INNO 2004 x

From Intuition to Insight:

Desirability, Feasibility &

Viability

Week 5
 AGENDA - SESSION 5
1. Team Presentations

2. Market Sizing

3. Competitor Analysis

4. Channels

5. Revenues

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 SESSION 5
New ideas!

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 LAST WEEK - TO DOs
1. Review the Hypothesis Validation Board

2. Review the Hypothesis forms (Customer Segments & Value Proposition)

3. Interview guide & Interviews (minimum 20 people)

4. Survey guide & Surveys (develop for minimum 100 people)

5. Write (in blog) about traps & fallacies that may be applicable to your validation
results

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 TEAM PRESENTATIONS

1. Interview guide & Interviews (minimum 20

people)

2. Survey guide & Surveys (develop for minimum

100 people)

3. Overview of Blog and Landing Page

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 VIABILITY

“A viable business idea is a business which can be operated

successfully and smoothly i.e., it has maximum chances to
survive commercially and financially for the long term
taking the competitors into consideration.”, Quora
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 VIABILITY

“Business opportunity that is large enough and accessible

enough to be worthwhile investing.”, Fox University
x

Desirability is judged by customers or users; Viability is

judged by investors and/or resource providers.
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 MARKET SIZING

Problem-Solution-Market Fit
• What problem are you solving?
• How is the world a better place with your invention in the hands
of your customers?
• Does it save people time? Does it save people money?
• Is it similar to an existing product, only much better? Is it a
breakthrough invention, solving a problem that everyone has,
but no one yet realizes is a problem?

• Source: Libes, Michael 'Luni’, “The Next Step: Guiding you from
idea to startup” (Kindle Locations 179-181).

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 MARKET SIZING

Market
• Who are your customers?

• Are there sufficient number of customers to

make your business sustainably profitable?
(Segment size)

• How are you different from your competitors

to deliver your Value Proposition?

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 MARKET SIZING

Approaches
• There are tow ways to size de market: (1) Top Down and (2) Bottom Up.

Top Down
easier
good double check
Bottom Up
harder
more realistic

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 MARKET SIZING

Top Down Approach Universe

• Implies defining the universal target market Filter A

and applying various filters to continuously
reduce the value until achieving a potential
market estimate. Filter N

Potential Market
Estimate

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 MARKET SIZING

Top Down Approach - Example 1

The Australian government is planning to make social payments to farmers via their
mobile phones:
• Universe = Adults in the rural area = 2.5 million adults (Census 2016)
• Of which, 13 % are farmers (325,300) (Census 2016)
• Payment only works for those who have a mobile phone, which corresponds to 90%
(Census 2016)
• 60% qualify, based on the harvest results (CommBank, 2017)
• Potential Market = 2.5 million x 13% farmers x 90% with a mobile phone x 60%
qualified = 175,500 clients

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 MARKET SIZING

Top Down Approach - Example 2

Luxottica wants to introduce new eyewear in the Australian market to people (above 15
years old) who do not have 20/20 vision:

• There are approximately 24 million people in Australia (Census 2016)

• 82,2% are over 15 years old (Census 2016)
• 70% do not have 20/20 eye vision (Eye Health Australia, 2005)
• A pair of the new glasses sells for $100

• Potential Market = 24 million x 0,822 x 0,7 x $100 = $1.38 billion

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 MARKET SIZING

Bottom Up Approach
• Start by identifying customer segments we intend to achieve and then
make estimates of their size and growth.

• Unlike the Top Down approach, which includes different customer

segments and ignores some variables, such as operational restrictions,
the Bottom Up approach is more robust to evaluate market size.

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 MARKET SIZING

Bottom Up Approach - Example 1

• Where are water bottles for cyclists usually sold? In Bicycle Stores.
• How many bicycle stores are there in the USA? About 5,000 stores.
• How many of those stores are willing to sell and storage my bottle?
5% (or 250 stores)
• How many bottles does each store sell per year? 40 bottles per
store, per year.

• Potential Market = 250 stores x 40 bottles = 10.000 bottles/year

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 MARKET SIZING

Bottom Up Approach - Example 2

• Our store on Rundle Mall is visited every day of the week by about 1,500 people (the
shop is open 365 days);

• The average rate of conversion for such shops is 0.8%, so we estimate selling 12 pairs
of glasses per day at a price of $20;

• We can open another 20 stores per year, what is our potential market in dollars?

