1. Software Product Management Certificate Program Week 9: Revenue Forecasting

2. Agenda Current events (5 min) Where are we? (5 min) Roadmap for Fall Plan for tonight Today’s Topic (90 min) Forecasting Revenue Identifying/Valuing Other Benefits Breakout activities (30 min) Draft revenue forecast Identify other benefits Homework assignment (10 min) Complete revenue forecast Identify other benefits Final Prep: Concept Pitch (20 min) Optional session on 10/3 (6-9pm) Final Course Survey (20 min)

3. Introduction to strategy and PdM frameworks (Week 2) Customer research (Week 3) Market opportunity analysis; begin competitive analysis (Week 4) Intro to Strategy & Research Finish competitive analysis; market segmentation (week 5) Defining target customer (week 6) Target Customer Define problem to be solved (Week 6) Define competitive positioning (week 6) Problem Statement & Competitive Positioning Developing a release theme/driver (week 7) Release Theme/Driver Sales Channels and Pricing Strategy (week 8) Creating Business Value (week 9) Business Value Fall 2014: Where are we?

4. Learning Objectives Show how your product concept will add value to your organization – Build a revenue forecast – Create the “benefits” side of a cost/benefit analysis

5. Pricing: Will you charge customers/users for your product? Dropcam Facebook Fitbit Hotel Deal Finder MakerBot Starbucks 5

6. How will you price your product? How do you want price to contribute to the positioning of your product? What pricing strategy will you choose to launch your product? What pricing model will you use? Establish a range of potential price points – Lowest – Highest 6

7. Sales Channels: Direct vs Indirect If you will not be charging directly for your product: – Identify which revenue streams you will try to increase – Locate an annual figure for that revenue stream – Pick a target percentage of growth your product will have on that revenue stream 7

8. Increase Sales – New Product/Service Sales – Increase Existing Product/Service Sales – New/Increased Advertising Revenue Reduce Costs – Cost of Goods Sold – Operating Costs How Will You Add Value? (to your organization)

9. Prepare a Revenue Forecast When: The benefit you produce can be directly attributed to increased sales of one product, service, or product line Prepare a Cost/Benefit Analysis When: The benefit you produce is related to cost savings The benefit you produce applies to increasing the sales of many products, services, or product lines (i.e., may not be directly attributable) Which should I use? Revenue Forecast vs Cost/Benefit Analysis

10. REVENUE FORECAST

11. Forecasting Two basic methods – “Top down” (based on Total Available Market) Market capacity Market share Good for forecasting markets that are new to your organization – “Bottom up” Volume per sales rep/region “Named prospect” Good for forecasting existing markets and products Historical data helps – Close rates or win/loss ratio Use all data available When all else fails, make an assumption and document it! (what + why)

12. Top Down: Total Available Market Your market research numbers are used here Helps develop and explain the basis for your forecast by showing segmentation You subtract segments or parts of segments you cannot reach – Platform, competitive lock-in Net to addressable market opportunity

13. EXAMPLE: “TOP DOWN” REVENUE FORECAST

14. Start With Data

15. Apply Limitations: Roadmap, Penetration Capability

16. Add Pricing Assumptions

17. Compute Total Annual Forecast

18. EXAMPLE: “BOTTOM UP” REVENUE FORECAST ‘UR Cool’: mobile app for managing your coolness & popularity

19. BENEFITS ANALYSIS (COSTS COVERED NEXT QUARTER)

20. Cost/Benefit Analysis Start with Benefits – Defines the opportunity – Scales the solution Source for input: Problem Statement, Value Proposition, Vision Molecule Quantify the benefits – Web site metrics – User observation – Accounting team – Opinion/assumption – Opportunity costs List “soft benefits” too – unquantifiable Costs – covered next quarter

