My presentation on Lean Startup Metrics given at Lean Startup Machine on the 4th Feb and Startup Weekend on the 25h Jan.

1. LEAN STARTUP METRICS
@STUECCLES
4th Feb 2012

2. I NEVER FELT LIKE I
WAS LEARNING
ANYTHING IMPORTANT

3. “An actionable metric is one
that ties specific and
repeatable actions to observed
results.”
ASH MAURYA http://www.ashmaurya.com/

4. EVENT BASED TRACKING

7. F UNNELS

8. SIMPLE SIGN-UP FUNNEL

9. EXTENDED SIGN-UP FUNNEL

10. A/B TESTING

11. +152%

12. A/B TESTING USER MAP
ON HOMEPAGE

15. GOOGLE BING

16. “THAT BLUE WAS WORTH $80M AT
LEAST”
PAUL RAY - PRODUCT MANAGER BING

17. AN
INTUITIVE
LEAP
LOCAL
MAXIMA
PROPS @BOKARDO FOR LAST FEW SLIDES

18. @37SIGNALS

19. WHAT TO A/B TEST
Short Answer: Everything
Longer Answer: That you have
enough traffic to see significant
results that are not trival
optimisations (HINT you are not
Bing/Google)

20. WHAT TO A/B TEST
Every new feature should go
into A/B testing.
If has negative or no real effect,
pull it.
Optimise existing features/copy/
design (80% existing 20% new)

21. F RAMEWORK

22. ACTIVATION REFERRAL
RETENTION
REVENUE
ACQUISITION
Dave McClure http://500hats.typepad.com/

23. DON’T TRY TO MEASURE TOO MUCH

24. E XAMPLES

25. SAY HELLO TO OUR 3 FICTIONAL
STARTUPS

26. G GIE CO LR
DO
Social Network for Dog Lovers.
Makes money through
advertising and affiliate sales of
lush dog collars.

27. G GIE CO LR
DO
Key business drivers are:
Advertising and affiliates need
large traffic/page views so
growth and retention are key

28. ACQUISITION VISIT
ACQUISITION SIGN-UP
CREATE
ACTIVATION PROFILE
POST
ACTIVATION COMMENT
PICTURES
SHARE INVITE
REFERRAL
PICTURES FRIENDS
REVENUE BUY COLLAR

29. IL ES AM BA
AG
Project management tool for Agile
startups.
Makes money through monthly
subscriptions. Has a free trial period.

30. IL ES AM BA
AG
Key business drivers are:
Conversion to paid usage and
cancelation rates

31. ACQUISITION VISIT
ACQUISITION SIGN-UP
ACTIVATION CREATES
PROJECT
UPGRADES
REVENUE PAID
CANCELS
REVENUE ACCOUNT

32. T MY DR ILL
R EN
Marketplace to rent/buy drills from
your neighbour (AirBnB for drills)
Takes a small percentage of the
transaction between two parties

33. T MY DR ILL
R EN
Key business drivers are:
Two sided business model
means acquisition of both
lenders and borrowers and
transactions per user

34. ACQUISITION VISIT
LENDER BORROWER
ACQUISITION SIGN-UP SIGN-UP
SEARCHES SEARCHES
ACTIVATION
BORROWERS LENDERS
BORROW
REVENUE DRILL

35. ONE KEY METRIC
There is generally only one key
metric you need to concentrate
on at a time. Such as referral or
sign-up conversion or
cancellation rate.

36. A CQUISITION

37. TRACKING MARKETING
CHANNELS
Google Adwords
Banners
Social Media
Partnerships
PR
Blogging
Anything that links to your site!

38. TRACKING MARKETING
CHANNELS
Use unique urls (tracking
parameters) on every url you
create/give-out/pay for
Use bit.ly
Use HTTP referrers to group PR

39. MEASURING COST OF VISITS
Cost per click (site visit)
Cost of campaign / traffic
generated
(Social media) Cost of effort /
traffic generated

40. MEASURING COST OF
ACQUISITION
Cost of one visit / conversion
rate = Cost of an acquisition
Acquisition could be paid for
acquisition or free sign-up
Unfortunately not that simple

41. DIFFERENT CHANNELS CAN HAVE
DIFFERENT CONVERSION RATES

42. MARKETING CHANNELS
Per channel track:
Scale
Cost
Conversion
Optimise and scale channels
with best Cost of Acquisition
(CoA) and potential to Scale

43. ACQUISITION
Cost of Acquisition < Customer
Lifetime Profit
Then scale acquisition at a
similar or lower rate
A/B test acquisition channels to
optimise

44. ACQUISITION INCLUDING REFERRAL
If it costs £3 to acquire a
customer through advertising
But that customer brought in 2
other customers through referral
The COA of that channel is £1

45. A CTIVATION

46. SURE THEY SIGNED-UP BUT DID
THEY LIKE IT?

47. ACTIVATION AT FACEBOOK
(i) which data points predict
whether a user will stay?
(ii) if they stay, which data points
predict how active they’ll be
after three months?

