Lean Startup

Saturday 1st of October 2011 10:09:10 PM


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Challenges

  • Management
    • Setting priorities
    • Defining key metrics (and creating 'dashboards')
    • Reporting progress
  • Product/Service
    • Building the “right” features
    • Getting product out in a timely fashion
    • Testing for user conversion and adoption
  • Marketing
    • Accessing appropriate channels (Search, Social, New Media, etcetera)
    • Cost-efficient distribution

Three core models

  • Business models: define one-page business model [customer segments + desired actions and behaviors]
  • Conversion dashboards: identify critical conversion events and dashboard for each segment and prioritize
  • Marketing channels: test and develop marketing channels [measure Volume (#), Cost ($), and Conversions (%)]

Principles

  • Optimize products and marketing by means of fast iterations cycles and A/B testing
  • Collect usage metrics in real-time
  • Decisions are based on measured user behaviour – measure conversions; compare 2+ options and optimize for conversions
    • Design and optimize for conversion
  • Focus on user experience [and distribution]
  • Keep it simple and actionable

Optimize for “happiness” [both user and business]

  • Define states of user and business value
  • Prioritize (estimate) relative value of each state
  • Move users from lower value states to higher value states
  • Achieve low cost and high value at scale

Discover meaning

  • Top 10-100 words
    • Brand/Products
    • Customer needs/benefits
    • Competitor's brand/products
    • Semantic equivalents (and misspellings)
  • Relevant images
    • People
    • Products
    • Problems
    • Solutions
  • Call-to-action
    • Words
    • Images
    • Context
    • Emotion

Alternative high-level business models

  • Get users (= Acquisition and Referral)
  • Drive usage (= Activation and Retention)

Metric activities [AARRR]

  • Acquisition: users/visitors come to the site(s) from various Channels
  • Activation: users enjoy 1st visit, that is, they have a “happy” experience
  • Retention: users come back, visit site multiple times
  • Referral: users like the product/service enough to refer others
  • Revenue: users conduct some monetization behaviour

Roles and accompanying functions

  • 'BizDev'
    • Q: Which metrics? Why?
    • A: Focus on critical few actionable metrics
    • Hypothesize customer lifecycle
    • Target ~3-5 conversion events
    • Test, measure, iterate to improve
  • Marketing/Sales
    • Q: What channels? Which users? Why?
    • A: High volume (#), low cost ($), and high conversion (%)
    • Design and test multiple marketing channels and campaigns
    • Select and focus on best performing channels/themes
    • Optimize for conversion to target CTAs, not just site/landing page
    • Match/drive channel cost to/below revenue potential
    • Low hanging fruit
      • Blogs
      • SEO/SEM
      • Landing pages
      • Automated emails
    • Example marketing channels
      • Public Relations
      • Contests
      • Business Development
      • Direct Marketing
      • Radio/TV/Print
      • Dedicated Sales
      • Email
      • SEO/SEM
      • Blogs/Bloggers
      • Viral/Referral
      • Affiliate/Cost-Per-Acquisition (CPA)
      • Widgets/Apps
  • Product/Service Development
    • Q: What features to build? Why? When are you done?
    • A: Useful, unique features that increase conversion
    • Wire-frame your conversion steps
    • Measure, A/B Test and iterate fast (daily or weekly)
    • Optimize for conversion improvement

Simplified business model [users + conversions + priorities]

  • Q1: What types of people visit/use your website?
    • Visitor [average user/buyer]
    • Contributor [content contributor/seller]
    • Distributor [fan (unpaid)/affiliate (paid)]
  • Q2: What actions could they take to help you or them?

