 – Lessons Learned Presentations

Agenda

» Team Presentations» Customer Relationships» Mentoring

Presentations

» What were your hypotheses about who/what your channel would be? Did you learn anything different?

» Did anything change about Value Proposition? » Update your Google Group with Business Model

Canvas» Draw your channel diagram

Verb Club

WionTV

Appstore Analytics

Forward Intelligence

City Recess

Source: http://giffconstable.com/

key activities

value proposition

customer relationships

customer segments

key partners

revenue streams

channelskey

resources

cost structure

CUSTOMER RELATIONSHIPS

What relationships are you establishing with each segment? personal? automated? acquisitive?

Retentive??

We Call Customer Relationships

Demand Creation• Get, Keep and Grow• How will customers hear about your product?• How much will it cost to acquire a customer using these

strategies?• How does market type impact my demand creation

strategy?

Customer Relationship Definition

GetKeepGrow

Get Customers

Who needs to hear about you?

End User

Influencer / Recommender

Economic Buyer

Decision Maker

Suppliers

Channels

Government

Partners

Demand Creation Getting Free UsersDemand

Creation

• Search Engine Optimization (SEO)• Blogging / Sharable content• Social Media / Gaming Mechanics• Communities• Proven viral coefficient >1

Demand Creation Paying For Users

Demand

Creation

» Public Relations» Demand Capture

˃ SEM˃ “Free” products (e.g. widgets)˃ Biz Dev˃ Affiliate Marketing

» Market Education˃ Webinars˃ Email marketing˃ Trade Shows˃ Analyst Reports˃ Direct Sales˃ TV / Radio

Get Customers Funnel - Physical

“Get Customers” Funnel

Keep Customers

Keep Customers Funnel - Physical

Get Customers Loyalty Programsproduct updates

Keep Customers

Customer check-in calls

Customer satisfaction survey

Earned and Paid

Media

Grow Customers

Grow Customers Funnel - Physical

Earned and Paid Media

Get Customers

Keep Customers

Grow Customers

Awar

enes

s

Inte

rest

Cons

ider

ation

Purc

hase

Keep Customers

Loyalty Programsproduct updates

Grow CustomersU

n-Bundling

Up-Sell

Cross-sell

Referrals

Customer check-in calls

customer satisfaction survey

Get Customers

Get Customers Funnel – Web/Mobile

“Get Customers” Funnel

Acqu

ire

Activ

ate

Viral Loop

Demand Creation Feeds the Sales Funnel

Earned and Paid Media

SEO

PR

Viral Mktg

SEO

SEM/PPC

Blogs/Website

Affiliate Mktg

Advertising

Tradeshows

Viral Loop

“Get Customers” Funnel

Acqu

ire

Activ

ate

Keep Customers

Keep Customers Funnel – Web/Mobile

Earned and Paid

Media“Get Customers”

Acqu

ire

Activ

ate

Viral Loop

Keep Customers

Affiliate ProgramsProduct updates

Blogs, RSS, emails

Contests,events Loyalty

Programs

Grow Customers

Grow Customers Funnel – Web/Mobile

Keep Customers

Contests,events

Blogs, RSS, emails

product updates Affiliate Programs

Grow CustomersN

ext-Sell

Referrals

Up-Sell

Cross-sell

Loyalty Programs

Acqu

ire

Viral Loop

Earned and Paid

Media

Activ

ate

• How many come through the first step?

• How much does that cost?• What is the conversion between

each level?• How much in revenues can you

get out of each acquired customer?

Demand Creation by Market Type

Existing

Resegmented

New

Clone

• Create, drive demand into your sales channel

• Educate the market about what’s changed

• Drive demand into channel

• Educate the market• Identify/drive early adopters into your

sales channels

• Copy a business

Market TypeExisting Resegmented New

Customers Known Possibly Known Unknown

Customer Needs Performance Better fit Transformational improvement

Competitors Many Many if wrong, few if right

None

Risk Lack of branding, sales and distribution ecosystem

Market and product re-definition

Evangelism and education cycle

Examples Google Southwest Groupon

How does market type influence demand creation?

