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!
- 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?
- 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.
- 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.
Pirate Metrics (AARRR) - Customer Life Cycle
- How do your users become aware of you?
- Can you get them to engage?
- How do I get them to keep coming back?
- Can I extract money?
- 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
- 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.
- 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
- 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.
- 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
- 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.