MHR322 Exam 2 Prep

Identify LTV based on the following information for a co-working space: Price/month: $500 cost/month to the co-working management company: $100 average tenant use: 25 months

$10,000

Calculate Cost of Customer Acquisition (CoCA) based on the following information for a co-working space: Total sales & marketing budget: $1,000 Sales & marketing associated with bringing in new customers: $500 Number of new customers acquired: 5

$100

You have invented a new treatment for sick cows that will save farmers $1000/treatment. The cost of producing each treatment is $20. Assume you are following a 'value-based pricing' strategy. Which of the following is your best pricing option for maximizing your profits?

$300

The basic formula for Cost of Customer Acquisition (or Customer Acquisition Cost) is:

(cost of sales and marketing to acquire new customers)/(number of new customers acquired)

You have decided to launch a new board game. You estimate the cost per unit to be $12, your selling price will be $20 and your initial investment is $160,000. What is your break-even quantity?

20,000 units

Which part of the Business Model Canvas describes the types of relationships a company establishes with specific customer segments? Revenue streams Customer relationships (probs this one, but check) Value proposition Channels (THIS IS WRONG)

?

All of the following are considered additional or secondary roles in the decision-making unit EXCEPT:

Champion

Which part of the Business Model Canvas describes how a company communicates with and reaches its customer segments to deliver a value proposition?

Channels

Which part of the Business Model Canvas describes all costs incurred to operate a business model?

Cost structures

A good starting point for figuring out COCA is to figure out how long it will take one salesperson to sell product to one customer. The proportion of the salesperson's annual salary required to make the sale is the COCA.

False

And example of a 'consumables' business model would be a free website that sells your information to advertisers.

False

Because they could lose the full value of the investment if the company defaults on the loan, debt investors generally expect a higher return than equity investors.

False

One of the major advantages of crowdfunding is that it allows the entrepreneur to work directly with a producer or distributor instead of having to pitch their idea to potential customers.

False

The core process for Lean Startup is Build, Learn, Measure.

False

The persona for your product is also the primary economic buyer.

False

When calculating cost of customer acquisition, entrepreneurs tend to overestimate costs because they only remember the shortest sales cycles.

False

When you are trying to sell a new product or service, you usually only have to convince one key person to make the sale.

False

In the decision-making unit an influencer is:

The person with depth of experience whose opinion can affect the rest of the decision making unit

What is the best definition of the primary economic buyer?

The person with the authority to spend money to purchase the product

The best way to figure out the decision-making unit is to talk to your potential customer.

True

The best way to figure out the decision-making unit is to talk to your potential customers.

True

The business model you select and implement for your venture will have a significant impact on both whether you need to raise external capital as well as how you raise external capital.

True

The cost of customer acquisition (COCA) analysis begins with mapping the process to acquire a paying customer.

True

The primary goal of your short term sales process is to create demand for your product and fulfill those orders.

True

When identifying key assumptions about your venture, you should carefully review your "next 10 customers" list.

True

When mapping the process to acquire a paying customer, you should note whether payment will come from the customer's yearly operating budget or from the customer's long-term capital budget.

True

According to the Mullins article on customer cash, the model that connects buyers and sellers is

matchmaker model

All of the following are primary roles in the decision-making unit EXCEPT:

purchasing agent

When testing assumptions, even if "the dogs eat the dog food" you will still have to show that:

someone will actually pay for the dog food

The Lean Startup Approach is based on having a detailed, long-term business plan in place before talking to potential customers.

False

The MVBP should balance simplicity with the features that customers will pay the most money to acquire.

False

Which part of the Business Model Canvas describes the cash a company generates from each customer segment?

Revenue streams

An angel is a wealthy individual who is investing his/her own money.

True

MVP stands for Minimum Viable Product.

True

One of the most important reasons to map out the process to acquire a paying customer is to understand the length of the sale cycle.

True

Which business model charges customer for the products or services actually used or consumed?

