LEAN STARTUP METRICS @STUECCLES 4th Feb 2012

I NEVER FELT LIKE I WAS LEARNINGANYTHING IMPORTANT

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

EVENT BASED TRACKING

F UNNELS

SIMPLE SIGN-UP FUNNEL

EXTENDED SIGN-UP FUNNEL

A/B TESTING

+152%

A/B TESTING USER MAP ON HOMEPAGE

GOOGLE BING

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

AN INTUITIVE LEAPLOCALMAXIMA PROPS @BOKARDO FOR LAST FEW SLIDES

@37SIGNALS

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

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

F RAMEWORK

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

DONT TRY TO MEASURE TOO MUCH

E XAMPLES

SAY HELLO TO OUR 3 FICTIONAL STARTUPS

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

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

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

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

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

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

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

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

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

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

A CQUISITION

TRACKING MARKETINGCHANNELSGoogle AdwordsBannersSocial MediaPartnershipsPRBloggingAnything that links to your site!

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

MEASURING COST OF VISITSCost per click (site visit)Cost of campaign / tracgenerated(Social media) Cost of eort /trac generated

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

DIFFERENT CHANNELS CAN HAVEDIFFERENT CONVERSION RATES

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

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

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

A CTIVATION

SURE THEY SIGNED-UP BUT DID THEY LIKE IT?

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

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

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

R ETENTION

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

COHORT METRICS - CREATEDPROJECT

COHORT METRICS - CAME BACK

R EFERRAL

REFFERAL MECHANISMSSocial Media SharingInvite a friend type mechanicsApp ReviewsWord of mouth

VIRAL COEFFICIENTThe average number ofcustomers each customer refers

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

VIRAL COEFFICIENT - EXAMPLE Viral coecient =Reerals x click through x conversion 5 x 0.2 x 0.5 = 0.5

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

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

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

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

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

NET PROMOTER SCORE Survey a small percentage of your customers by email weekly Record who you sent to so you dont repeat the same people every week

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

R EVENUE

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

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

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]

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

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

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

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

T IPS

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

TIPSAutomate it and put it in adashboardIf it cant be automated make asimple spreadsheet and an easyway to update it

TIPSDont forget to measuremarketingMake metrics a habit

T HANKS