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This is my first post on this subreddit, and I would like to share my recent experience on building a meal kit start-up. Sorry for my English as It is not my native language, I will do my best.
I made so many mistakes during this path and I guess it is part from any entrepreneur career. We began as a subscription company focused on delivering weekly gluten-free meals in my city.. We validate our product with a list of known and unknown people, and we had great feedback with some suggestions which were a good point to start.
We wanted to build something different from what is usual here in Brazil, so we decided to go to a subscription-weekly model because it made sense for us, a lot of people we’ve interviewed said they would consume our product on a daily basis if they could get a discount.
So, we decided to build our platform before even selling our product (Big mistake). After we launched it our friends and family quickly subscribed to our userbase and we started selling our first meal kits.
However on the minute we started our marketing campaign with influencers we could not convert our leads to subscribe at all… They did not understand the model, they just wanted to try or have it for an occasional week. So to break this barrier, we put an overprice of 10% for the ones who were willing to try it, because in our perspective we could not sell something to a Lead the same price we sell to a subscriber.
Of course, this didn’t work as expected because people thought our product was too expensive comparing to our competition (they do traditional retail). Our business started to melt on cash, and we had no other way to survive then be a traditional retail company, we would not focus on subscribe anymore or sell through our website, and all the interactions with customers would be acquisition on Instagram with influencers and redirected to our WhatsApp to convert.
Company began to gain traction through this cycle: Generating leads through influencers campaign, good conversion on WhatsApp, if customers liked it we put them on our user list, weekly we send them our menu and we focus on expanding this user list as well as retain active users.
The problem is, isn’t the WhatsApp a bit intrusive to be marketing weekly with customers? I’ve searched for some companies that could automate this customer relation management, but I couldn’t find any specific for WhatsApp. In your opinion is this a sustainable way for growing or should we change for another strategy like email marketing even if our sales are specially on WhatsApp?
TLDR: Meal kit company launched on August 2019 on subscription model for weekly meal plan. Subscription did not work out because customers are not use to it in food here in Brazil. We changed our business model, built a segmented list as we got feedback from happy customers and send weekly menu for them by WhatsApp. Company is getting traction and performing well right now, but we are not confident this is the right path. What are your opinions regarding WhatsApp marketing, is it too intrusive? Should we move to e-mail marketing?
Ximena Aleman is co-founder and chief business development officer at Prometeo, an open banking platform that serves Latin America.
It may have entered the game later than other leading regions such as Europe and North America, but Latin America’s fintech industry is dynamic and growing fast. The sector was recently given a valuation of more than $ 150 billion and continues to expand year-on-year.
And while the longer-term impact of COVID-19 on the sector is yet to be determined, there’s no doubt that the demand for certain fintech solutions is on the rise. As smaller financial institutions across the region are under pressure to digitize, many are calling on fintechs to help them along this journey. In addition, a number of SMEs are seeking out digital loan services to help them get through the crisis.
The sector’s speedy expansion has meant that regulators in LatAm are under increasing pressure to enact legislation that addresses the murky waters of fintech activity, providing confidence to consumers and investors alike. However, regulation across the region must be careful to not quash innovation, while startups must figure out how to be agile in an environment which is becoming increasingly regulated. Let’s take a closer look at what impact regulation has had so far in LatAm, and what needs to happen to strike a balance between sector growth and public trust.
The development of fintech regulation across LatAm
Mexico is currently leading the way when it comes to fintech regulation in LatAm, thanks to its comprehensive 2018 fintech Law. The law covers most fintech activities, including crowdfunding, virtual wallet, transactions carried out with cryptocurrencies and open banking. In addition, Mexico has certain financial laws that regulate financial entities in their execution of transactions using fintech. The law also provides a regulatory sandbox for both licensed and non-licensed companies.
Brazil is the furthest ahead after Mexico, as it individually legislates crowdfunding and peer-to-peer lending, while a special congressional commission is working on a broader legislative strategy. Brazil’s Central Bank also endeavors to make open banking legislation effective by the third quarter of 2020, which will pave the way for a thriving open banking ecosystem.