Usage-Based

Companies engage in prototyping and experimentation in order to:

assess the viability of new products and services quickly

In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, the venture's failed efforts to coordinate deals with multiple automakers represent a flaw in which section of the business model:

key partners

In the decision-making unit, the most important role in determining whether your product sells is:

primary economic buyer

The primary economic buyer is:

the decision maker who will sign off on spending money

Use the following information. A new startup called DanO.com has launched a website where you can subscribe on a monthly basis to received inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: Monthly subscription sells for $15/customers/month Cost of sending out the email is $5/customer/month - expected customer life is 10 months Placing 1,000 Google ads will cost $200. 5% who see the ad go to the website to request more info Customers that request more information receive a personal sales call that costs $20/call. 60% of those who receive a call become a customer What is The Lifetime Value of a Customer at DanO.com? $180 $50 (THIS IS WRONG) $150 $100

$100

The lifetime value of a customer (LTV) is: The value a customer received from using your product during the product lifetime The total revenue associated with a customer (THIS IS WRONG) The total profit associated with a customer The value a customer received from using your product during the customer's lifetime

?

To develop an effective map for the process of acquiring a paying customer, it is important to: Figure out exactly who will make the final purchasing decision(THIS IS WRONG) Figure out whether the target customer fits your persona or not Figure out whether the various decision-making units have the budgeting authority to make purchases Figure out how much it will cost, in total, to acquire a customer(THIS IS WRONG)

?

Which part of the Business Model Canvas describes the most important things a company must do to make its business model work? Key resources (THIS IS WRONG) Channels Products and services Key activities

?

Calculating total addressable market for follow-on markets is essential relatively early in the venturing process because you need to be prepared to pivot if your beachhead market does not develop as expected.

False

Generally speaking, angels tend to invest in early stage companies after a venture capital firm has made an investment.

False

Giving away your product or service for free can be a viable business model as you sort out how to monetize it later.

False

Long-term sales processes are focused almost entirely on word of mouth and advertising.

False

Once you have identified your beachhead market, you should identify 10-12 adjacent markets and calculate TAM for each.

False

Which business model relies on the customer providing their credit card or billing information in advance and then being charged for small purchases, usually of digital goods with no physical value?

Microtransactions

In "A Broken Place," the follow-up article about entrepreneur Shai Agassi, it turns out that the "strategy" didn't work. "A Broken Place" looks more carefully at the business model of the venture, which was based on the idea that: People wanted to pay the lowest possible price for their car and transportation (THIS IS WRONG) People wanted their car to accelerate as fast as possible People wanted to ensure that their transportation had the least environmental impact possible People wanted to buy a transportation service, not a specific car as a product

People wanted to buy a transportation service, not a specific car as a product

Which of the following is the best definition of a business model?

The rationale of how an organization creates delivers and captures value

All of the following are key factors when designing a business model EXCEPT: How much value your product provides to customers What your competition is doing(THIS ONE IS WRONG) The strategy or core you will implement What the customer will be willing to do The incentives for your distribution channel

The strategy or core you will implement

Cost of Customer Acquisition (CoCA), also known as Customer Acquisition Cost (CAC), is best defined as: How much a customer is willing to pay in order to acquire the products or services you sell The total profit generated by a customer The total cost to acquire and keep a customer for a given period of time(THIS IS WRONG) The total sales and marketing cost required to earn a new customer

The total sales and marketing cost required to earn a new customer

A key real world lesson of the stories told about the electric car company "Better Place" in your readings is: No matter how good the innovation is, the venture will still fail if it doesn't have the right team to drive implementation (THIS IS WRONG) There are limits of innovation and it is difficult to get consumers to embrace new technology Getting consumer to embrace new innovation requires having the right technology at the right time in the right place When the innovation is compelling enough, consumers will embrace new technology

There are limits of innovation and it is difficult to get consumers to embrace new technology

A business model is a framework by which you capture value from customers based on the product or service you sell.

True

And Connie chance talk "when advertising isn't enough" she states that one of the key differences is that the large US consumer Internet companies typically have only one main revenue stream while those in China have multiple large revenue streams.

True

Calculating the total addressable market size for follow-on markets helps you stay aware of the long-term potential of your business.

True

Crowdfunding is a financing strategy where an entrepreneur uses an online platform to raise capital to fund the development or production of a new product or artistic creation.

True

Generally speaking, angels tend to invest less than venture capital firms.

True

Hayek argued that knowledge of time and place is more important than scientific knowledge in The Use of Knowledge in Society paper.

True

In the 'Fake It - Chapter 13' reading from "Sprint," creating a facade of a product can quickly get you 90% of the way to something that you can test with customers.

True

It is important to carefully consider your new ventures business model because it gives you many options to choose from and it is difficult to change your business model later.

True

Mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product.

True

Mapping your sales process strategy requires matching specific sales activities at each stage (short term, medium term, and long term) with the specific type of customer (or segment) you expect to reach with that activity.

