Homework Week 2

Thanks to everyone for participating yesterday in our 2nd group session for the Summer 2013 class.

Here’s the deck from today. We got through most, but not all of it. 

Special thanks to Savvo for taking us through the Challenge Map. This exercise is a good way to evaluate where you are and what you need to do next.

I don’t know about you, but I am fired up about 90% increase in incremental wine volume for the brand.

Did you say 90%? What? Holy crap. That is awesome!

Savvo is a really interesting story to me. I think it may be interesting to you as well.

Savvo Story

Participated in the Lean Challenge last summer

Worked hard, became Apprentice-level Entrepreneurs by end of the Lean Challenge

Didn’t win the contest, but continued to work on their startup, relentlessly and with purpose

Designed a good experiment to validate the solution hypothesis - Savvo’s in-store app will increase wine volume and revenue. 

Got 3 customers to agree to test and got them to pay $ to do it.

Now, Savvo has 30 days of real, in-store transactional data. 

Data show a 90% increase in incremental volume for brand & 11% increase in incremental category volume for retailer.

This. Is. Awesome.

Savvo is on their way to validating Product/Market fit. 

The next step is to convert these data into a compelling value prop and business case for the brand. I’m sure they are working to make new proposals to the current brand, new brands, current retailer and new retailers. 

How much money are we talking about? 

Let’s say the brand does $300 per store, before Savvo.

$300 revenue per store per month
1,000 stores
= $3.6MM annual revenue

After Savvo…

$300 * 1.9 = $570 revenue per store per month
1,000 stores
= $6.84MM

Incremental revenue = $3.24MM @ 60% gross margin = $1.9MM incremental EBITDA. That’s meaningful for a brand.

Ask them these questions before showing the results:

1. What is the average revenue lift from a marketing promotion?

2. What is the best promotion you’ve run in the past year and how much incremental revenue did it generate?

Then, share the 90% figure with them. Watch their eyebrows for reaction.

Now, how much should we charge the brand for Savvo? I think we are talking about real money here.

How many other brands are in these stores? Wow.

The question I posed in class was, “Do you have product/market fit?”

How will they know if they have product/market fit?

I think a good rule of thumb is 3 customers. 3 customers, who are in the same customer segment, who have purchased the same product, at approximately the same price and terms. Get 3 done and you are ready to start selling for real.

One is an anomaly. Two is momentum. Three is a trend.

For this week, please take a look at the homework assignment. We didn’t get a chance to cover these items in class, I will send some additional information.

In the meantime, go talk to more customers. Learn more about how they think about their problems and how your current solution might fit or not fit into their lives.

See you next week!

Dave