Every new business quickly realizes that revenue coming in every period on a committed basis is the Holy Grail to survival and growth. Based on traditional research, getting new customers is five to ten times harder than getting additional revenue from existing customers. Thus the subscription model (low fixed monthly payments), has become the norm for new products and services.
In fact, subscription pricing has been around for a long time for magazines, cloud-based software, and gaming, but now I’m seeing it used for just about anything, including for more stylish clothes via Mr.Conection, gourmet foods via TryTheWorld, and toys for your kids via KiwiCo. If you are an entrepreneur not using this model, it may be time to consider a pivot.
In fact, in a classic book “The Automatic Customer,” by John Warrillow, who runs the successful subscription based research business The Value Builder System™, I saw the nine most common variations on the subscription model today. If you are looking to start a new business in any domain, it’s definitely worth your time to check your fit for one of these models:
Membership website model. With this model, you provide website access to insider information for a regular subscription payment. It works best in a tightly defined niche market, like antique car owners, or rare-coin junkies, or woodworking enthusiasts, where experts hare hard to find, and members can gain from interacting with each other.
All-you-can-eat content model. By providing access to a large variety of titles, like NetFlix with streaming movies, or Hulu for TV shows, with new content added regularly, there is always a reason to keep up your subscription. If you already have many followers for some limited free offerings, this also becomes a natural freemium upgrade.
Private club model. On the other end of the spectrum, if your service or experience is in limited supply, make it a status offering for the strivers out there who want to act and feel like affluent consumers. Here the key is to convince customers that you have something really rare, and maybe even entice them into a long-term but affordable relationship.
Front-of-the-line model. If you can help with a relatively complex product or service, this one is especially appealing to customers who are not overly price sensitive, or ones for whom waiting in line can have catastrophic consequences. It works for the need to resolve IT issues in a small business, to avoiding long lines at popular clubs and hotels.
Consumables model. You should consider this subscription model if you sell things that naturally run out, like Easypeasiesdiapers or Birchbox for cosmetics. People are willing to pay for convenience, but don’t underestimate the logistical challenges in fulfilling orders and providing services to thousands of subscribers in out-of-the-way places.
Surprise box model. This model involves shipping a curated package of goodies to your subscribers each period. It may have started with wine club memberships, but has now been extended to include BarkBox for family dog treats, Standard Cocoa for those who love chocolates, and SpicySubscriptions for lovemaking paraphernalia.
Simplifier model. Everyone these days wants to simplify their life, so this subscription model works well for personal service businesses, like pet grooming, tutoring, window cleaning, and even bookkeeping. The key is making sure the customer doesn’t have to remember the scheduling, deal with immediate variable payments, or worry about quality.
Network model. This model works best where your product or service utility improves as increasing numbers of people join in. It was popularized with dating sites and LinkedIn, but now is popping up with many services, like Zipcar for car-sharing, Spotify for music sharing, and WhatsApp for international messaging for a low predictable fee.
Peace-of-mind model. This one is an extension of the insurance model into new domains. For example, Amber Alert GPS will make sure your kids don’t wander outside of safe zones, Site24x7 will let you know if your web site is down, and Social Studio monitors social networks so you know what people are saying about your brand.
If your startup is in the Business-to-Business (B2B) world, you need to realize that the subscription model has evolved considerably since SalesForce.com introduced Software as a Service (SaaS) way back in 1999. Popular variations of cloud subscription services now include offerings billed as Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).
So now may be the time to start or transform your business into a recurring revenue engine with subscriptions, or just add an option to get some extra sales growth. But be aware, these models bring with them a whole new psychology of selling, supporting, and measuring your success with customers. Do your homework before jumping in with both feet.
Your vision for the startup lies 3 storeys up, but this time, you won’t use the stairs or the elevator to reach the top, you use a ladder.
Yes, a ladder.
Each rung on the ladder signifies a challenge you have to overcome to move on to the next one.
One wrong step, and you’ll have to start over.
