The Lean LaunchPad

Lecture 3: Customers/Users/Payers

Steve Blank

Jon Feiber

Jon Burke

http://i245.stanford.edu/

Agenda

• Team Bus Model Presentations

• Customer Segments

CUSTOMER SEGMENTS

images by JAM

which customers and users are you serving? which

jobs do they really want to get done?

CUSTOMER SEGMENTS

images by JAM

which customers and users are you serving? which

jobs do they really want to get done?

Corporate? Consumer?

• Business to Business (B to B)

– Use or buy inside a company

• Business to Consumer (B to C)

– Use or buy for themselves

• Business to Business to Consumer (B to B to C)

– Sell a business to get to a consumer

– Other Multi-sided Markets with multiple customers

Customer Types

• Saboteurs

• Intermediaries (OEM’s and resellers)

Market Type & Ignoring Customers

• Clone Market?

• Existing Market?

• Resegmenting an Existing Market?

– niche or low cost

• New Market?

• When do I ignore customer feedback?

General Heuristics

• You need to talk to more customers than you

ever thought possible – 100’s physically, 1000’s

on the web

• “I left a message” or “I sent an email” doesn’t

count – it’s confusing motion with action

• Do NOT start at the top. You only get one

meeting. You’ll almost certainly look like an idiot

– First figure out the order of battle

Corporate Customers

Business to Business (B to B)

What do they want you to do?

• Increase revenue?

• Decrease costs?

• Get them new customers?

• Keep up with or pass competitors?

• How important is it?

• Problem or a Need?

Customer Problem

Customer Problem

Customer Problem

Customer Problem

Customer Problem

Customer Problem

Who’s the Customer in a Company?

• User?

• Influencer?

• Recommender?

• Decision Maker?

• Economic Buyer?

• Saboteur?

• Archetypes for each?

How Do They Interact to Buy?

• Organization Chart

• Influence Map

• Sales Road Map

Pass/Fail Signals & Experiments

• How do you test interest?

• Where do you test interest?

• What kind of experiments can you run?

• How many do you test?

How Do They Hear About You?

• Demand Creation

• Network effect

• Sales

If It’s a Multi-sided Market

Diagram It!!

buzzgroup

Consumer Customers

Business to Consumer (B to C)

What do they want you to do?

• Does it entertain them?

• Does it connect them with others?

• Does it make their lives easier?

• Does it satisfy a basic need?

• How important is it?

• Can they afford it?

Archetypes

buzzgroup

Consumer Customers

• Do they buy it by themselves?

• Do they need approval of others?

• Do they use it alone or with others?

How Do They Decide to Buy?

• Demand Creation

• Viral?

• SEO/SEM

• Network effect?

• AARRR (Dave McClure)

Pass/Fail Signals & Experiments

• How do you test interest?

• Where do you test interest?

• What kind of experiments can you run?

• How many do you test?

The Consumer Sales Channel

• A product that’s bits can use the web

• But getting a physical consumer product into

retail distribution is hard

• Is Wal-Mart a customer?

• More next week

Multi-Sided Markets

Business to Business to Consumer

(B to B to C)

Who’s The Customer?

• Consumer End Users, Corporate Customers

Pay

• Multiple Consumers

• Etc.

Multiple Customer Segments

• Each has its own Value Proposition

• Each has its own Revenue Stream

• One segment cannot exist without the other

• Which one do you start with?

Market Type

Definitions: Four Types of Markets

• Clone Market

– Copy of a U.S. business model

• Existing Market

– Faster/Better = High end

• Resegmented Market

– Niche = marketing/branding driven

– Cheaper = low end

• New Market

– Cheaper/good enough, creates a new class of product/customer

– Innovative/never existed before

Clone Market Existing Market Resegmented

Market

New Market

Market Type determines:

Rate of customer adoption

Sales and Marketing strategies

Cash requirements

Market Type

Existing Resegmented New

Customers Known Possibly Known Unknown

Customer

Needs

Performance Better fit Transformational

improvement

Competitor

s

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

Market Type - Existing

• Incumbents exist, customers can name the mkt

• Customers want/need better performance

• Usually technology driven

• Positioning driven by product and how much value

customers place on its features

• Risks:

– Incumbents will defend their turf

– Network effects of incumbent

– Continuing innovation

Market Type – Resementing Existing

• Low cost provider (Southwest)

• Unique niche via positioning (Whole Foods)

• What factors can:

– you eliminate that your industry has long competed on?

