EIP: Week Seven

Given an idea for the product and a solid understanding of the customer, student teams now need to select the right business model for value extraction, which will be crucial for reducing the Cost of Customer Acquisition (CoCA) and increasing Lifetime Value (LTV) of each acquired customer. The business model needs to align with stakeholder interests, customer value creation, competition, and distribution dynamics. Examples include subscription models, transaction fees, and usage-based pricing, each with its own strategic advantages.

Pricing is essential for profitability and should reflect the value provided rather than just production costs. Different customer segments will respond to different pricing strategies, from enthusiasts willing to pay a premium to pragmatists seeking balanced pricing. 

To work out the 'unit economics' of the business, information about pricing is used to calculate a customer's Lifetime Value (LTV). This involves estimating total profits from a customer over their lifetime, which need to exceed the Cost of Customer Acquisition (CoCA). For this purpose, student teams will evaluate revenue streams, retention rates, and potential upselling opportunities, accounting for variable profits over time.

Next, the teams need to develop a go-to-market plan that aligns product and channel-market fit. For this, they need to select appropriate sales motions—whether automated, through resellers, or field sales—based on LTV and market maturity. The aim is to ensure scalability and reduce CoCA over time, which can now be calculated by assessing total marketing and sales expenses against new customer acquisition. 

Once this information has been gathered, teams can begin to shape the core content of their business plan web site. To lay the ground for subsequent work on refining and presenting the associated pitch, this week will also include a guest lecture on pitching skills.