MHR 322 exam 2 quizzes
A good starting point for figuring out COCA (cost of customer acquisition) 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. (T/F)
False
An example of a consumable business model would be a free website that sells your info to advertisers (T/F)
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. (T/F)
False
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. (t/f)
False
Giving away your product or service for free can be a viable business model as long as you sort out how to monetize it later (T/F)
False
In The Use of Knowledge in Society paper, Hayek argued that Centralized planning was a superior economic system because it allowed government experts with data to determine the price and production levels instead of leaving those decisions to a large number of individuals and businesses. (T/F)
False
The persona for your product is also the primary economic buyer. (T/F)
False
Mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product. (T/F)
True
More most new ventures, cost of customer acquisition will start very high and should decrease over time. (T/F)
True
One of the most important reasons to map out the process to acquire a paying customer is to understand the length of the sales cycle. (T/F)
True
Pricing should be based primarily on the value your customer gets rather than the cost to produce the product or service. (T/F)
True
The COCA analysis begins with mapping the process to acquire a paying customer (T/F)
True
The best way to figure out the decision-making unit is to talk to your potential customers. (T/F)
True
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 a. $10,000 b. Cant be determined c. $12,500 d. $15,000
a. $10,000
In "Build, Measure, Learn" Eric Ries tells the story of their instant messaging startup IMVU. They spent 6 grueling months developing the product, and when they released it: a. It went viral b. It had a rough launch but eventually caught on c. It didn't work d. No one even tried it
d. No one even tried it
Which part of the business model canvas describes the most important things a company must do to make its business model work? a. channels b. products and services c. key resources d. key activities
d. key activities
Once you have identified your beachhead market, you should identify 10-12 adjacent markets and calculate TAM for each. (T/F)
False
The 17 business models presented in Disciplined entrepreneurship represent the full set of possible business models you should consider for your venture. (t/f)
False
The Lean Startup Approach is based on having a detailed, long-term business plan in place before talking to potential customers. (T/F)
False
When they first start, most entrepreneurs have a pretty accurate sense of how much it costs to gain a new customer. (T/F)
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. (T/F)
False
A key part of the pricing process requires data collection and analysis on alternatives that provide similar benefits to customers. (T/F)
True
A top-down perspective on calculating COCA requires totaling all sales and marketing expenses for a given time period and dividing by the number of customers acquired (T/F)
True
Calculating cost of customer acquisition also includes the cost of trying to sell to customers who ultimately choose not to buy the product or service. (T/F)
True
Calculating total addressable market size for follow-on markets helps you stay aware of the long term potential of your business (T/F)
True
Customer acquisition cost analysis should take into account all sales and marketing costs, including salaries of salespeople, printing of brochures, cost of trade show exhibits, advertising, etc. (T/F)
True
Equity investors in early stage companies might expect return rates as high as 50%-60% per year (T/F)
True
Generally speaking, angels tend to invest less than venture capital firms. (T/F)
True
Hayek argued that knowledge of time and place is more important than scientific knowledge in The Use of Knowledge in Society paper. (T/F)
True
In Connie Chan's 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 many large revenue streams (T/F)
True
In the lean startup methodology, building a sustainable business is the outcome of a series of evolving product experiments (T/F)
True
It is important to carefully consider your new venture's business model because it you many options to choose from and it is difficult to change your business model later. (T/F)
True
Lifetime value of a customer can be calculated as the total revenues generated by the customer over time minus the operational costs of serving the customer. (T/F)
True
MVP stands for Minimum Viable Product. (T/F)
True
When a company uses debt financing, it receives capital in exchange for a promise to repay the capital, usually with interest payments as well. (T/F)
True
Use the following information: A new startup called DanO.com has launched a website where you can subscribe on a monthly basis to receive inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: Monthly subscription sells for $15/customer/month Cost of sending out the email is $5/customer/month The average customer subscribes for 10 months and then drops the service 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 Cost of Customer Acquisition at DanO.com? a. $40 b. $1200 c. $50 d. $24
a. $40
You run a t-shirt printing store. You estimate the cost of a single blank shirt + ink to be $12, and your selling price will be $18. The cost in time and materials to set up the printer for a new design is $60. What is your break-even quantity on a specific design? a. 10 shirts b. 3.33 shirts c. 5 shirts d. $6
a. 10 shirts
Customers may be resistant to purchasing a new or unfamiliar product. Steps that you can take to overcome this resistance include: a. Make it compatible with existing customer behavior b. Positioning the product close to competitor products c. Ensure that advertising and documentation clearly demonstrate how a customer would adjust behavior to best use the innovation d. Make sure the quality of the product is signaled by an attractively low price
a. Make it compatible with existing customer behavior
After your beachhead market, follow-on markets include: a. Selling new versions of your product to the same customers and selling your initial product to markets that are similar to your beachhead. b. Selling more of your initial products to the same customers and selling your initial product to markets that are similar to your beachhead. c.Selling add-on services associated with your product to the same customers and selling your initial product to markets that are similar to your beachhead.