Each rung signifies your growth strategy and the ladder altogether is your path to success.
Only a good idea cannot sustain a business in the long run. Without a growth strategy, without a plan, you’re bound to lose your balance.
Did you know?
Only about 50% of businesses survive their fifth year while a mere 30% make it to the ten-year mark.
So, if your startup does not have a growth strategy yet, it’s time to formulate one and this article is here to guide you.
What is a Growth Strategy?
Growth strategy refers to a method adopted by a company to capture a larger share of the market. This strategy sustains the business in the long run and its formulation goes beyond the current market conditions.
Several factors influence the formulation of a growth strategy, as listed below –
Target audience and potential or untapped audience
Existing competition in the market
When you climb up that ladder, you need to be very cautious about the steps you take. There will be competitors who’d try to pull you down, hoping you fall. The weather might be windy, it might rain. What would you do then? How will you continue climbing?
Thus, it’s not wise to only focus on the vision. Or even worse, have no vision in mind and climb aimlessly.
Don’t confuse Growth Strategy with Growth Hack:
Growth Strategy vs. Growth Hack
Growth hacks yield massive growth in a short period and are often cheap processes. Growth strategy, on the other hand, is a long-term process that requires testing several approaches to foster growth.
You can majorly distinguish them on the following basis –
Results: Upon implementation, results for growth strategy are steady and slow. Whereas, for growth hacks, you can see quick results.
Implementation Speed: Growth strategy is implemented over a long period and through this, small businesses aim to grow their customer base and try different channels.
On the other hand, a growth hack is focussed on growing user base quickly and at a low price by executing a particular technique on a specific channel.
Develop A Growth Strategy For Your Startup
Following are key factors you should be well versed with as you develop a growth strategy for your startup:
Information on the market through market analysis. This includes understanding –
Long Term Growth Strategies each of which will be explained in detail, so you can select which strategy best suits your company.
Growth Milestones form the framework for the execution of selected long-term strategy.
To get a clear picture of the service that you can offer, you need to understand the audience you seek to serve, the market conditions and services offered by your competitors.
Competitor Analysis and understanding the audience’s demographics gives you a clear idea of where you’ll stand if you enter the market.
Often competitors don’t fulfil the consumers’ needs, however, due to lack of alternative the consumer has to stick with that product or service.
You can gain an edge here and offer services that your competition doesn’t.
This is what DuckDuckGo did.
With the value proposition “The search engine that doesn’t track you”, DuckDuckGo was competing against Google Chrome. From its commencement in 2008 to now, it boasts of 30% annual growth.
DuckDuckGo separated itself from the competition early on in terms of privacy that no other search engine had ever offered.
This is an example of how you can serve the repressed demands of the customers.
Apart from this,
Sometimes customers don’t realise that there is a possibility of an alternative. Back in 2009, when Whatsapp was launched, BlackBerry Messenger, SMS, and G-Talk were the few means to exchange virtual messages.
The founders of Whatsapp understood the need of the customers (SMS-like internet messaging to actual phone contacts) and launched an app with the tagline “No Ads! No Games! No Gimmicks!”. Needless to say, they’ve stuck by it ever since.
This is an example of how your startup can become an alternative for people.
So, you see:
It all comes down to your value proposition. How is your startup bettering customer’s lives? What incentive do they have upon consumption of your product or service?
For any startup to succeed, it is important to fully understand the need of the customers and identify areas where your competition lacks.
Competitor analysis can help you ascertain the areas you can better serve and areas you can venture into. That said, your competition can be the cause of your failure if not monitored with caution.
Here’s an example of ShareChat’s Growth Strategy:
When India was already dominated by Whatsapp, Facebook, and Instagram, ShareChat came up with the unique proposition of a social media platform sharing information in vernacular language. ShareChat today, boasts of 60 million monthly active users.
The app appealed to the customers not because they could share messages, but because they could do so in their own language. An idea as simple as this, turned ShareChat into a $ 650 million dollar company. It successfully made the customers realise its value and created a need for the application.