– Be reduced well below the industry’s standard?

– should be raised well above the industry’s standard?

– be created that the industry has never offered? (blue ocean)

Market Type – New

• Customers don’t exist today

• How will they find out about you?

• How will they become aware of their need?

• How do you know the market size is compelling?

• Which factors should be created that the industry has

never offered? (blue ocean)

For Oct 18th Presentation

• Talk to 10-15 customers face-to-face

• What were your hypotheses about users and

customers? Did you learn anything different?

• Did anything change about Value Proposition?

• What do customers say their problems are? How do they

solve this problem(s) today? Does your value proposition

solve it? How?

• What was it about your product that made customers

interested? excited?

• If B-B, who’s: decision maker, size of budget, what are

they spending it on today, how will this buying decision

be made?

• Update your blog/wiki/journal

Examples

Ying Wang (Lead)

Yu Lei (PI)

Mike Wisniewski (Mentor)

Landmine Clearance

NSF / ICORP Program

Technology Application

Sensing

Materials

Surveying, mapping

and marking of

hazardous areas

Removal of

landmines and

Unexploded

Ordnance (UXO)

Contacting…

• Flir (Fido).

• CEIA (metal detector company in Italy).

• United Nations (UN).

• Smith Detections.

Action: Sent email and made calls (703-678-2118).

Feedback: No answer on the phone. Waiting for email reply.

Action: Sent email.

Feedback: Waiting for email reply.

Action: Sent email (bradyj@un.org) and called (212-963-3344) to Mr.

Justin Brady, Acting Director, United Nations Mine Action Service (UNMAS).

Feedback: Waiting for reply.

Action: Sent email and called (973 496 9280) to Reno DeBono, Director

of Chemistry and Applications.

Feedback: Waiting for reply.

Landmine Clearance

Customer

Discovery

Customer

Validation

Pivot

Customer

Creation

Landmine Clearance

Speed: Government entities too slow for this process/program

Minimum feature set: Included too many variables (environmental, deployment)

Pivot

Obtain Near instantaneous customer feedback

Be: Fast, agile and opportunistic and formulated a dramatically new model

Customer

Discovery

Customer

Validation

Pivot

Customer

Creation

Explosive Detection for Transportation Hubs

Landmine Clearance

Speed: Government entities too slow for this process/program

Minimum feature set: Included too many variables

(environmental, deployment)

Pivot

Obtain Near instantaneous customer feedback

Be: Fast, agile and opportunistic and formulated a dramatically new model

Customer

Discovery

Customer

Validation

Pivot

Customer

Creation

The Business Model Canvas 1

1.US Army

2. Other Gov. Entities

3. UN1. Reliable

2. Cheap

3. Easy to use

4. Rapid

5. Large scale

1. Dedicate Personal

Assistance

2. Demo

3. Training

1. IP

2. Chemicals

3. Facilities

1. Production

2. Distribution

1. Manufacture of

machine

Production Sensing materials

Direct sales.

Distribution

1 Machine sales

The Business Model Canvas 2

1.US Army

2. Other Gov. Entities

3. UN

Airports

1. Reliable

2. Cheap

3. Easy to use

4. Rapid

5. Large scale

1. Dedicate Personal

Assistance

2. Demo

3. Training

Partner’s distribution

channels

1. IP

2. Chemicals

3. Facilities

1. Manufacture of

machine

2. Existing

companies: Smiths

Detection.

Production Sensing materials

4. Wider spectrum

Direct sales.

Distribution

1 Machine sales

1. Production

2. Distribution

Target Market

• Who am I going to sell to?

• Airports

• How large is the market be (in $’s)?

• $100 M

• How many units would that be?

• 200 M units

TotalAvailableMarket$4.8 B

ServedAvailableMarket

$1 B

Target Market$100 M

From Canvas version 1 to version 2

• What we thought: Government entities get to need landmine clearance techniques.

• What we did: contacted with the major demining organizations and the UN.

• What we found: Government entities too slow for landmine clearance program.

• What we have done: modified our business model.

• Here’s what are going to do: Contact with airports and Smith Detection.