a. Selling new versions of your product to the same customers and selling your initial product to markets that are similar to your beachhead.
In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, the business model began to fall apart when: a. The actual car produced by the company was lower-end than planned, with less travel range, and a higher price. b. The company did not get an opportunity to buy General Motors after GM went bankrupt. c. Agassi began spending money on non-essential things like a visitor center d. The company's Board of Directors ran into problems managing Agassi. Next
a. The actual car produced by the company was lower-end than planned, with less travel range, and a higher price.
In the Commanding Heights video the Polish egg market was an example of: a. The lack of price controls caused the prices to initially climb and then decline b. The lack of price controls had no impact on the market c. The continuation of price controls allowed for a steady supply d. The lack of price controls caused the prices to initially climb and then stay at that high level
a. The lack of price controls caused the prices to initially climb and then decline
According to "Fake it til you make it," the biggest problem with building a fully functional product / service rather than a (90%) facade is: a. The longer you spend working on a prototype or a real product, the more attached you'll become, and the less likely you'll be to accept negative test results. b. Fully functional products / services are really expensive to develop, and you might not have enough money to do marketing and advertising. c. Potential customers can clearly tell the difference between a facade and the real product and won't be willing to give you feedback.
a. The longer you spend working on a prototype or a real product, the more attached you'll become, and the less likely you'll be to accept negative test results.
Cost of Customer Acquisition (CoCA), also known as Customer Acquisition Cost (CAC), is best defined as: a. The total sales and marketing cost required to earn a new customer. b. How much a customer is willing to pay in order to acquire the products or services you sell. c. The total cost to acquire and keep a customer for a given period of time. d. The total profit generated by a customer.
a. The total sales and marketing cost required to earn a new customer.
Which part of the Business Model Canvas describes how a company communicates with and reaches its customer segments to deliver a value proposition? a. channels b. revenue streams c. value proposition d. key activities
a. channels
You should be able to identify likely price points that would work for your customers by: a. combing the info you have about your customers budget process and purchasing authority b. combining the info you have about total addressable market and the top priority of your persona c. combining the info you have about competitors and long-term market trends d. combining the info you have about the end user and your distributed channels
a. combing the info you have about your customers budget process and purchasing authority
Mapping the process to acquire a paying customer usually requires all of the following steps EXCEPT: a. estimating the per unit cost of acquiring a new customer b. estimating how long it will take to generate a lead for a potential customer c. estimating the time and effort required to make the actual sale d. identify which members of the DMU you will need to access
a. estimating the per unit cost of acquiring a new customer
In the video "To Raise Money or Not Part 2, the speaker explains that a key reason they chose to raise venture capital was: a. having the VC as an investor added credibility to their sales pitch to the companies they were targeting as customers. b. bringing the VC on board meant that the founders had significantly reduced work loads because the VC supported a lot of the operational activities. c. bringing the VC on early meant that they would never have to raise capital again. d. they needed an enormous amount of money that they just couldn't raise any other way
a. having the VC as an investor added credibility to their sales pitch to the companies they were targeting as customers.
In the decision-making unit, the most important role determining whether your product sells is: a. primary economic buyer b. influencer c. end user d. purchasing department
a. primary economic buyer
All of the following are primary roles in the decision-making unit EXCEPT: a. purchasing agent b. end user c. champion d. primary economic buyer
a. purchasing agent
Which of the following is NOT one of the 9 building blocks of the Business Model Canvas? a. team b. cost structure c. key activities d. key partnerships
a. team
The lifetime value of a customer (LTV) is: a. the total revenue associated with a customer b. the total profits associated with a customer c. the value a customer receives from using your product during the PRODUCT lifetime d. the value a customer receives from using your product during the CUSTOMER's lifetime
a. the total revenue associated with a customer?