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 MARKET SIZING

Bottom Up Approach - Example 2

• Our store on Rundle Mall is visited every day of the week by about 1,500 people (the
shop is open 365 days);

• The average rate of conversion for such shops is 0.8%, so we estimate selling 12 pairs
of glasses per day at a price of $20;

• We can open another 20 stores per year, what is our potential market in dollars?
R: We can sell 91,980 pairs of glasses and get an annual revenue of around $1.75 million

Potential Market = 12 x 20 x 365 x 20 = $1,752,000

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 MARKET SIZING

Estimating Market Demand from a Segment

Reachable market Total addressable

(effort * resources)
Effort required to sell
through each channel
Segments, Channels to
reach them
market
Service/available
market (possible, given
segments)
Reachable (target)
market (given resources)

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 MARKET SIZING

TAM-SAM-SOM
• TAM = Your Total Available or Addressable Market (everyone you wish to reach with
your product)

• SAM = Your Segmented Addressable Market or Serviceable Market (the portion of TAM
you will target)

• SOM = Your Share of the Market (the subset of your SAM that you will realistically
reach – particularly in the first few years of your business)

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 MARKET SIZING

TAM-SAM-SOM

Source: http://en.wikipedia.org/wiki/Total_addressable_market

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 MARKET SIZING

TAM-SAM-SOM

http://matthewsonmarketing.com/2012/11/19/chapter-3-market-sizing-and-segmentation/

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 MARKET SIZING

Top-Down or Bottom-Up?

• Top-Down is best to estimate TAM and SAM

• Bottom-Up is best to estimate SAM and SOM

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 MARKET SIZING

How to size the market top down?

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 MARKET SIZING
Videos
TAM (3:55 mins) and JerseySquare Market Size (2:36 mins)

https://www.youtube.com/watch?v=_-N5u7i_Vgk&list=PL2J4B0FelZVRM20vdqtn-UYPt87c5C1wR&index=2
https://www.youtube.com/watch?v=xaoHNAGn1dg&list=PL2J4B0FelZVRM20vdqtn-UYPt87c5C1wR&index=3

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 COMPETITOR ANALYSIS

Value Proposition
• What is the problem that we are
resolving?
• Is it an important problem?
• What is the solution that we are
proposing?
• What is the value we provide to the
customer?
• What are the main attributes of our value
proposition?

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 COMPETITOR ANALYSIS

“Strategy is defined by what you won't do.

Excellence is defined by what you won't do
well. ”

Frances Frei, Harvard Business School

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 COMPETITOR ANALYSIS

Value Curve - Major Airline

7

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 COMPETITOR ANALYSIS

Value Curve - EasyJet

7

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 COMPETITOR ANALYSIS

Value Curves: Comparison

7

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 COMPETITOR ANALYSIS

Definition of Value Attributes: The Process

Step 1: Identification of Value Attributes

Step 2: Selection of Value Attributes

Step 3: Relative Evaluation of Attributes

Step 4: Comparison with Competitors

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 COMPETITOR ANALYSIS

Step 1: Identification of Value Attributes

• Each team thinks and writes about 8 key factors of differentiation from your main
competitors.

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 COMPETITOR ANALYSIS

Questions for Attribute Definition

• What is the experience that our clients seek?

• Which are the attributes that our clients value?

• Can we differentiate ourselves from our competitors through the experience that we
provide?

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 COMPETITOR ANALYSIS

Questions for Attribute Definition (Blue Ocean)

• Which are the attributes that the industry assumes to be important and can be
eliminated?
• Which are the attributes that can be substantially reduced compared to what is
common in the industry?
• Which are the attributes that can be increased far beyond what currently
characterizes the industry?
• Which are the attributes that can be created and that have never been offered by the
industry? Source: Kim, W C and Mauborgne, R: Blue Ocean Strategy, 2005

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 COMPETITOR ANALYSIS

Examples of Attributes
• Convenience • Design
• Speed • Environment
• Friendliness • Simplicity
• Price • Easiness
• Credibility • Entertainment
• Availability • Knowledge
• Location • Quality
• Variety • Capability

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 COMPETITOR ANALYSIS

Step 2: Attribute Selection

• Reduce to 8 by asking team members to select the attributes they consider most
important. 7