Long Term Growth Strategies
Once you’re through with market analysis and have a clear idea of the product or service you offer, the biggest task is to decide which long-term growth strategy you’ll adopt.
So, let’s look at some realistic strategies for startups along with examples of growth strategies.
The Network Effect simply means that a product or service increases in value as more people use it.
There are six forces that usually contribute to network effect:
Buyer-to-Seller Cross Side
Buyer Same Side
Seller-to-Buyer Cross Side
Seller Same Side
You can understand them with the help of the following examples:
Buyer-to-seller cross side: “You should list your place on Airbnb. I want to rent it”.
Buyer same side: “Don’t list your place on XYZ website, list it on Airbnb, it’s trustworthy”.
Direct-to-buyer: Airbnb advertisement asking people to book their stays through Airbnb.
Seller-to-buyer cross side: “I’ve listed my place on Airbnb, you can make your reservation now”.
Seller same side: “I listed my place on Airbnb, you should too”.
Direct-to-seller: Airbnb advertisement aimed at asking sellers to rent their place at Airbnb and make easy money.
Consider the example of Segment.
Segment has used the network model to increase its users. The company models the aforementioned six growth channels and assigns quantitative metrics to them.
Segment uses this model to make data-informed decisions and identifies which channel to invest in, to maximise profit.
You too, can choose your primary market segment as a specialised market niche and plan for gradual expansion intro the market through building a network.
To convince your users to refer the product/service offered by your company, you should:
Provide good customer service
Define your value proposition
Ensure your system can handle the growth
Network effect evolves positively for a startup if its users derive both inherent value and network value upon consuming and referring the product.
The in-person strategy refers to increasing awareness of the brand and its usage by contacting prospective customers in person.
Tinder’s clever strategy is best to explain this approach.
Tinder targeted specific demographics and successfully took over the online dating scene. Initially, to grow its user base Tinder organised social events, gatherings, and parties for college students where only those people who had installed the application were allowed.
They also took to college campuses and very quickly the application gained popularity. Users understood its value as summarised in the following points –
Free and easy-to-use interface
Hassle-free sign up
Tangible opportunity to meet people in person
There were hardly any players in the field of online dating and Tinder became the online dating solution.
There is a lot to learn from Tinder’s growth strategy. They give users complete control over who they wish to talk to and offer a very realistic experience.
Free Product Strategy
As you might have guessed by the name, you can get all key stakeholders to try your product through this strategy.
Clearbit, a marketing data engine, exploited this strategy so much that it was their single biggest traffic driver.
How they did it?
Clearbit launched a logo API where a company could directly design their logo. They prioritised instant gratification and soon, drove over 60,000-page views in their first week.
It was a valuable tool given away for free which helped generate insane brand awareness.
Matt Sornson, CMO at Clearbit, stated that free giveaway of their service led to a surprising amount of inbound from large enterprise customers.
This method is especially useful for highly technical or SaaS products.
Referral Bonus Strategy
The aim of this strategy is to incentivise the customers for the company’s growth.
The company got its early users to refer them to others and gave them money to do so. The bonus was set at $ 20 for signups.
Naturally, word spread and users grew quickly. And as they grew, signup bonuses were reduced to $ 10 and then $ 5.
This was highly effective for PayPal as the referral program helped them grow to 5 million daily users and the company now has an active user base of 305 million.
We can conclude that, although this strategy requires high capital investment in the beginning, the returns are commendable if executed after proper research.
Once you have selected the growth strategy for your startup, it is time for you to share your vision with your teammates.
Break down the long-term strategy into defined annual and quarterly plans.
Strategic annual and quarterly plans will help you:
Divide tasks amongst team members
Hold each person accountable
Reinforce the vision
Empower each team member
Improve decision making
Strategic plans will force your team to consciously take into account the internal and external factors affecting the business.
Establishing KPIs also support and influence business objectives. They demonstrate how effectively you are working toward the set goals.
Ask yourself what targets you should fulfil to achieve success.
