Step 8 - Validate Marketing and Sales (Right side of the canvas)

Once the product is being used in its chosen market(s), a customer acquisition funnel needs to be established to help drive (or entice) new visitors to that product. Its role is to qualify potential customers, then convert them into users and paying customers.

A good starting point for this process is Dave McClure’s AARRR, the onomatopoeically titled “Pirate” model for startup metrics. This model tracks the following steps and key metrics:

• Acquisition: How do users locate you? (Growth metric)

• Start with online advertising and a basic offer

• Iterate the offer via A/B testing on multiple platforms

• Keep iterating until you find a consistent stream of leads (and you never stop iterating)

• Activation: Do users have a great first experience? (Value metric)

• Try multiple offers and collect feedback to make a great first impression

• Retention: Do users come back? (Value metric)

• Measure NPS and find ways of adding more value or more offerings.

• Revenue: How do you make money? (Value metric)

• Today, the most successful and sticky business models are subscription based.

• Referral: Do users tell others? (Growth metric)

• Here again, the NPS approach is key to testing virality.

The AARRR model is not easy to forget once you use it, and most successful Silicon Valley companies have used some variant of this approach. 

At this point, the holy grail of product-market fit should have been achieved. That is, customers have become very excited by your product and are willing to pay for it. 

In late 2004, at Amazon, a software developer, Charlie Ward, wrote up a half-page idea that suggested a premium subscription model might work. An internal finance guru shot down the idea, saying that the shipping costs would explode if everyone ordered small items. Jeff Bezos applied Amazon’s MTP (is it better for the customer) and forecasted that the extra orders would allow them to build more logistics hubs. Thus was born Amazon Prime, a shift in the business model that was iterated aggressively. Today, Prime boasts more than 200 million subscribers globally.