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 COMPETITOR ANALYSIS

Value Curve: ABC Bank

7

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 COMPETITOR ANALYSIS

Step 3: Evaluation of the Attributes

• Each team to make an evaluation of how they think the business is positioned in
relation to the competition in each of the chosen attributes

• On a scale from 1 (poor) to 7 (excellent)

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 COMPETITOR ANALYSIS

Value Curve: Commerce Bank

7

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 COMPETITOR ANALYSIS

Step 4: Comparison with Competitors

• Define who are the main competitors

• Make an evaluation on how each competitor positions itself in each of the chosen
attributes (if different, calculate average of team scores)

• Compare the different value propositions

• Discuss the outcome

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 COMPETITOR ANALYSIS

Value Curve: Commerce Bank vs ABC Bank

7

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 COMPETITOR ANALYSIS

Perceptual Map Supported by Data (2D)

A visual picture of how customers perceive different competitors.

Evidence Table
Option Price Look
X
Y
Z

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 COMPETITOR ANALYSIS

Examples of Perceptual Maps

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 COMPETITOR ANALYSIS

Examples of Perceptual Maps

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 COMPETITOR ANALYSIS

Competitor Matrix: Is there space?

High

Adapted by TL Hill from Hamilton and Kashlak article on CCSI

An analysis tool that helps you establish your
company's competitive advantage. It provides an
easy-to-read portrait of your competitive landscape

Competence
and your position in the marketplace.

Average

in Long Range Planning, 1995..

Competitors Size Competence Aggressiveness

Actual $ or
# People

Actual Ratings or expert

opinion

Low
Potential Investment or
public statements Passive Average Aggressive
Aggressiveness

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 COMPETITOR ANALYSIS

Examples of Competitor Matrix

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 COMPETITOR ANALYSIS

Examples of Competitor Matrix

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 COMPETITOR ANALYSIS

SWOT Analysis STRENGTHS WEAKNESSES

OPPORTUNITIES
THREATS

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 COMPETITOR ANALYSIS

SWOT Analysis
• SWOT stands for strengths, weaknesses, opportunities and threats.
• SWOT analysis is used by companies as a way to audit current business processes and
also monitor competitors.
• Once you know who your competitors are then the first step will be to complete a SWOT
competitive analysis to see which companies have an advantage over yours.

• Source: http://www.skuuudle.com/blog/your-guide-to-swot-competitive-
analysis#sthash.Q8ReDfFU.dpuf

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 COMPETITOR ANALYSIS

Strengths
• A company’s strengths are usually their competitive advantages. For example, if a
competitor has superb customer service and yours is lacking then your competitor
has a clear strength and advantage over you.
• When you find out what your competitors’ strengths are you can choose to match
these by offering the same level or better service or you could choose to exploit your
competitors’ weaknesses.

• Source: http://www.skuuudle.com/blog/your-guide-to-swot-competitive-
analysis#sthash.Q8ReDfFU.dpuf

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 COMPETITOR ANALYSIS

Weaknesses
• Every company has a weakness and examples could be long delivery times, old
customer data, limited marketing budget, poorly trained staff or a weak brand.
• When you find out what your competitors’ weaknesses are you can take advantage of
these by offering 24 hour delivery or upping your marketing efforts for example.
• Whatever weaknesses your competitors have, they can become your opportunities.

• Source: http://www.skuuudle.com/blog/your-guide-to-swot-competitive-
analysis#sthash.Q8ReDfFU.dpuf

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 COMPETITOR ANALYSIS

Opportunities
• Your SWOT competitive analysis will give you clear information on potential
opportunities. If you find that your competitors are dedicating their marketing budget
to purely offline work then you can ensure you maximise your online marketing
efforts and advertise offline too.
• Alternatively, if your competitors seem to be targeting everyone with the same
message then you can create niche marketing campaigns which focus on attracting
particular groups of customers.

• Source: http://www.skuuudle.com/blog/your-guide-to-swot-competitive-
analysis#sthash.Q8ReDfFU.dpuf

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 COMPETITOR ANALYSIS

Threats
• Threats to your company could include new competitors in your industry either from
new businesses or from existing businesses expanding their offerings.
• Price changes could also pose a threat to your company if a competitor starts to
charge much less for items which are similar to yours.
• Other threats could include competitors finding superior suppliers or distributors.