Market Type determines: Rate of customer adoption

Sales and Marketing strategies Cash requirements

Homework - Web• Get a working web site and analytics up and running

+ Track where your visitors are coming from (marketing campaign, search engine, etc.) and how their behavior differs

+ What were your hypotheses about your web site results?• Actually engage in “search engine marketing” (SEM)• Spend $20 as a team to test customer acquisition

cost.• Ask your users to take action, such as signing up for a newsletter.• Use Google Analytics to measure the success of your campaigning.• Change messaging on site during the block to get costs lower, team

that gets the lowest delta costs wins.• If you assume virality

• Show viral propagation of your product and the improvement of your viral coefficient over several experiments

• What is your assumed customer lifetime value? • Are there any proxy companies that would suggest

that this is a reasonable number?

Homework – Non-Web• For non-web teams:

• Get prototype demo working.• Build demand creation budget and forecast.• What is your customer acquisition cost?• Did anything change about Value Proposition or Customers/Users?• What is your customer lifetime value? Channel incentives – does your

product or proposition extend or replace existing revenue for the channel?• What is the “cost” of your channel, and it’s efficiency vs. your selling price?

• Everyone: Update Google Group• What kind of initial feedback did you receive from your users?• What are the entry barriers?• Present and explain your marketing campaign. What worked best and

why?• Read:

• The Startup Owners Manual, pages 277-331 • Watch: Mark Pincus, “Quick and Frequent Product Testing and Assessment”,

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2313

Examples

“insero” = to plant ”gen” = gene

Manufacturing platform for rapid, cost-effective, and scalable

production of therapeutics in tobacco

Lucas Arzola (EL)Karen McDonald (PI)

Vasilis Voudouris (Mentor)

What We Know

» We have a novel technology platform with numerous market opportunities» Our working hypothesis – that we can scale up and commercialize our

platform for production of life-saving therapeutics» Jon Feiber – “Since you are a platform technology, it makes sense to

engage in ‘market discovery’ and ‘customer discovery’ at the same time during the next weeks”

» Challenging this hypothesis by speaking with as many experts and customers as we can

» This week: explored decision making and distribution channels in the case of a pandemic

The Business Model Canvas

Tobacco SuppliersGene Synthesis CompaniesCMOs - Purification - Fill & Finish- Packaging- QA/QCCROs- Clinical TrialsFDA

Capital InvestmentsManufacturing CostsLicensing CostsMarketing

Contract Manufacturing Fully Integrated Manufacturing (Sales) Licensing (Royalties)

Distribution through Government and Pharma Companies

Long-Term Contracts with Government and Vaccine Manufacturers

U.S. Government- CDC - HHS BARDA- DOD DARPAForeign GovernmentsNGOsVaccine Manufacturers-Established and Emerging Biotech

SpeedCost-EffectivenessRobustnessScalabilitySafetyEase of CustomizationU.S. Supply

R&DManufacturingRegulatory ApprovalLicensingMarketing

IP – Patents, Trade SecretManufacturing Facility

Target Product – seasonal & pandemic flu vaccines

Getting Out of the Lab!Cast a broad net by talking to many different experts and customers:

(1) Executives from large companies

Name Title Institution

Michael Girard Sustainability Manager Aerojet

Michael Jacobson Director of Corporate Responsibility Intel

Joseph Kieren Director of Corporate Real Estate AT&T

(2) Entrepreneurs and angel investors from SacramentoName Title Institution

Andrew Hargadon Professor of Management UC Davis

Wil Agatstein Professor of Management UC Davis

Larry Palley Former General Manager Intel

John Selep Operations Manager HP

Thomas Alberts Consultant SBDC

Cary Adams Head of MedStart Program SARTA

Getting Out of the Lab!

(3) Experts in the commercialization of biotech platform technologies

Name Title Institution

Greg McParland Consultant DSM Ventures

Fernando Garcia Senior Director Amyris

(4) Experts in vaccine manufacturing

Name Title Institution

Ann Arvin PCAST Vaccinology Working Group (Key Opinion Leader on Vaccines)

Stanford

Misa Sugui Associate Scientist MedImmune

Floro Cataniag Laboratory Manager MedImmune

Channels and Distribution

Conversation with Dr. Ann Arvin – Key Opinion Leader on vaccinesIn the case of a pandemic: Vaccine manufacturers have to be producing vaccines for seasonal flu –

regulatory approval, QA, and validation need to be in place When a pandemic occurs, the government (BARDA) negotiates a manufacturing

contract with vaccine companies – number of doses, formulation, price, and time are agreed upon

