Class Notes from April 3rd – Talk by Susan DelBene, CEO

I. There are two keys elements required to start a business: Mission and Positioning

  1. Mission – drives the company and people; focus is on long-term vision; never truly attained but is a goal to strive towards
    1. Simple, short, easy to understand
    2. Clarity essential to ensure consistency of understanding among everyone as to what the company ‘is’
    3. Important to create early in order to set priorities; will evolve over time
    4. Defines success – what does success look like for your company
  1. Positioning – how you want the outside world to view your company or product
    1. Name – equivalent to company’s name/URL
    1. Important for Internet company names – clarity, easy to spell, somewhat description, facilitates addressing/searches

b. Trademark immediately – outline context to file in terms of the space

    1. Brand – meaning associated with the name
    1. Investment to establish branding makes sense if the brand will add value to the company and is consistent with the long-term business strategy
  1. Building a customer base
  1. Customer acquisition through advertising
    1. define as finely as possible
    2. use targeted advertising (can be very expensive)
    3. Prioritize customer segmentation
  1. Can also cultivate general branding using demographics, behavior, psychographics
  2. Three metrics on the web re: building customer base
    1. generate traffic to your site to create awareness (put specifics for how you plan to do this in your business plan)
    2. utilize lists of email names from those who visit your site – promotional activities
    3. optimize opportunities with those who actually purchase something (‘customers’)
  1. Business Plan – detail how you’ll drive traffic to your site and how you will generate customers who will actually purchase
  1. Not all customers are equal
  1. Know the lifetime value of a customer – 3 considerations
    1. cost of attrition (‘zero defect’ philosophy)
    2. cost of customer retention
    3. cost of new customer acquisition
  1. Revenue stream over lifetime must exceed the cost to acquire customer
    1. – cost approx. $1,500 to acquire customer; est. lifetime profit = $350 (There’s something wrong with this picture.)
  1. Evaluate the value of partnership/alliance in order to obtain new customers
    1. Unless you have exclusivity, it doesn’t make sense to pay for highest tier/visibility on web portals
    2. AOL generated few new customers; generated lots of new customers
    3. Ask: who are the customers (in terms of demographics)? Where do they go (how can you find them/tap into them)? Does the portal have a channel that will actually capture paying customers for you?
    4.’s conversion rate is approx. 6% (6% of those who visit site make purchase)
    5. Other portal sites have conversion rate on average of 1% to 3%
    6. conversion from depended on the value in the offering – made sense to promote using ‘$10 off’ approach in order to get names and demographic information
  1. Advertising Trends
  1. More people are moving to off-line advertising
    1. Develop partnerships with organizations that share in the same customer demographics and who can drive those customers to your site (Example: promotion through McDonalds of first aid kit to parents)
    2. Restrict offline promotions to single use to avoid double-dipping
    3. In measuring new customer base, discount for non-repeats so you don’t overstate
  1. Portal site problems – low conversion rates; fueling drive to use more off-line advertising
    1. Evaluation criteria
    1. what is the reach of portal vis-à-vis your demographics
    2. what is your company’s need to do general branding on-line
    3. what is your willingness/expectation that you’ll be able to make up for higher customer acquisition costs down the line
  1. Offline Advertising
    1. Direct marketing
    2. Bulky mail
    3. Email – proper positioning can help avoid perception of ‘spamming’; don’t do repetitive mailing or too frequent mailing
    4. Connect promotion/advertising to an on-line activity (such as education newsletter) that users want but get your partners to send out the message to avoid issues with privacy
  1. Key to Media Advertising
    1. Call to action (purpose of short term campaign) – may combine with branding
    2. Branding (purpose of long term campaign)
    3. Promotion/discounts – tell someone what you want them to do
  1. Customer Retention Strategies
  1. Technology can be very helpful here to cultivate ‘stickiness’
  2. Methods
    1. Shopping lists
    2. Personalizing site
    3. Credit card information
    4. Loyalty programs
    5. Technology can be used to ease customer transition to your site/change behavior
  1. Research – use both qualitative and quantitative
  1. Types
    1. log analysis
    2. path finding
    3. external validation – perception of the product/how to use the product
    4. promotional analysis
    5. advertising analysis (for the Internet)
  1. Beta sites – make your mistakes with them because paying customers have higher expectations
  2. Smart to use marketing research company
    1. make sure you get critical mass so results are valid (appropriate scale)
    2. define how you intend to use the data and exactly what data are needed before collecting it
  1. Public Relations
  1. Take advantage of free advertising through 3rd party when profiled as ‘news’
  2. Endorsement by celebrity is expense but may really pay off
    1. select based on how target customers relate to the celebrity
    2. double-edged sword: if celebrity reputation sours, may rub off on your product
  1. ‘News’ approach works as well internationally
  2. VC firms have great connections with the ‘reporting’ world
  1. Business to business
  1. Advertising – generally spend less than B to C
    1. probably don’t need broad based advertising
    2. use industry standards that will target the market more precisely (SIC codes)
    3. should be SOLUTION oriented, not discount oriented

B. Selecting Channels

    1. can you help get their products out to the market/customer faster
    2. can your partners help you deliver that solution
    3. enhance context/infrastructure
    4. technology partnership – considerations
    1. big fish vs. little fish – will little fish be there tomorrow?
    2. as little fish, is the product unique enough to stand alone?
    3. get several partners in case some partners defect
    4. consider what enemies you will make by partnering with someone else

Some background on

Founded June 1998

Developed query processing engine that can function across multiple types of databases

Ready for beta testing; just closed 2nd round of financing

Currently employs 35 people

Enterprise product: slower sales cycle; bigger margin; very sticky once you acquire customer

Market opportunities: (1) improve/enhance the user/technical interface

(2) requires annual upgrades/service that will generate revenue stream

Selection of Beta Customers

Intellectual Property Issues (IP)

Next Steps for



Closing Remarks About Today’s Business Models

Successful business model – can you make money in a reasonable amount of time and with a reasonable margin?

Successful model solves real business problems