How to Start a New Business Using the Lean Startup Method (part 4 – customer relationships)

Launched in tech university entrepreneur programs in California, the Lean Startup Method is expanding to other universities across the United States. After studying the failures of tech startups, the main goal of the Lean Startup Method is to eliminate all time, energy and money spent on creating products or services that nobody wants to buy. This method is intended for startup businesses, but it can also apply to existing businesses that want to grow.

The fourth step, after focusing on a target customer, choosing a value proposition, and evaluating channels, is to decide how you will create and maintain relationships with your customers.

The three elements of this decision are how will you get, keep and grow customers.

Get: what tools and tactics will you use to attract customers? The most common tools are public relations, traditional and web advertising, email, webinars, direct mail, and trade shows. Tactics are focused on getting attention from others using publications in journals, speeches at conferences, writing blogs and guest blogs, posting in social media, and using public relations to get articles and interviews in publications and news media. The best tools and tactics for you depend on the choices you have made about customers, value proposition, and channels.

Keep: Once a customer has made the first purchase, what can you do to keep them as a customer? We have all seen the reports that say it’s much easier and less expensive to sell to existing customers than to find new customers. How can you do this? Some companies use loyalty programs, and others hold contests or events for existing customers. You can maintain your relationship with existing customers through newsletters, blogs, and social media posts. Think about the different ways that you will reach out to existing customers in ways they will find helpful, not spammy.

Grow: Here’s where you work to maximize the “lifetime value of the customer”. The lifetime value will be different for customers in different industries or demographics. How can you repeat sell, upsell (a more expensive offer) or cross-sell (a related product, like an accessory for a smartphone) your existing customers? What else do you have that will meet an ongoing customer need?

The work you have done to choose a target customer, define a value proposition, pick channels to deliver your information and your product, and figure out how to get, keep and grow your target customers will make it possible to take the next step, creating your revenue model.

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How to Start a New Business Using the Lean Startup Method (part 3 – channels)

Launched in tech university entrepreneur programs in California, the Lean Startup Method is expanding to other universities across the United States. After studying the failures of tech startups, the main goal of the Lean Startup Method is to eliminate all time, energy and money spent on creating products or services that nobody wants to buy. This method is intended for startup businesses, but it can also apply to existing businesses that want to grow.

The third step, after focusing on a target customer and choosing a value proposition, is to decide what channels the potential customer will use to discover your product and research your value proposition, and what channels you will use to get your product to the customer.

Customers can find your product and your company online (virtual channels), or by visiting a retail store or having products and services delivered (physical channels).

The channels you choose will make a big difference to your costs and your chances of success. Remember music stores? They sold physical products (records and CDs) through physical retail channels. Eastman Kodak sold physical film and paper through physical channels. Encyclopedia Brittanica and the Yellow Pages have been replaced by online competitors. The economics of online selling and delivery are driving industries and companies to move everything possible to virtual channels.

For many years computer software was a physical product (a CD or DVD) that the customer purchased from a retail store. Now almost all software is downloaded – no physical product. Netflix made a profit when their customers ordered movies online that were delivered and returned through the mail (physically). But since 2011 their DVD-by-mail business has been eclipsed by their streaming video (virtual) delivery. Amazon sells physical products through virtual channels. So does the shoe company Zappos. Both of them have to deliver the product through physical channels, but they have eliminated the need to have physical retail displays of their product. And by collecting customer product ratings, they add value in a way a physical store can’t.

Books, newspapers and magazines can be purchased and delivered physically, or ordered online and downloaded using services like iTunes  and products like Amazon’s Kindle reader and tablets sold by Apple, Samsung, and now Microsoft. How long will it be before all of these products are sold and delivered exclusively online? And what about education? Do students really need to be in class every day to get their high school diploma or college degree?

When choosing your channels, look for ways to move everything online.Most of the products in your home are still physical, like food, clothing, shoes, and electronic equipment. Electricians, plumbers and carpet cleaners will still be showing up physically. People probably won’t buy engagement rings online. But a startup business may find a competitive advantage by replacing something that competitors do physically with something done online. Or if you’re an existing business, a new competitor may displace you the same way.