Start @ 15min

Eric Ries - The Lean Startup

Any sustainable company grows based on the actions of its customers

If a company is growing based on your actions, that's not sustainable.

The three engines of growth!

  1. Stickiness Engine - Keep people coming back
    • If you have customers, and they keep coming back - you will make money.
    • Can you get customers faster than you lose them?
  2. Virality Engine - Can I get people to invite their friends
    • If people invite their friends, I will grow.
    • How many will tell their friends and how fast or how quickly they do it. Cycle time is important to measure.
  3. Price Engine - I am going to spend money to get some customers.
    • How much money are my customers bringing in.
    • How much can I spend to acquire them - Is it costing me less to acquire a customer, then I get from that customer?

Dave McClure - Accelerator 500 Startups... Super Angel Investor.
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version

Pirate Metrics (AARRR) - Customer Life Cycle

  1. Acquisition
    1. How do your users become aware of you?
  2. Activation
    1. Can you get them to engage?
  3. Retention
    1. How do I get them to keep coming back?
  4. Revenue
    1. Can I extract money?
  5. Referral
    1. Do users go and promote your product.

Growth Hacking - How do I increase ALL of these things.
Using a combination of Humans & Machines to scale ably increase one of these.

The Order of how things happen is important

  1. Empathy (Understanding your customers need)
    • I've found a real poorly met need that a reachable market faces.
      Eg: Excellent Customer Development Example @18:30
      • Explain your product get feedback
      • End conversation - ask if they know someone who might find this useful
      • If they say NO -> it's a bad sign! they don't feel proud or smart enough.
        If they say YES - (put them on spot) ---> Ask if they can CALL them.
        If unwilling to call them - you are not proud of the idea, doesn't make you feel smart...maybe you wouldn't share even if you liked it
        If they call them - ask them to explain it to that person, now see if they tell your message to someone else.
        When they are done - Ask them if you can talk to them.
        • Customer Development is NOT soft and how they feel etc - If you end each interview with this, its easily measurable
          YOU DON'T NEED TO WRITE A LINE OF CODE TO TEST THIS IDEA
          Problem is not that you can build stuff...nobody cares.
          • % of People could name a friend
          • % willing to call the friend
          • % who picked up the phone
          • % willing to let you talk to them
          • % willing to meet. 
  2. Stickiness - Can I get people coming back
    • I've figured out how to solve the problem in way they will keep using and pay for.
    • Need to know what an engaged users looks like
  3. Virality - Getting them to tell their friends
    • I've found ways to get them to tell their friends, either intrinsically or through incentives.
    • No point in virality, if you don't have stickiness.
  4. Revenue - take money and use it to acquire more new customers.
    • The users and features fuel growth organically and artificially.
    • Virality before revenue - because when you have virality, your cost of acquisition is cheaper
  5. Scale - growing revenue or users in a non-linear way 
    • I've found a sustainable, scalable business with the right margins an a healthy ecosystem.

eg: SaaS user acquisition cost.
Avg user sticks around for say 2 years
6 months of revenue to pay the cost of acquisition --> then I am loaning every user money for six months  >> its a cash flow problem or working capital issue,
but your model works.

Question: Prepay --- its good, but you as business don't know when they abandon you (12 months later)...to minimize a load of customers falling off at the end of the year.
You want to implement "would you like to cancel" model to get feedback sooner and solve issue.
---The above applies if you are in the stickiness phase (you don't know what product you are building, still testing and improving)
If you are at Revenue & Scale - you won't be asking if user wants to cancel, you probably have other metrics to measure.

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Lean Analytics Framework

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