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LEAN STARTUP METRICS @STUECCLES 4th Feb 2012

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I NEVER FELT LIKE I WAS LEARNINGANYTHING IMPORTANT

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

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EVENT BASED TRACKING

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F UNNELS

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SIMPLE SIGN-UP FUNNEL

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EXTENDED SIGN-UP FUNNEL

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A/B TESTING

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+152%

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A/B TESTING USER MAP ON HOMEPAGE

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GOOGLE BING

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

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AN INTUITIVE LEAPLOCALMAXIMA PROPS @BOKARDO FOR LAST FEW SLIDES

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@37SIGNALS

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WHAT TO A/B TESTShort Answer: EverythingLonger Answer: That you haveenough traffic to see significantresults that are not trivaloptimisations (HINT you are notBing/Google)

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

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F RAMEWORK

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ACTIVATION REFERRAL RETENTION REVENUEACQUISITION Dave McClure http://500hats.typepad.com/

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DON’T TRY TO MEASURE TOO MUCH

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E XAMPLES

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SAY HELLO TO OUR 3 FICTIONAL STARTUPS

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

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

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ACQUISITION VISITACQUISITION SIGN-UP CREATEACTIVATION PROFILE POSTACTIVATION COMMENT PICTURES SHARE INVITE REFERRAL PICTURES FRIENDS REVENUE BUY COLLAR

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IL ES AM BAAGProject management tool for Agilestartups.Makes money through monthlysubscriptions. Has a free trial period.

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IL ES AM BAAGKey business drivers are:Conversion to paid usage andcancelation rates

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ACQUISITION VISITACQUISITION SIGN-UPACTIVATION CREATES PROJECT UPGRADES REVENUE PAID CANCELS REVENUE ACCOUNT

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T MY DR ILLR ENMarketplace to rent/buy drills fromyour neighbour (AirBnB for drills)Takes a small percentage of thetransaction between two parties

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

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ACQUISITION VISIT LENDER BORROWERACQUISITION SIGN-UP SIGN-UP SEARCHES SEARCHESACTIVATION BORROWERS LENDERS BORROW REVENUE DRILL

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ONE KEY METRICThere is generally only one keymetric you need to concentrateon at a time. Such as referral orsign-up conversion orcancellation rate.

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A CQUISITION

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TRACKING MARKETINGCHANNELSGoogle AdwordsBannersSocial MediaPartnershipsPRBloggingAnything that links to your site!

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TRACKING MARKETINGCHANNELSUse unique urls (trackingparameters) on every url youcreate/give-out/pay forUse bit.lyUse HTTP referrers to group PR

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MEASURING COST OF VISITSCost per click (site visit)Cost of campaign / trafficgenerated(Social media) Cost of effort /traffic generated

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MEASURING COST OFACQUISITIONCost of one visit / conversionrate = Cost of an acquisitionAcquisition could be paid foracquisition or free sign-upUnfortunately not that simple

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DIFFERENT CHANNELS CAN HAVEDIFFERENT CONVERSION RATES

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MARKETING CHANNELSPer channel track:ScaleCostConversionOptimise and scale channelswith best Cost of Acquisition(CoA) and potential to Scale

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ACQUISITIONCost of Acquisition < CustomerLifetime ProfitThen scale acquisition at asimilar or lower rateA/B test acquisition channels tooptimise

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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

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A CTIVATION

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SURE THEY SIGNED-UP BUT DID THEY LIKE IT?

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ACTIVATION AT FACEBOOK(i) which data points predictwhether a user will stay?(ii) if they stay, which data pointspredict how active they’ll beafter three months?

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ACTIVATION AT FACEBOOK(i) having more than one session asa new user, and entering basicprofile information.(ii) how often a user was reachedout to by others, frequency of thirdparty application use, and howforthcoming a user was on the site.

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

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R ETENTION

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RETURNING USERSTracking unregistered users thatreturn often (useful for contentsites with advertising)Tracking registered users thatreturn and take some sort ofaction.

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COHORT METRICS - CREATEDPROJECT

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COHORT METRICS - CAME BACK

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R EFERRAL

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REFFERAL MECHANISMSSocial Media SharingInvite a friend type mechanicsApp ReviewsWord of mouth

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VIRAL COEFFICIENTThe average number ofcustomers each customer refers

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VIRAL COEFFICIENT - EXAMPLEEach Doggiecollr customerinvites 5 other customers byemail20 % click on that email link50 % of those users convert intocustomers

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

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VIRAL COEFFICIENTA viral co-effiecient greater than1 means that every customergets more than one othercustomer on averageTherefore your product willgrow virally

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VIRAL COEFFICIENTMeasure automatically for allyour in built referralmechanisms.Give customers unique inviteURLs and track conversions

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VIRAL CYCLE TIMEThe average time taken for areferral to turn into a customerWith the viral coeffiecent andviral cycle time you candetermine your viral growth

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

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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

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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

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

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R EVENUE

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

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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

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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]

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

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

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

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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

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T IPS

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TIPSConcentrate on macro metricsEverything you do should be anattempt to change a metricMeasure if it didTry to use as few tools aspossible

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TIPSAutomate it and put it in adashboardIf it can’t be automated make asimple spreadsheet and an easyway to update it

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TIPSDon’t forget to measuremarketingMake metrics a habit

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T HANKS