Which part of the Business Model Canvas describes the bundle of products and services that create value for a specific customer segment? a. value proposition b. Revenue streams c. Key partnership d. Products and services
a. value proposition
In Disciplined Entrepreneurship, a customer is not always just a customer. which of the following is an example of a more complex customer situation? a. when you have a 2 sided market where multiple target customer types are needed b. when there are network effects that connect your customer via multiple channels c. when a single market includes multiple customer segments d. when your business model calls for both a primary customer and an economic customer
a. when you have a 2 sided market where multiple target customer types are needed
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? a. $1100 b. $300 c. $30 d. $19.99
b. $300
Which of the following best describes the key point in the 'Fake It- Chapter 13' reading from "Sprint" by Knapp, Zeratsky, & Kowitz? a. The first mover advantage is key to success b. Build just enough to learn, but not more c. Entrepreneurs need to move fast and break things d. Investors will only give funding to confident entrepreneurs
b. Build just enough to learn, but not more
All of the following are considered additional or secondary roles in the decision-making unit EXCEPT: a. Purchasing department b. Champion c. People (or organizations) with veto power d. Influencers
b. Champion
In Connie Chan's talk, "When Advertising Isn't Enough", she talks about the different business models used in China to sell e-books. Which of the following was NOT mentioned? a. Purchasing books 1000 characters at a time b. Customers bid on a limited number of e-books. c. Free books with a tipping option d. Free books that you pay to unlock the ending
b. Customers bid on a limited number of e-books.
In the video "Principles of Lean," Steve Blank presents a three-step process for the Lean Startup, including each of the following stages EXCEPT: a. Frame hypotheses b. Establish clear goals c. Test hypotheses d. Build incrementally and iteratively
b. Establish clear goals
Companies that utilize the Lean Startup approach will demonstrate: a. Indifference to costs b. Experimentation c. An emphasis keeping few employees d. A very low ratio of employees-to-managers
b. Experimentation
To develop an effective map for the process of acquiring a paying customer, it is important to: a. Figure out how much it will cost, in total, to acquire a customer b. Figure out whether the various decision-making units have the budgeting authority to make purchases c. Figure out exactly who will make the final purchasing decision d. Figure out whether the target customer fits your persona or not
b. Figure out whether the various decision-making units have the budgeting authority to make purchases
A software company allows customers to use the basic product without charge but charges customers who wish to access premium features (e.g. better search options). This is an example of which pricing model? a. Value pricing b. Freemium c. Pay-to-play d. Everyday low pricing
b. Freemium
B2B ventures should understand budgeting authority in the customer acquisition process because: a. The DMU includes the economic buyer who is likely also the budgeting authority at the organization. b. Many firms have an easier and faster approval process for operating budget expenses than capital budget expenses. c. Many firms have an easier and faster approval process for capital budget expenses than operating budget expenses. d. The DMU includes people with veto power who are likely also the budgeting authority at the organization.
b. Many firms have an easier and faster approval process for operating budget expenses than capital budget expenses.
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: a. People wanted to ensure that their transportation had the least environmental impact possible. b. People wanted to buy a transportation service, not a specific car as a product. c. People wanted their car to accelerate as fast as possible. d. People wanted to pay the lowest possible price for their car and transportation.
b. People wanted to buy a transportation service, not a specific car as a product.
