BMC Customer Relationships - How to Build a Startup

Summary

The video script delves into the critical aspect of customer relationships within a business model. It highlights the importance of acquiring, activating, retaining, and growing customers, especially in the context of digital platforms like web and mobile. The script illustrates the double-sided funnel concept, emphasizing the need for hypotheses testing and real-world validation to understand customer dynamics effectively.

Takeaways

• 📈 Customer relationships are a crucial fourth element.
• 🔄 Customer relationships interact closely with other business elements.
• 🌐 Key questions: How do I get, keep, and grow customers?
• 🛠️ Strategies for acquiring customers differ between web/mobile and physical channels.
• 🔍 Visual representation: double-sided funnel for customer journey.
• 💻 Example focus: How to get customers to a website and activate them.
• 🔄 Retention is critical to avoid attrition and churn.
• 💰 Once acquired, aim to increase customer spending and product usage.
• 📊 Hypotheses are developed initially but need validation through real-world testing.
• 🚶 Practical learning happens outside the theoretical framework, in real interactions.

Q & A

What is the fourth piece mentioned in the transcript related to business strategy?

The fourth piece is customer relationships, which focuses on acquiring, retaining, and growing customers.

How does the interaction between customer relationships and other business aspects differ for web/mobile versus physical channels?

The interaction is different because the methods of acquiring, activating, and retaining customers vary significantly between digital and physical platforms.

What is the visual representation of customer relationships mentioned in the transcript?

The visual representation is a double-sided funnel, illustrating the process of acquiring and retaining customers.

What are the key stages in the customer acquisition process for a web example?

The key stages are acquiring customers to the website, activating them to take action, and keeping them to prevent attrition and churn.

What does 'activating' customers mean in the context of the transcript?

Activating customers refers to encouraging them to take a desired action on the website, such as making a purchase or signing up for a service.

What is meant by 'attrition' and 'churn' in the context of customer relationships?

Attrition refers to the natural loss of customers over time, while churn specifically refers to customers actively leaving a service or product.

How can a business make customers spend more money or use their product more after acquiring them?

Businesses can do this by implementing strategies to increase customer engagement, loyalty programs, or offering additional products and services.

What is the importance of hypothesis in understanding customer relationships?

Hypothesis are initial assumptions that guide the understanding of customer behavior and preferences, which are then tested and refined through real-world interactions.

Why is it said that one will only figure out customer relationship strategies 'when you're out of the building'?

This phrase suggests that practical, on-the-ground experience and customer feedback are crucial for truly understanding and refining customer relationship strategies.

How does the concept of a 'double-sided funnel' relate to the process of getting and keeping customers?

The double-sided funnel metaphorically represents the narrowing down of potential customers to a smaller group of loyal, retained customers, emphasizing the importance of both acquisition and retention.

What strategies can be employed to grow customer relationships beyond just acquiring and retaining them?

Strategies such as personalized marketing, customer education, and expanding product offerings can help grow customer relationships by increasing their value and satisfaction.

Outlines

00:00

📊 Understanding Customer Relationships in Business

The paragraph discusses the importance of customer relationships as a critical aspect of business strategy. It emphasizes how customer relationships interact with other business components, focusing on acquiring, retaining, and growing customers. The analogy of a double-sided funnel is used to visualize the process, especially in web and mobile contexts. Key concepts include attracting customers to a website, activating them to take action, retaining them to prevent attrition, and encouraging them to engage more deeply with the product. The paragraph also highlights the iterative process of testing hypotheses in real-world settings to refine these strategies.

Keywords

💡Customer Relationships

Customer Relationships refer to the interactions a company has with its customers, which are critical for business success. In the context of the video, it is the fourth piece of a business model and involves acquiring, retaining, and growing customers. The script discusses how these relationships differ in digital and physical channels, highlighting the importance of understanding customer dynamics in a web/mobile environment.

💡Distribution Channels

Distribution Channels are the pathways through which a company delivers its products or services to customers. The video script mentions that these channels can vary greatly between web/mobile and physical environments, indicating the need for tailored strategies to reach the target audience effectively.