So now that you’re ready with your product:
You can create a network of people including your friends and family and ask them to test it first. Their feedback can help you ascertain areas of improvement and also help you make assumptions about the target audience.
No matter which industry you’re in, the climb to the top will never be easy. It is thus important to not lose sight of your vision and continue climbing, one rung at a time.
Go On, Tell Us What You Think!
Did we miss something? Come on! Tell us what you think of our article on growth strategy for startups in the comments section.
TL;DR: Startup struggling to grow post-Seed, any advice for future funding rounds?
I'm the founder of a B2B marketplace startup. I was a solopreneur during most of 2019 and bootstrapped the entire business. I launched the product in Q3 2019 and began acquiring business customers quite soon after launch.
We raised a pretty sizeable seed round from a VC right before Xmas 2019 and I spent the first 3 months hiring two experienced senior team members (Ops & Tech), and developing our branding & website.
At the end of January this year, we were seeing average growth, probably getting a new business customer every 2-3 weeks. We weren't too worried as we were still developing our product, funnel, sales strategy and so on.
Once COVID hit, like many of us, all sales and interest took a nosedive. Our pipeline turned to shit, and they claimed to no longer have budget for our product, despite it sitting in a relatively integral function of a business (HR/Culture).
Our strategy to cope with this so far:
Circle back on our product. We recently retained a great UX/UI designer for a lot less than his market value (due to being furloughed) to properly design what I had bootstrapped and sold to clients. Prior to covid, the strategy was to sell what we had (a crappy looking but very functional platform) for as long as possible until our revenue reached a milestone that triggered a redesign.
Focus on getting the most out of our current clients. Our platform is accessed by all employees of a business, so our focus was to boost engagement so we can potentially grow their account size. Moreover, we could use that to build case studies to attract new customers
Slightly shift our marketing strategy. We ceased all direct sales advertising, and have now ceased cold-mailing and outbound campaigns. Instead, we are investing our budget on building brand recognition and awareness in our sector so that we are top of mind when things go back to normal.
Market research. The nagging question mark is that of Product Market Fit. I fear that early signs of PMF we had before covid-19 are now out of the window as those businesses have been dealt a hammer blow. So our challenge now is to build a method in which we experiment and test different iterations and marketing messages to see which market segment gains the most traction.
My worry is: without growth, are we a lame duck?
Why I've decided to post. I'm anxious that we're not going to be attractive to any investor if we haven't shown aggressive growth, despite the recession.
My question to you:
What are the kinds of achievements to strive for, if growth is not possible, to investors in Q4 2020 in order to raise another round?
Currently we have a run rate of about 15 months which is OK but that's if we strap ourselves in and essentially only pay salaries.
Let's say my web app has 10k monthly users and it's for free but it runs ads and the estimated earning would be 0.016$ per monthly user which sums up to be 160$ . One part of it goes to Amazon Web Services (60$ ). What would you do with the remaining 100$ ? This estimation is completely inaccurate and abstract. As this is my first business, how can I be sure of my actions? I expect for earning to grow proportionally with the user base. Thanks for any advice :).
First off, I'll confess that I don't have experience growing a startup before, so please forgive my ignorance!
Some quick context:
Startup is in edtech
Founder started a classic tutoring academy, is pivoting into online learning
Founder created thousands of math videos based around questions on North American math curriculum textbooks for the past decade
Startup provides three tiers of service (free = access to some videos, mid tier $ 20/mth = all videos, $ 170/mnth = tutoring service).
Currently has about ~1000-2000 daily free users, ~200 mid tier, and ~100 tutoring.
Analytics implemented are GA and Hotjar
My role is to grow the userbase, but I don't really know where to start. I'm plopped in the middle of a new feature launch, so I'm thinking of ways to make that feature announcement, but right now I don't know what I can do to make the most impact with the least amount of resources.
I can think of trying to gain as many free users, or converting free to paid, or making the user experience of the product more streamlined, but I don't really know which direction makes the most sense. I'd need to make data-driven decisions, but I don't know where to start.
How should I approach this when I feel like I can go in so many directions?