Case Exercise: Business & Product fundamentals
A case exercise for you to think through!
Assume you are thinking to set-up a small startup, selling variants of coffee from your mom's awesome recipe. The recipe is only known to your family, because your mom happened to experiment a lot before she perfected these. Your relatives and friends all praise the coffee so much, that you think that there is good business here. You have quit your workplace to focus on the idea.
The first thing you do is come up with a name for the coffee brand. Going against the name suggestions given by family, you come up with "Juniper Coffee". Naming the brand yourself gave you a sense of ownership, which was good for a while. Now comes the task of going ahead and defining what the business is going to shape like
Activity 1: Plan
As a Product thinker, you think big and wanted to take this recipe across India, taking hints from D2C brands like Blue Tokai Coffee, Sleepy Owl coffee and more.
Read more about D2C brands here:
List down what all you could do to get your brand "Juniper Coffee" across India
What all stakeholders/ partnerships will be required to fulfil this dream
Activity 2: Reality check & Way forward
While you wanted to scale "Juniper" directly as a D2C brand, you figured that you lack expertise on how to create packed packages (like Sleepy Owl Coffee) to send over to customers. Initial experiments failed and you figured it would take some more time to crack it.
While you went through the above exercise, you developed doubts over the product. You are doubtful how the market will respond to the product. As you are a product thinker, you decide to test whether the coffee recipes (i.e. product here) would sell in the market. You no longer are confident about Friends & Family's good reviews on the coffee. Only if the market response is well, would you go ahead with the further plan.
Activity:
Come up with a plan to test if your mother's coffee would sell. It should be like an MVP, quickly executable with defined results/outcomes to be able to take decision.
How would you test if the market would like your product (not your friends/family)
Figure out How many folks would you test your product with, who would these folks be, where would they be.
Params to keep in mind:
Response over coffee (Do folks love the coffee variants or not & if there are variants which receive a lot more love than others)
Potential pricing? (e.g. What happens when folks loved the coffee but did not show interest in paying for it?)
Activity 3a: Contingency plan
What should you do if your test in Activity 2 fails.
Would you persevere or leave the plan to start something else. The latter would disappoint your mother, whom you have set expectations for.
How would you break this to your mom and friends. Your personal reputation is also tied as your workplace friends are asking about the state of your coffee startup.
Activity 3b: Positive Affirmation from Market (Taking the product to market)
Your test worked well. While the test could have been designed better, but for now it passed the bill. So, it was decided that you would open a small cafe first and see the business before thinking about scaling. Your mom has consented to be the chef/ coffee brewer for sometime, till she is able to train folks to do it.
Launching the first cafe:
How would you choose:
Location for the cafe
Menu & Pricing
Cafe design/ Ambience
Staff/ culture guidelines
Creatives for your brand
How would you get the word about your cafe out
How would you market it to the first set of users about market launch
On what channels (FB/Insta/LinkedIn/Newspaper/Local TV), would you hype your cafe launch
List all sources of expenses that would be required to set-up and run the cafe for first 1 year
How would you come up with an approx. budget that you can afford for the above two. Guesstimate the amount of business that you can generate in Year 1. Target 50% of your Year 1 revenue as the max. budget you would spend when starting
What all stakeholders would you have to keep in loop to start your cafe?
e.g. Property Owner, Food Authorities, Police permissions, Working staff etc.
Activity 4: Strengthening the fundamentals
A Venture Capitalist, Lata, came over to your shop, by chance and loved the coffee, so much, that she decided that she would invest in the product, if you are able to showcase business in the coming year. You knew Lata from Startup news as she is known for her D2C investments. This is the opportunity you were seeking. She would help you create the D2C product (like Sleepy Owl coffee), that you were planning to start your business with.
But she is clear that you would have to demonstrate business acumen first, and open more cafes first and then take D2C route. She becomes your regular customer and keeps visiting your cafe, bringing more folks along, but her focus on business fundamentals is rock-solid. To keep true to her word, she has already scheduled a calendar invite for 12 months down the line and would be available on calls bi-monthly to help you navigate through challenges.
Now you need to figure out questions you had vaguely thought about earlier. But Lata sensed you needed structure and asked you to read about Acquisition, Activation, Retention, Revenue, Engagement for your cafe.
Value Prop:
What exactly is the unique value prop of your coffee?
Is the value prop strong enough to get folks to pay?
Why would folks visit your cafe over alternatives?
Target Audience:
What is the target audience for your cafe?
Any characteristics like age, language, gender, region, socio-political group, profession, industry, more.
Acquisition:
How do you acquire new customers for your cafe?
What partnerships can you strike to increase footfall in your cafe?
Where do you advertise about your cafe? (Where is your audience more likely to be?)
Activation + Conversion:
What does the cafe need to do so that the customers want to purchase from the shop, even if they land up by mistake?
How should the store owners try and make sure that the visitors make at least one purchase?
Engagement:
How should the experience inside the cafe be, so customers feel good?
Is the cafe appearance/ambience important?
What can the cafe staff do to impress the customer early?
What do you do so that your existing customers keep coming back to your cafe?
Retention:
Is it important for an older customer to come back or can the cafe work with always acquiring new customers?
What is easier, retaining the old customer or acquiring the new one?
What other advantages does a retained customer bring?
What can you do so that your customers come back again and again ?
Think what you can do apart from offering a good coffee & good experience in the cafe [Hint for one of the ways: Gift cards, Customer Rewards, Points etc.]
Referral:
How does the word about your college cafe spread?
Who do you think refers here and who is referred?
What more can you do so that folks refer your cafe to their friends and family? (any learnings from existing referral programs from the products you use?)
Revenue:
How would you increase the Average order value from each customer?
What can you do to earn extra sources of revenue apart from the beverages + food being served in the cafe?
Share your ideal revenue projections for your cafe for Year 1 and Year 2. (Estimate the salaries to be paid, other costs when estimating so the setup is profitable)
Scaling
What can you do to experiment and move towards scaling your brand "Juniper Coffee"?
Activity 5: Getting your way
If Lata did not visit (by chance) in the previous activity, what would you have done to attract interest from her or similar VCs to invest in your brand.
Activity 6: <Optional, but good to think about>
Impressed from solid business performance, Lata has decided she would invest in your brand. But she requires you to come up with figures on what you would do with that money.
Identify how much you approx. want to raise via funding?
How much do you value your business?
How much equity you wish to dilute?
What would you do with the raised money?
Activity 7: Feedback loop
What do you so that your brand makes improvements based on customer feedback?
How do you pay close attention to customer feedback?
Really like the concept of opening up A Cafe as a start up. Really good work HeyPM team.