• Source: http://www.skuuudle.com/blog/your-guide-to-swot-competitive-
analysis#sthash.Q8ReDfFU.dpuf

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 COMPETITOR ANALYSIS
Video

Bill Gross: The single biggest reason why startups

succeed (6:40 mins)

https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed?language=en#t-283758

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 CHANNELS

Channels • How to communicate your value proposition?

• How to get your product/service to the

customers? And how to provide support?

• Which are the best channels for your existing and

new customers?

• Is there a link between the channels?

• What are the best channels in terms of costs?

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 CHANNELS

Roles of Channels
Marketing

Sales

Distribution

After sales support

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 CHANNELS
Free Marketing Channels Web Site

Email Marketing

Blogs

Company Social Media Customers

Communities

SEO

Viral Marketing

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 CHANNELS
Free Marketing Channels PR

Word of Mouth

Company Customers

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 CHANNELS

Paid Marketing Channels

PPC

Direct Mail

Tele-marketing

Company Customers
SEM

Press

Events

Fairs

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 CHANNELS
Paid Marketing Channels TV

Radio

SMS

Company Customers

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 CHANNELS
Direct Sales

Owned Shops
Sales Channels

Online Sales

Company Customers
Online Sales (3rd Party)

Partner Stores

Distributors

Dealers

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 CHANNELS
Pop-Up Stores

OEM
Sales Channels

System Integration

Company Customers
Value-Added Resellers (VARs)

Franchising

Consultant

Agent

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 CHANNELS

Get Customers – Recommended Channels

• Blog
Acquisition
Activation • Web Site

Retention • Email Marketing

Sale • SEO

• Social Media

• Free Tests

• Testimonials

• Viral Marketing

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Viral Marketing

“How to go Viral” https://www.youtube.com/watch?v=A_YaMGoCiwQ (8:50 mins)

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Keep Customers – Recommended Channels

Actualization • Blog
Communication
• Communities
Personalization
• Social Media

• Email Marketing

• Newsletters

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Newcastle Smart City Strategy

“The app is a simple, cost-effective way for Council to communicate with our customers and a highly efficient way
for them to notify us of tasks that need to be done,” lord mayor Nuatali Nelmes .

• GPS technology, letting members of the public identify public toilets, parks
and other council amenities

• “Report it' tool”

• Public property damage: locations or assets in need of repair

• Notifications on when to put out the bins

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 CHANNELS

Grow Customers – Recommended Channels

Recommendation • Blog

Cross-Selling • Web Site

Up-Selling • Communities
Next-Selling • Social Media
• Email Marketing
• Articles
• Recommendations

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 CHANNELS

Channels - Validation Process

1) Design
Business
Model

5) Analyse 2) Define
Results Hypothesis

4) Test 3) Prioritize
Hypothesis Hypothesis

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How to test Channels?

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Hypothesis Post-it #1
Component: Channels
Hypothesis E-shop will be our main sales channel
CH01
Test Create a shop online (through website or
landing page). Generate traffic and record the
e-Shop will information requests/email registrations.
be our main
sales
channel

Validation More than 50% of sales originated from

online shop

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Hypothesis Post-it #2
Component: Channels
Hypothesis Social networks will be the main marketing channel
CH02 to lead generation tactic
Test Create a fictitious pack in an online page. Record
Social Networks traffic and orders.
will be the main
marketing
channel to lead
generation tactic

Validation Get 10 orders in 2 weeks

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Hypothesis Post-it #3
Component: Channels
Hypotheses Agents will be an important sales channel
CH03
Test Talk to 5 or 6 agents and evaluate their interest.
Most business
deals will
come from
visitors to own
agents
Validation More than 50% agree to sell our product/service

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 CHANNELS

Validation Board

(Quadro de Validação)

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 CHANNELS

Exercise
• Define which free and paid marketing & sales channels are more appropriate for your business
model.

• What hypothesis regarding channels do you think need to be tested for your business model?

• How are you going to test them? (provide 2 examples)

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 CHANNELS

How to generate traffic?