💡Acquisition

Acquisition, in the video's context, is the process of attracting new customers to a company's offerings. It is part of the customer relationship management and involves strategies to get customers to the company's website or product, as illustrated by the script's discussion on how to get customers to engage with the website.

💡Activation

Activation is the stage in customer relationship management where a company encourages new customers to take action, such as making a purchase or using a service. The script uses this term to describe how to make customers do something after they have been acquired, emphasizing the importance of turning potential customers into active ones.

💡Attrition

Attrition refers to the loss of customers over time, often due to dissatisfaction or disinterest. The video script discusses attrition in the context of customer retention, highlighting the need to prevent customers from leaving through churn.

💡Churn

Churn is a measure of the rate at which customers stop doing business with a company. It is closely related to attrition and is a critical metric for assessing customer retention. The script mentions churn as a factor to consider when discussing how to keep customers from leaving.

💡Growth

Growth, in the context of customer relationships, refers to increasing the value of existing customers through upselling, cross-selling, or encouraging more frequent use of a product or service. The script touches on this concept when discussing how to make customers spend more money or use a product more extensively.

💡Hypothesis

A hypothesis is an educated guess or proposed explanation made in the early stages of understanding a phenomenon. In the script, the term is used to describe initial assumptions about customer relationships that need to be tested and validated outside the building, emphasizing the importance of empirical validation in business strategy.

💡Web Example

The term 'web example' in the script refers to a specific illustration of customer relationship management in the context of online business. It is used to explain the different stages of acquiring, activating, and retaining customers in a digital environment, providing a practical context for the concepts discussed.

💡Double-Sided Funnel

A double-sided funnel is a visual metaphor used in the script to describe the process of acquiring and retaining customers. It suggests that there is a narrowing down of potential customers at the top (acquisition) and a need to prevent loss at the bottom (retention), illustrating the challenges of managing customer relationships.

💡Out of the Building

The phrase 'out of the building' is used in the script to emphasize the importance of going beyond theoretical assumptions and into the real world to test hypotheses about customer relationships. It suggests that practical experience and customer feedback are essential for truly understanding and optimizing business strategies.

Highlights

Customer relationships are a critical fourth component in business strategy.

Customer relationship management involves acquiring, activating, retaining, and growing customers.

Distribution channels differ significantly between web/mobile and physical environments.

The double-sided funnel is a visual representation of customer relationship dynamics.

Acquiring customers involves getting them to visit your website.

Activation is about making customers perform an action on the website.

Retention strategies aim to reduce customer attrition and churn.

Growth focuses on increasing customer spending and product usage.

Hypotheses about customer relationships need to be tested in the real world.

Understanding customer relationships requires going beyond initial assumptions.

Customer acquisition is the first step in building a customer base.

Activation is crucial for converting visitors into engaged users.

Retention is key to maintaining a stable and loyal customer base.

Growth strategies are essential for expanding the business through existing customers.

The importance of testing hypotheses outside the building for practical insights.

Customer relationship management is an ongoing process of hypothesis testing and adaptation.

The interplay between customer relationships and other business components is vital for success.

Visual tools like the double-sided funnel aid in conceptualizing customer interactions.

Transcripts

Customer relationships is kind of a fourth piece,

and customer relationship has a really interesting interaction with these other three pieces.

It basically says how do I get customers, how do I keep them,

and how do I grow them, and just like thinking about distribution channels,

these are very different for web mobile than they are for physical channels.

But visually, they kind of look like this double-sided funnel.

Let's just take a look at quickly a web example--in getting customers, you're going to be

o worrying about how do I acquire them that is how do I get them even to my website,

how do I activate them that is how do I make them do something, and then later on

we'll see after I got them how do I keep them around that is how do I not lose them

through attrition and churn and then what can I do once I have customers

to make them spend more money or use my product even more.

One of the things we'll be thinking about is how do I get, keep, and grow customers.

And just like every other step, you might have hypothesis on day one,

but you're only going to figure this out when you're out of the building.