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? a. The A-round investors will expect to get a higher rate of return than the Seed investors b. The perceived risk of the venture should reduced c. The entrepreneur will receive a personal financial return as a result of the A-round. d. The valuation in the A-round will be exactly the same as in the Seed round Next
b. The perceived risk of the venture should reduced
In the decision-making unit, an influencer is: a. An individual or organization with the ability to reject a purchase for any reason b. The person with depth of experience whose opinion can affect the rest of the decision-making unit c. The person who wants the customer to purchase the product d. The person or department who handles the logistics of the purchase
b. The person with depth of experience whose opinion can affect the rest of the decision-making unit
In the video on "Building the Minimum Viable Product," Eric Ries argues that the worst fate for any product launch is: a. a few customers like it but then no one else buys it b. customers give you no feedback at all c. the product does not work d. customers hate it
b. customers give you no feedback at all
Which part of the Business Model Canvas describes the cash a company generates from each customer segment? a. value proposition b. revenue streams c. Products and services d. Customer relationships
b. revenue streams
All of the following are good ways to reduce COCA Except: a. use word of mouth b. target the largest customer segments first to reduce the effective cost on a per customer basis c. stay focused on the target market d. improve conversion rate in the selling process
b. target the largest customer segments first to reduce the effective cost on a per customer basis
The primary economic buyer is: a. the person who will actually use the product b. the decision maker who will sign off on spending money c. the person with depth of experience who can influence the rest of the DMU d. the person or department who deals with the logistics of the purchase
b. the decision maker who will sign off on spending money
Which of the following is a key principle of the prototype mindset? a. prototypes are only as good as the ideas behind them b. the prototype must appear real c. prototype now, build later d. more prototypes are always better
b. the prototype must appear real
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 a. $2500 b. $200 c. $100 d. $5000
c. $100
Companies engage in prototyping and experimentation in order to: a. Determine the strategic direction of the overall organization. b. Develop peer-reviewed journal articles. c. Assess the viability of new products and services quickly. d. Develop peer-reviewed journal articles.
c. Assess the viability of new products and services quickly.
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? a. Decreasing the lifetime value of customer b. Increasing the cost of customer acquisition c. Decreasing the cost of customer acquisition d. Increasing the number of customers you acquire
c. Decreasing the cost of customer acquisition
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: a. Channels (distribution) b. Value proposition c. Key partners d. Revenue
c. Key partners
All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: a. Choose your business model with COCA in mind since some business models have higher costs and slower sales cycles b. Speed through the sales funnel c. Target the customer segments with the longest sales cycles so you have the most time to close deals d. Improve the quality of your leads (people who might be interested)
c. Target the customer segments with the longest sales cycles so you have the most time to close deals
Which of the following is NOT one of the 9 building blocks of the Business Model Canvas? a. Customer segments b. Channel c. Technology d. Value proposition
c. Technology
In the decision-making unit, a champion is: a. The person who will actually use the product b. The decision maker who will sign off on spending money c. The person who wants the customer to purchase the product d. The person with depth of experience whose opinion can affect the rest of the decision-making unit
c. The person who wants the customer to purchase the product
Which business model sells product at a very low margin but incorporates high-margin add-on products? a. Consumables b. Transaction fee c. Upsell with high-margin products d. One-time upfront charge plus maintenance
c. Upsell with high-margin products
In the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that the goal of entrepreneurship is to: a. advance society to the benefit of all people. b. create value to reward the people who generate innovations. c. build an organization that will outlive the founders. d. bring innovations to market as quickly as possible.
c. build an organization that will outlive the founders.
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: a. Whether a venture capital firm should invest in the venture or not b. whether the venture's underlying technology will work or not c. the key assumptions and hypotheses about why the venture could succeed d. whether the team is capable of implementing the business
c. the key assumptions and hypotheses about why the venture could succeed
The basic equation for calculating LTV (lifetime value) of a customer is: a. (Average Value of a Sale) X (Number of Repeat Transactions) / (Average Retention Time in Months or Years for a Typical Customer) b. (Average Price of a Sale) X (Number of Repeat Transactions) X (Average Time To Acquire a Typical Customer) c. (Average Price of a Sale) X (Number of Repeat Transactions) / (Average Retention Time in Months or Years for a Typical Customer) d. (Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
d. (Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
The basic formula for COCA is a. (Total cost of all the company's sales and marketing)/ (number of new customers acquired) b. (Total cost of all the company's sales and marketing)/ (total number of company's customers) c. (Cost of sales and marketing to acquire new customers)x (number of new customers acquired) d. (Cost of sales and marketing to acquire new customers)/ (number of new customers acquired)
d. (Cost of sales and marketing to acquire new customers)/ (number of new customers acquired)
When considering raising capital for a company, the "Syndicate" refers to: a. A group of decision-makers at a financial institution (like a bank or mutual fund) that determine which investments to make. b. A shadowy entity related to the Hoofer Sailing Club that always seems to determine the winner of Commodore's Cup. c. The group of managing partners at a venture capital firm that ultimately select the start-up companies to invest in. d. A group of people or institutions who participate in the investment together.
d. A group of people or institutions who participate in the investment together.
