MHR FINAL EXAM

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

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?

$40

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 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?

10 shirts

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

Which part of the Business Model Canvas describes the most important assets required to make a business model work?

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A utility patent (the most common type) provides protection for 20 years from:

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Mapping the process to acquire a paying customer usually requires all of the following steps EXCEPT:

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The QWERTY keyboard is a good example of:

An inferior standard that remains in place because users don't want to change

The author of Disciplined Entrepreneurship describes "A Decision-Making Unit" as being made up of:

Champion, Economic Buyer, and Influencers

Which of the following is the best example of "A/B Testing" as it is used in entrepreneurship?

Comparing two versions of a webpage/ad against each other by seeing which one gets more click or views

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?

Freemium

A seed funding round likely indicates the venture:

Has no product and no revenue

The primary tradeoff in determining how much money to raise is:

Having the money you need to succeed despite potential mistakes along the way versus how much ownership you give up.

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

Prospect theory describes how consumers may view a new technology by what they are giving up versus what they are getting. Choose the following innovation that best represents this theory:

Satellite Radio | Give up: Free Music ; Get: Better Selection

After your beachhead market, follow-on markets include:

Selling new versions of your product to the same customers and selling your initial product to markets that are similar to your beachhead.

All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT:

Target the customer segments with the longest sales cycles so you have the most time to close deals

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

In the decision-making unit, a champion is:

The person who wants the customer to purchase the product

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

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:

The strategy or core you will implement

In "Build, Measure, Learn" Eric Ries suggests that the core question behind lean thinking is:

Which of our efforts create value and which are wasteful?

a common mistake in generating a quantified value proposition is:

being too aggressive and overestimating the measurable value that a customer will get from your product

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

build and organization that will outlive the founders

Which of the following best describes the key point in the 'Fake It- Chapter 13' reading from "Sprint" by Knapp, Zeratsky, & Kowitz?

build just enough to learn, but not more

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

cost structures

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

customer segments

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?

customers bid on a limited number of e-books

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

Testing key assumptions about your venture requires:

designing and performing experiments

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 the video "Principles of Lean," Steve Blank argues that a business plan is good for:

established companies with successful products that are developing new products

Companies that utilize the Lean Startup approach will demonstrate:

experimentation

A debt investor cannot lose the entire value of the investment.

false

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.

false

All intellectual property is subject to the same rules and requirements for obtaining protection.

false

An accurate explanation for how customers buy products is: "Build a better mousetrap and the world will beat a path to your door."

false

An asset-based business loan requires that the company identify a specific asset that the company will utilize to generate funds in the event that the company cannot make interest or principal payments on the loan.

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

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

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.

false

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

false

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

false

The persona for your product is also the primary economic buyer

false

True (A) or False (B): Banks are the primary source of initial investment dollars for startup companies in the software industry.

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

a quantifiable value proposition goes into detail on technology, features and functions

false

one of the lessons of the "milkshake Example" is that all fast food customers buy a milkshake based on roughly the same value proposition

false

Price is important in the functioning of an economy because it ___________.

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?

hourly rates

once you have completed your high-level product specification, the next step is to:

make a brochure for the product that targets the Persona

Customers may be resistant to purchasing a new or unfamiliar product. Steps that you can take to overcome this resistance include:

make it compatible with existing customer behavior

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:

no one even tried it

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 buy a transportation service, not a specific car as a product

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

primary economic buyer

the value proposition includes 3 key elements

product specifications, pain relievers, gain creators

All of the following are key principles of the "prototype mindset" EXCEPT:

prototypes are no better than the ideas behind them

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

purchasing agent ARE: champion primary economic buyers end-user

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

the cost of acquiring the customer

the primary economic buyer is

the decision maker who will sign off on spending money

a key components of the value proposition canvas is:

the jobs that your customer is trying to get done

Most copyrights protect creative work for the duration of:

the life of the last surviving author plus 70 years

in the decision making unit, a champion is

the person who wants the customer to purchase the product

Which of the following is a key principle of the "prototype mindset?

the prototype must appear real

Cost of Customer Acquisition (CoCA), also known as Customer Acquisition Cost (CAC), is best defined as:

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:

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

A business loan is substantively no different than other types of debt such as student loans or a home mortgage.

true

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

true

A sole proprietorship does not require any registrations and the owner simply reports the business income on his/her personal tax forms.

true

A sole proprietorship is legally indistinguishable from the owner-- they are effectively the same in the eyes of the law.

true

Be flexible on pricing for early testers and "lighthouse customers" because you can use them as case examples to help sell other customers.

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.

true

Customer acquisition cost analysis should take into account all sales and marketing costs, including salaries of salespeople, printing of brochures, costs of trade show exhibits, advertising, and so on.

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

If a trademark has been used in commerce (e.g. a logo on a product or words on a website that are linked to a product), then the trademark may be protected in the geographic areas it has been used, even if the owner did not file for registration with state or federal government

true

In a corporation (c-corporation), the owners (shareholders) are not legally liable for the decisions and actions of the managers.

true

In the Lean Startup framework, the products a start-up builds are really just experiments.

true

In the Lean Startup methodology, building a sustainable business is the outcome of a series of evolving product experiments.

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.

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.

true

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

true

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

true

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

true

The difference between the lean startup "MVP" (minimum viable product) and Disciplined Entrepreneurships "MVBP" (minimum viable business product) is that the MVP only requires a product that tests specific assumptions about the venture.

true

Unlike patents, trademarks can be potentially protected forever

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

When a company uses equity financing, it gives up partial ownership of the company in exchange for investor capital.

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

during a life cycle use case analysis you must try to see the product through the customer's eyes rather than your own

true

intellectual property refers to intangible personal property which may be protected by various legal mechanisms

true

one possible result of interviewing 10 high-potential customers is discovering that there is a better Persona for your product than you previously identified

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.

truw

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

usage-based

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

value proposition

identifying 10 high-potential customers (after your Persona) helps ensure that:

you have identified a scalable opportunity, not just a one-customer solution