48. ACTIVATION AT FACEBOOK
(i) having more than one session as
a new user, and entering basic
profile information.
(ii) how often a user was reached
out to by others, frequency of third
party application use, and how
forthcoming a user was on the site.

49. ACTIVATION METRICS OFTEN DRIVE
OTHER METRICS IN REFERRAL,
RETENTION, REVENUE

50. R ETENTION

51. RETURNING USERS
Tracking unregistered users that
return often (useful for content
sites with advertising)
Tracking registered users that
return and take some sort of
action.

52. COHORT METRICS - CREATED
PROJECT

53. COHORT METRICS - CAME BACK

54. R EFERRAL

55. REFFERAL MECHANISMS
Social Media Sharing
Invite a friend type mechanics
App Reviews
Word of mouth

56. VIRAL COEFFICIENT
The average number of
customers each customer refers

57. VIRAL COEFFICIENT - EXAMPLE
Each Doggiecollr customer
invites 5 other customers by
email
20 % click on that email link
50 % of those users convert into
customers

58. VIRAL COEFFICIENT - EXAMPLE
Viral coefficient =
Refferals x click through x conversion
5 x 0.2 x 0.5 = 0.5

59. VIRAL COEFFICIENT
A viral co-effiecient greater than
1 means that every customer
gets more than one other
customer on average
Therefore your product will
grow virally

60. VIRAL COEFFICIENT
Measure automatically for all
your in built referral
mechanisms.
Give customers unique invite
URLs and track conversions

61. VIRAL CYCLE TIME
The average time taken for a
referral to turn into a customer
With the viral coeffiecent and
viral cycle time you can
determine your viral growth

62. NET PROMOTER SCORE
Number of people who would
recommend your product to a
friend.
A single question survey

63. NET PROMOTER SCORE
How likely is it you would
recommend AgileSamba to a
friend or colleague?
0 1 2 3 4 5 6 7 8 9 10
NPS = % Promoters - % Detractors

64. NET PROMOTER SCORE
Survey a small percentage of
your customers by email weekly
Record who you sent to so you
don’t repeat the same people
every week

65. NET PROMOTER SCORE
NPS is not a direct
measurement that translates to
key metrics
Can act as a leading indicator of
other metrics

66. R EVENUE

67. MAKING MONEY
Key for any business is to find
out how much profit they make
for every customer and scaling
the number of customers

68. LIFETIME CUSTOMER VALUE
How much money you make for
every customer you acquire
For some this is a single
transaction
For subscription businesses it
depends on retention

69. CANCELLATION RATE
Is the percentage number of
customers who cancel in any
given month compared to total
(paying) customers
[Cancellation rate] = [product
utility] + [service quality] +
[acceptable price]

70. LIFETIME CUSTOMER VALUE (LTV)
LTV = monthly revenue x no
months in lifetime
No months = 1 / cancellation
rate
LTV = monthly revenue /
cancellation rate

71. LIFETIME CUSTOMER VALUE (LTV)
For example:
If £20 a month and cancelation
rate is 10% a month
LTV = £200

72. LIFETIME CUSTOMER VALUE (LTV)
Often not that simple. Short term
cancellation rates are much
higher than long term
Use Cohort Analysis to
determine

73. LIFETIME CUSTOMER VALUE (LTV)
r = short-term cancellation rate
(e.g. 0.15)
p = long-term cancellation rate
(e.g. 0.03)
s = number of months in the
“short-term” age group (e.g. 3)
(1-r)^s × (s + 1/p) = expected
months

74. T IPS

75. TIPS
Concentrate on macro metrics
Everything you do should be an
attempt to change a metric
Measure if it did
Try to use as few tools as
possible

76. TIPS
Automate it and put it in a
dashboard
If it can’t be automated make a
simple spreadsheet and an easy
way to update it

77. TIPS
Don’t forget to measure
marketing
Make metrics a habit

78. T HANKS