In the "Build, Measure, Learn" (lean startup) framework, the key lesson is: a. It's good to have construction toys, like LEGO, around for people to use at a startup company to encourage creativity b. The first critical step towards success is to build a working prototype of the fully functional product c. Perseverance, creative genius, and hard work are the key to success. d. Create something to show customers and get their feedback as quickly as possible
d. Create something to show customers and get their feedback as quickly as possible
Lifetime value of a customer should take all of the following into account EXCEPT: a. Recurring revenue b. One-time revenue c. Costs of serving the customer d. The cost of acquiring the customer
d. The cost of acquiring the customer
Which business model charges customer for the products or services actually used or consumed? a. Parking meter or penalty charges b. "Cell phone" plan c. Shared savings d. Usage-based
d. Usage-based
In "Build, Measure, Learn" Eric Ries suggests that the core question behind lean thinking is: a. What research can we do in advance to identify a successful innovation? b. How much money will we need to bring our innovation to market? c. What new product will capture the largest share of the market? d. Which of our efforts create value and which are wasteful?
d. Which of our efforts create value and which are wasteful?
Which of the following tools would be the most useful for identifying key assumptions about your business idea that should be tested? a. entity selection b. 3-d printer c. LTV Calculation d. business model canvas/ lean canvas
d. business model canvas/ lean canvas
Which part of the business model canvas describes the different groups of people or organizations an enterprise aims to reach and serve a. key resources b. makrets c. channels d. customer segments
d. customer segments
Think about a Happy Meal. Which of the following consumer types is the most accurate for a parent a. champion b. influencer c. end user d. economic buyer
d. economic buyer
Price is important in the functioning of an economy because it ___________. a. helps venture capitalists raise investment capital b. is used to determine the taxes we owe to the government c. is the main driver of stock value d. helps transmit information regarding supply and demand across the entire market
d. helps transmit information regarding supply and demand across the entire market
Which business model is the most common for service firms because it rewards short term activity rather than scaling up? a. subscription or leasing model b. cost plus c. licensing d. hourly rate
d. hourly rate
In "A broken place" the article about better place and entrepreneur Shai Agassi, a key lesson about building a viable business model for a new venture is that: a. if you do not have a good distribution strategy your business model probably wont work b. if you are bringing a new technology to market you will need a lot of outside capital c. the most critical element of brining a new technology to market is a charismatic founder who can tell a compelling story d. it is very difficult to get consumers to change their behaviors
d. it is very difficult to get consumers to change their behaviors
Which part of the Business Model Canvas describes the most important assets required to make a business model work? a. key activities b. key partnerships c. value propositions d. key resources
d. key resources
According to Disciplined Entrepreneurship, the correct order of steps to bring an innovation to market is: a. quantify the value proposition; build an end user profile; market segmentation b. market segmentation; quantify the value proposition; build an end user profile c. build an end user profile; market segmentation; quantify the value proposition d. market segmentation; build an end user profile; quantify the value proposition
d. market segmentation; build an end user profile; quantify the value proposition
Which of the following best describes the key point in the 'Fake It- Chapter 13' reading from "Sprint" its not a good idea to invest a lot of time in untested product development because: a. it is too expensive to maintain long-term product development processes b. people at your company will get bored if they do not have something new to word on c. competitors will beat you to the market d. you will become attached to the product and unable to take negative test results to heart
d. you will become attached to the product and unable to take negative test results to heart
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? a. Advertising b. Franchise c. Operating and maintenance d. Reselling the data collected e. Microtransactions
e. Microtransactions
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? a. Operating and maintenance b. Reselling the data collected c. Advertising d. Franchise e. Microtransactions
e. Microtransactions
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 (T/F)
true
when mapping the process to acquire a paying customer, you should note whether payment will come from the customers yearly operating budget or from the customers long term capital budget (t/f)
true