The efficiency stage comes before scaling and after validation. This stage is about refining the value proposition for the mainstream market, streamlining the conversion funnel and finding profitable high volume customer acquisition channels for growth. Efficiency is often thought of as the stage where any holes in the customer pipeline are fixed, in preparation for adding fuel in the scale stage.
In the validation stage, product market fit should be achieved with one key target segment and efficiency is about extending this into other segments and from early adopters to the mainstream market. This leads to a refined message that resonates with why users love your product.
Some of the activities performed during efficiency stage:
- Developing marketing/educational material to support speaking to a mainstream market (vs early adopters in validation).
- Improving the user experience
- Streamlining the conversion funnel by using the metrics developed in validation and focussing on refining the growth engine (paid, viral or sticky).
- Developing a repeatable scalable sales process
- Finding profitable customer acquisition channels that will support high volume in the scale phase. This in preparation for exploding!
- Improving the product to increase retention and minimizing churn.
Key metrics to watch
As a minimum the goals of efficiency are to tune the engine of growth to support scaling. Premature scaling (ie when inefficient) is one of the biggest causes of startup failure.
Sticky engine of growth: Lower churn and increase retention
Viral engine of growth: Obtain a viral coefficient >1
Paid engine of growth: Revenue per customer is greater than the cost per acquisition