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 CHANNELS

Facebook

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LinkedIn Ads

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LinkedIn Groups

Copyright Fábrica de Startups 77

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 CHANNELS

YouTube/Insta

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Google/Yahoo/Bing Ads

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Reddit Advertising

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 CHANNELS

Stumble Upon Ads

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 CHANNELS

Hacker News

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Scoop.it

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Pinterest

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Slideshare

Copyright Fábrica de Startups 85

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 CHANNELS

Lean Startup Circle

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 CHANNELS

Quora

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Amazon.com

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 CHANNELS

Blog Posts

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Blogs Comments/Posts

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 REVENUES

Revenue Sources • What are the different revenue

sources?
• What are the pricing models?
• How much are customers willing to
pay?
• What is contribution the of each
source for the overall revenue?
• How much are competitors
charging customers?

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 REVENUES

Direct Revenues

1. Transactions 7. Pre-Pay
2. Use 8. Freemium
3. Success 9. Pay-per-use
4. Renting 10.Intermediation
5. Licensing 11.Advertising
6. Subscription

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 REVENUES

Transaction

$1.500.000

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 REVENUES

Use - Pay for consumption

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 REVENUES

Success

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 REVENUES

Renting

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 REVENUES

Licensing

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 REVENUES

Subscription

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 REVENUES

Subscription

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 REVENUES

Pre-Paid

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 REVENUES

Pre-Paid

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 REVENUES

Freemium

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 REVENUES

Freemium

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 REVENUES

Freemium - Some back all others

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 REVENUES

Freemium - Free product and paid services

Services

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 REVENUES

Freemium - Backed by Advertising

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 REVENUES

Freemium - Get one free, pay the other

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 REVENUES

Freemium - Free product in exchange for non monetary

compensation

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 REVENUES

Pay-per-use
“Pay as you use it”

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 REVENUES

Intermediation

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 REVENUES

Advertising

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 REVENUES

Indirect Revenues
1. Referral revenues

2. Affiliate revenues

3. Renting mailing lists

4. Renting available resources

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 REVENUES

Referral Revenues

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 REVENUES

Referral Revenues

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 REVENUES

Affiliate Revenues

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 REVENUES

Affiliation Programs

https://affiliate-program.amazon.com/

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 REVENUES

Affiliation Programs

http://www.spreadshirt.com/

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 REVENUES

Renting Mailing Lists

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 REVENUES

Renting Available Resources

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 PRICING

Pricing Models
1. Cost Based Pricing
2. Value Based Pricing
3. Competitive Pricing
4. Volume Pricing
5. Portfolio Pricing
6. “Shaver” Price
7. Feature Pricing

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 PRICING

Common Approaches

• Cost + Margin

Cost Based • Focused in economic and internal

issues and not in the customer
• 2 to 5 times the Cost

•Determined by the customer’s

perception of value
Value Based •Shows more value then other
alternatives

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 PRICING

Competitive Pricing

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 PRICING

Volume Pricing

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 PRICING

Portfolio Pricing

www.appsumo.com

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 PRICING

“Shaver” Price

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 PRICING

Feature Pricing

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 PRICING
Discover Your Information Publishing Possibilities

“55 Ways to Earn Money”

Source: “55 Time-Tested Information Programs and Products”, John Eggen, Copyright Mission Possible

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 THIS WEEK - TO DOs
1. Calculation of TAM, SAM & SOM (for years 1, 2 and 3)

2. Value Curves, Perceptual Map and SWOT Analysis

3. Update the Business Model Canvas (if needed) and Blog

4. Hypothesis on Channels (3) and Revenue Streams – Develop

Validation Forms & Update Hypothesis Risk Matrix and Validation
Board

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 RECOMMENDED READINGS
• Business Model Generation” by Alex Osterwalder, pages 126 to 133

• https://www.matthewsonmarketing.com/chapter-3-market-sizing-and-segmentation/

• http://www.slideshare.net/profmanishparihar/segmentation-targeting-positioning-11607615

• http://steveblank.com/2010/03/01/death-by-analysis/

• “10 Pricing Strategies for Entrepreneurs” http://www.nurturetalent.com/10-pricing-strategies-for-

entrepreneurs/

• “My experiments in lean pricing” http://venturehacks.com/articles/pricing-experiments

• “The Manual-First Startup” http://viniciusvacanti.com/2013/05/07/the-manual-first-startup/

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SEE YOU NEXT WEEK !