CDC provides the elucidated strain to the manufacturer FDA considers the pandemic flu vaccine to be a variation of the seasonal flu

vaccine – new regulatory approval is not necessary Vaccine manufacturers work with the new strain to ramp up production as

quickly as they can – takes 4-6 months Sterility and quality testing is performed for the produced vaccines – some tests

are done in-house and some are done by outside laboratories Vaccine is released

Channels and DistributionGetting the vaccines to the patients Vaccine manufacturers have contracts with wholesalers (i.e. McKesson Corp.)

to distribute the vaccines – distribution is not a cost for the manufacturers, they hand over the product

In the case of a pandemic, vaccines are also distributed through local contracts with the state health departments

They distribute the vaccines to hospitals and clinics, where they can be administered to the patients

Organizational StrategyConversation with Greg McParland – Former CEO of biotech platform company:

the virtual biotechnology company model» “Starting out and for as long as you can, you should be a virtual company. You can

have contracts to outsource the downstream part of the process (purification, fill and finish, packaging, etc.) ”

» “Keep your core technology and focus on using your manufacturing platform for protein production”.

» Common practice in biotechnology – almost every company has contracts with CROs, CMOs, marketing and distribution arrangements, etc.

» More flexibility – move quickly from failed avenues of research to more promising projects

» Startups partner with big pharma companies to complete clinical trials and take product to market

“If you build it, they will come” – but only build the essential core that lets you control your technology platform

More FeedbackConversation with Dr. Ann Arvin – Key Opinion Leader on vaccines Pain point: Reliability issues with traditional egg platform - willingness to move

away to a different manufacturing platform Pain point: Current platforms are not fast enough, cannot have an impact in case

of a pandemic - sense of urgency in finding a manufacturing platform that can produce vaccines faster and at a large scale

Given this landscape, we still believe our technology can solve a significant problem in the vaccine market

Conversation with Dr. Misa Sugui & Dr. Floro Cataniag – MedImmune Pain point: attenuated virus platform is harder to work with, safety measures are

more stringent – would prefer recombinant subunit vaccines Wish: a faster process for vaccine production (our technology can help with this) Wish: a faster process for clinical trials and for approval of new drugs (this we

can’t do anything about) MedImmune is a possible partner - always looking for new vaccine production

technologies and new products to incorporate in their pipeline

More FeedbackConversation with Fernando Garcia – Amyris Biotech platform technology company First target product: drug for malaria, partnered with Sanofi to commercialize Change in strategy: they have transitioned into making biofuels Why have they made this transition? We will follow up with one of the founders

of the company to find out

Next StepsWe believe we have a good feel for our value proposition

We need to better understand how we can sell to customers and how to establish these relationships, how partners’ decisions are made – meeting with Sanofi Head of External R&D

Keep searching for a business model that will allow us to commercialize our technology – looking for meetings with companies that distribute/sell flu vaccine antigens for research and diagnostic use, trying to determine market size

We need to talk to many more experts and customers…

Business Canvas

Interviews

Action MotionCustomer Interaction Meetings:1. Director of R&D of C/A partner2. NETL Methane Hydrate RG3. Ed Faust, Global Marketing, Siemens4. Former GE Employee5. Berkeley sensors group6. Tim Fogarty, Director of IW Energy

Hypothesis Testing:1. Ed Faust, Global Marketing, Siemens

Planned Hypothesis Testing:1. Dr. Gilad Kusne, NIST2. Ann Truschel, Corporate Insurance

Broker3. Tim Fogarty, Director of IW Energy

Planned Customer Interaction Meetings:1. Jeff Farbacher, CEO Accutran2. Ed Faust, Global Marketing, Siemens3. Charles Noll, Marcellus Shale Coalition

ClusteredC

lu s

te

red

nu

Direct Marketing

Possible

Not Possible[Too expensive]

Marketing AgencyChemical

Chemical,Physical,Thermal….

- Every significant market segment has specific marketing agencies directed towards selling them goods

Direct sales to plants typically is a very hard way to generate scalable business in the sensors market.

Typically much better to bundle product into offerings from larger sensors businesses

Agrees with current approach to this first market!