Customer Channel Section
The Customer Channel Section
In this section, we configure parameters related to customer channels and product distribution channels of the business.
The parameters to be configured include:
Channel name: The name of the distribution channel. Typically, this is the name of channels such as Online, Offline, Wholesale, Retail, etc. Each business can have various distribution channels corresponding to its business model.
For example, a coffee shop might have Offline channels (customers visiting the coffee shop) and Online channels (customers ordering online), B2B channels (business and organizational customers), and Affiliate channels (customers referred by partners).
For a SaaS platform, potential customer channels might include the Website (customers finding through the website), Application (customers finding through an app), Affiliate (customers referred by partners), and B2B (business and organizational purchasers).
Generally, identifying customer channels entirely depends on the business model. When identifying customer channels, ensure the following to allow accurate model predictions:
a. Customer channels must accurately reflect the business model. b. Customer channels must be distinct and non-overlapping. c. Customer channels must be measurable, statistically analyzable, and trackable. d. Customer channels must differentiate between different customer types. e. The aggregation of all customer channels must accurately reflect the business objectives. f. Customer channels must serve a product line and associated revenue. In other words, the purpose of the customer channel is to identify the revenue sources and corresponding costs of products associated with that channel.
Existing Customer: The starting number of customers for the distribution channel. This is the number of customers that the distribution channel already has at the plan's start.
For new customer channels, the starting number of customers will be 0.
The Existing Customer value is the base from which changes in customer numbers will be calculated.
New customer/month: The number of new customers each month. This is the number of new customers that the distribution channel gains each month.
The model uses the number of new customers per month to predict the corresponding revenue and costs of that distribution channel since, for many current small business models like B2C SaaS, a sudden increase in customer numbers each month is necessary.
Growth/month: The monthly growth rate of new customers. This rate is applied in the formula as follows:
New customer of month i+1 = New customer of month i * (1 + Growth/month)
For example, if New customer of month i = 100 and Growth/month = 0.1, then New customer of month i+1 = 100 * (1 + 0.1) = 110.
Begin month: The month when the distribution channel starts. This month is when the distribution channel begins to be active. This value is useful, for example, in determining some customer channels that are seasonal.
Example: For Christmas season, the company wants to open a new sales channel related to Christmas items and gifts. This channel will start in October and end in December.
If nothing special, this value will start from 1.
End month: The month when the distribution channel ends. This is the month when the distribution channel ceases to be active. If nothing special, this value will end in the last month of the plan, i.e., the last month of the Duration (which will be 36 if it’s 3 years or 60 if it’s 5 years).
Churn rate: The rate at which customers leave the distribution channel. This is the monthly churn rate of customers from the distribution channel. The rate is applied in the formula as follows:
a. Begin customer of month 2 = End customer of month 1. b. Churn customer of month 2 = Begin customer of month 2 * Churn rate. c. End customer of month 2 = Begin customer of month 2 + New customer of month 2 - Churn customer of month 2.
Example,
End customer of month 1 = 100.
Therefore, Begin customer of month 2 = End customer of month 1 = 100.
Churn rate = 0.1.
Therefore, Churn customer of month 2 = 100 * 0.1 = 10.
Assuming in month 2, the new customer added is 200. Thus, New customer of month 2 = 200.
Therefore, End customer of month 2 = Begin customer of month 2 + New customer of month 2 - Churn customer of month 2 = 100 + 200 - 10 = 290.
The churn rate applies to the Begin Customer of month i value, not to the New Customer of month i value. In the above case, the churn rate applies to the value 100, not 200.
Acquisition Cost: The cost of acquiring new customers. This value will be used to calculate the CAC (Customer Acquisition Cost) for that distribution channel. However, the platform currently does not support this feature directly. Users can enter costs related to customer acquisition in the Costs section of the model.
For example, if the Website channel has advertising costs of $1000/month and the number of new customers each month is 100, users can enter $1000 in the Advertising section under Costs.
This feature will soon be updated on BeeKrowd to allow users to track the CAC of each distribution channel more efficiently.
In summary, determining the Customer Channel is the first activity users need to undertake before identifying the revenue streams of the financial model. This foundational step ensures that the revenue and associated costs are accurately predicted based on the business's customer acquisition and maintenance strategies. Each channel's performance metrics, such as growth rate, churn rate, and possibly acquisition cost, play a critical role in forecasting the business's financial health and strategic positioning in the market.
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