Marketing plan [AARRR]

  • Marketing plan = Target customer acquisition channels
    • Three important factors: Volume (#), Cost ($), Conversion (%)
    • Measure conversion to target customer actions
    • Test audience segments, campaign themes, CTAs
  • Match channel costs => revenue potential
    • Increase volume and conversions, decrease costs, optimize for revenue potential
    • Average Transaction Value (ATV), Average Revenue Per User (ARPU), Customer Lifetime Value (CLV)
    • Design channels that (eventually) cost <20-50% of target ATV, ARPU, CLV
  • Consider costs, scarce resource trade-offs
    • Actual $ expenses
    • Marketing time and resources
    • Product/Service time and resources
    • Cash-flow timing of expenses vs. revenue/profit

Principle: focus on one step at a time

  • Make a good product/service [Activation and Retention]
  • Market the product/service [Acquisition and Referral]
  • Generate revenue

Principle: apply “startup” model

  • Product
    • Build Minimum Viable Product/Service (MVP):
    • Demonstrate concept, reduce product risk, test functional use
    • Develop metrics
  • Market
    • Prove solution/benefit, assess market size
    • Improve product/service, expand market, test revenue
    • Test channel costs and revenue opportunities
    • Determine organizational structure, key people
  • Revenue
    • Get to sustainability
    • Marketing plan [predictable channels/campaigns and budget]
    • Scalability and infrastructure [customer service and operations]
    • Connect with distribution partners
    • Prove/expand market

Metrics

  • Acquisition
    • From marketing channels => largest volume (#), lowest costs ($), best performing (%)
    • Key metrics
      • Quantity
      • Cost
      • Conversions
    • Where are users coming from [acquisition methods]?
      • SEO/SEM
      • Blogs
      • Email
      • Social media and social networks
    • Keyword vocabulary
      • Your brand/products
      • Customer needs and benefits
      • Competitor's brand/products
      • Semantic equivalents and misspellings(?)
    • Things to analyse
      • Sources
      • Volume
      • Cost
      • Conversion
    • Tools
  • Activation
    • Example activation goals – what do visitors do on their first visit
      • Click on something
      • Account sign up/emails
      • Referrals/Tell a friend
      • Interact with widgets
      • Low bounce rates
    • Activation tips
      • Focus on user experience/usability
      • Provide incentives and CTAs
      • Test and iterate continuously
      • Key metrics (Pages per visit, Time on site, Conversions)
    • Example activation criteria
      • 10-30+ seconds page visit
      • 2-3+ page views
      • 3-5+ clicks
    • Do lots of landing pages and A/B testing. Iterate fast based on the results.
    • Tools
  • Retention (“Best practices”)
    • Life-cycle emails at +3, +7, and +30 days
    • Status/”Best of” weekly/monthly emails
    • “Something happened” emails
    • Make it easy to unsubscribe
    • Focus 80%+ on subject line (20% or less on body text) [?]
    • Q: How do users come back? How often? -> Cohort analysis
      • Distribution of visits over time
      • Rate of decay
      • Effective customer life-cycle
    • Retention methods
      • Automated emails (track open rate/CTR/quantity)
      • RSS/News feeds (track % viewed/CTR/quantity)
      • Widgets (track % viewed/CTR/quantity)
    • Example retention goals
      • 1-3+ visits per month
      • 20% open rate/2% CTR
      • High deliverability/Low spam rating
      • Long customer life cycle/low decay
      • Identify fans and cheerleaders
    • Retention tips
      • Email is simple and it works
      • Make “Unsubscribe” easy
      • Fanatics = virality + affiliate channel
    • Key metrics
      • Source
      • Quantity
      • Conversions
      • Visitor loyalty
      • Session length
    • Tools
  • Referral
    • Focus on driving referrals after users have a “happy” experience [average score >= 8 out of 10]
    • Referral methods
      • Send to friend via email/IM
      • Social media
      • Widgets [or embeds]
      • Affiliates
      • Viral growth
    • Tools
  • Revenue
    • [Pending]

Virality

Viral growth factor = X * Y * Z

  • X = % of users who invite other people
  • Y = average # of people that they invited
  • Z = % of users who accepted an invitation
  • A viral growth factor > 1 means an exponential organic user acquisition

Virality principles

  • Inviting should be a core process
  • The application/website should keep pulling people back in
  • The application/website has to be useful/fun even with no other users [Del.icio.us lesson: personal value precedes network value]






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