True

Venture capital firms are primarily driven by financial returns; angel investors may have a personal interest in a specific technology or venture in addition to wanting a financial return.

True

Which part of the Business Model Canvas describes the bundle of products and services that create value for a specific customer segment?

Value proposition

According to the Art of Startups by Bhide, savvy bootstrappers will build relationships with potential banking partners:

before the venture is actually creditworthy enough to justify a bank loan

In the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that the goal of entrepreneurship is to:

build an organization that will outlive the founders

Which of the following tools would be the most useful for identifying key assumptions about your business idea that should be tested?

business model canvas/lean canvas

According to the Art of Startups by Bhide, successful bootstrappers focus on their strategic vision on:

cash

The author of disciplined entrepreneurship describes a "decision-making unit" as being made up of:

champion, economic buyer, and influencers

The best types of experiments to run as you prepare to launch your venture are:

cheap, quick, and easy

You should be able to identify likely price that would work for your customers by:

combining the information you have about your customer's budget process and purchasing authority

In the "Build, Measure, Learn" (lean startup) framework, the key lesson is:

create something to show customers and get their feedback as quickly as possible

Which part of the Business Model Canvas describes the different groups of people or organizations as enterprise aims to reach and serve?

customer segments

The two main types of external funding for ventures are:

debt and equity

Assume you have completed a CoCA/LV analysis for your startup company. You have found that your cost of customer acquisition is greater than the lifetime value of a customer. Based on this finding what should you focus on?

decreasing the cost of customer acquisition

If your MVBP (minimum viable business product) appears to be successful, then the next step is to:

develop a Product Plan that identifies which features should be assed to the next iteration of your product and targeted at the next market segment

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who are willing to pay more but also want attention and service are part of the:

early adopters

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who are pragmatic about purchasing new products and represent the group that will determine whether you can scale your venture are:

early majority

Think about a McDonald's happy meal which of the following consumer types is the most accurate for a parent? Influencer End user Champion Economic buyer

economic buyer

Mapping the process to acquire a paying customer usually requires all of the following steps EXCEPT: Estimating the per-unit cost of acquiring a new customer Identifying which members of the decision-making unit you will need to access Estimating how long it will take to generate a lead for a potential customer Estimating the time and effort required to make the actual sale

estimating the per-unit cost of acquiring a new customer

Companies that utilize the Lean Startup Approach will demonstrate:

experimentation

If your business fails, what happens to the money invested by angels or venture capital firms (equity investments)?

first you pay off any loans or trade payables (suppliers); if there's anything left, it might get paid out to the stockholders

Some ventures can secure customer commitment before having a definitive MVP. All of the following could be ways to accomplish that EXCEPT:

have a customer secure a grant from a government agency so that the customer can pilot the product

Price is important in the functioning of an economy because it _______

helps transmit information regarding supply and demand across the entire market

Lifetime value is important because it tells you:

how much total profit (value) you can expect from a particular customer, which tells you how much you can spend to acquire that customer

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who make conservative decisions requiring well-defined and proven information are the:

late majority

In the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that what distinguishes successful ventures is:

pivoting from bad ideas to opportunities that have good product-market fit

All of the following are good ways to reduce COCA EXCEPT:

target the largest customer segments first to reduce the effective cost on a per customer basis

Which of the following is not one of the nine building blocks of the business model canvas?

technology

In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, the business model began to fall apart when:

the actual car produced by the company was lower-end than planned, with less travel range, and a higher price

If a company that does not have assets that can be claimed if the venture fails, a bank or financial institution is likely to provide debt financing only if:

the company has had stable cash flow for a while and conservative expectations

Lifetime value of a customer should take all of the following into account EXCEPT:

the cost of acquiring the customer

In her talk on why business models matter, Ann Miura-ko of Floodgate Ventures says that she likes to see a business model for a new venture because it shows:

the key assumptions and hypotheses about why the venture could succeed

In the Commanding Heights video the Polish egg market was an example of:

the lack of price controls caused the prices to initially climb and then decline

Assume that a venture has successfully raised capital from outside investors in a Seed round of funding. Which of the following is most likely true as it progresses from a Seed round to a Series A round?

the perceived risk of the venture should reduced

In the decision-making unit, a champion is:

the person who wants the customer to purchase the product

According to the 'Fake It - Chapter 13' reading from "Sprint," it's not a good idea to invest a lot of time in untested product development because:

you'll become attached to the product and unable to take negative test results to heart