21. Sample Cost/Benefit Analysis: Benefits Cost/Benefit Analysis 20092010 Total $ for Analysis Period Units$/unitTotalUnits$/unitTotal Benefits Increased revenue potential 2,000 $35 $70,000 3,000 $30 $90,000$160,000 Cost Savings by Department Sales Service 150,000$3$450,000 150,000 $3 $450,000 $900,000 Marketing Data Center/Ops etc. Total Hard Benefits $520,000 $540,000$1,060,000

22. Activity: Quantify Value Using Excel or a similar program, create a draft revenue forecast or benefit analysis Use any relevant market research you’ve found so far; identify further data that you need 30 minutes

23. Homework for this week Finish your work forecast/benefit analysis – Post for review in your team space Prepare for your Concept Pitch Questions/concerns? Email Adam

24. Team Project: Upcoming Due Dates Interview Results due by Oct 19 Competitive Analysis due by Oct 26 Problem statement and value proposition due by Nov 2 (present in class on Nov 5) Vision and scope due by Nov 9 Revenue forecast due by Nov 30 Concept Presentation: Dec 10 (last class)

25. Team Project: Upcoming Milestones Empathy Interview results due by Oct 19 Competitive Analysis due by Oct 26 – Individual submission: Complete a SWOT and Feature Matrix Analysis of 2 of your closest competitor Post your findings on the team site, read/comment on others posts Problem statement and value proposition due by Nov 2 – Individual submission: post analysis/comments on team site – Team submission: Prepare a 3-minute presentation summarizing your opportunity Target segment, target customer, problem, value prop, positioning, desired benefits, and segment size. Be prepared to present in class on the 5 th – Tips for preparing the presentation Best to select one or two teammates to present Slides are optional (keep it simple and brief—you only have 3 minutes!) Think of your Customer as the person you need to engage, in order to be successful Vision and scope due by Nov 9 – Individual submission Revenue forecast due by Dec 3 – Individual submission Concept Presentation: Dec 10 (last class) – Team submission (details + template will be forthcoming)

26. Preparing your Final Concept Pitch Deck (Dec 10) Task: Define an opportunity to improve an existing product. Desired Outcome: Persuade your audience (i.e., management) that the problem is real and actionable by your team, and the expected business value is worthy of investment. In other words, approval to move forward to the Requirements Phase. Elements of your presentation (~10-15 slides TOPS) Identify your target customer segment (2-3 slides) Define the problem to be solved (2-3 slides) Establish your competitive positioning (4-5 slides) Recommend a release theme/driver (1-2 slides) Demonstrate how it will create business value (1-2 slides) “Don’t bring a knife to a gunfight” (APPENDIX) Keep the presentation lean and to the point, but load up the appendix with backup material (analysis, data, contingency/alternate proposals, etc). Build on your 3-min presentation Material from weeks 7, 8, 9

27. A FEW MORE PRESENTATION TIPS…

28. Presenting Your Case: Top Success Factors Do the Decision Maker’s job Start with the big picture and let them drill down Keep it simple, brief State the obvious Get a sample of a past success Be prepared for the tough questions

29. Common Pitfalls Dense slides – Use the 3x5 rule (3 bullets, 5 words each) – Convert data-heavy tables to charts – A picture is worth 1000 words Forgetting ‘the ask’ – Do you want your project approved, or killed? – What resources will you need in either case? Irrelevant grabber – Try dramatizing your problem statement instead – Bring relevant visual aids (props) No context – (Re-)Introduce us to your scenario within the first minute Nervousness! – Script, rehearse, revise – When in doubt, stop talking + breathe

30. Presentation Logistics Each team has 30 minutes – Presentation (15 minutes) – Q&A (10 minutes) – Panel Feedback (5 minutes) Individual feedback forms – Complete one for each team (4x) – Feedback is a gift—be a thoughtful gift-giver

31. Session 10, 12/3 (optional): 6-9pm Available for: – Team work time – Practicing your presentation – Instructor feedback – Practice your rude Q&A