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Startup Metrics For Scottish Pirates (AARRR!) v1.3

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revised Startup Metrics for Pirates preso, for talk @ Univ. Edinburgh (January 2008)
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  • Business Models & Startup Metrics
    for Scottish Pirates (AARRR!) v1.3

    Dave McClure, Master of 500 Hats

    @ Univ. Edinburgh, January 2008

    blog: http://500hats.typepad.com/

    website: http://www.500hats.com/

    slides: http://slideshare.net/dmc500hats/

    * reminder: National Talk Like a Pirate Day is Sept 19th!

    *

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • Startup Metrics for Pirates:
    5 Steps to Web 2.0 Booty!

    Acquisition: users come to site from various channelsActivation: users enjoy 1st visit: "happy experienceRetention: users come back, visit site multiple timesReferral: users like product enough to refer othersRevenue: users conduct some monetization behavior

    AARRR!

    *

  • Customer Lifecycle & Conversion Behavior

    Website.com

    4. REFERRAL

    Emails & widgets

    Campaigns, Contests

    5. Revenue $$$

    Biz Dev

    Ads, Lead Gen, Subscriptions, etc

    2. Activation

    Homepage / Landing Page

    Product Features

    1. ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    Marketing Channels:

    largest-volume (#) lowest-cost ($) best-performing (%)

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    Activation Criteria:

    10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usage

    do LOTS of landing page tests & A/B tests

    make lots of dumb guesses & iterate FAST

    2. Activation

    Homepage / Landing Page

    Product Features

    1. ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    Automated emails are simple, easy retention feature (but dont overdo it)

    lifecycle emails @ +3, +7, +30d status emails weekly/monthly event-based emails as they occur but: make it easy to unsubscribe

    2. Activation

    Homepage / Landing Page

    Product Features

    1. ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    Only encourage users to

    refer *after* they have

    happy user experience;

    avg score >= 8 out of 10

    2. Activation

    Homepage / Landing Page

    Product Features

    4. REFERRAL

    Emails & widgets

    Campaigns, Contests

    1. ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Customer Lifecycle / Conversion Behavior

    Website.com

    This is the part *you*

    have to figure out

    I dont know jack about

    your business

    5. Revenue $$$

    Biz Dev

    Ads, Lead Gen, Subscriptions, etc

    2. Activation

    Homepage / Landing Page

    Product Features

    4. REFERRAL

    Emails & widgets

    Campaigns, Contests

    1. ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    *

  • Example Conversion Metrics
    (note: *not* actuals your mileage may vary.)

    CategoryConversion StatusConv %Est. ValueAcquisitionVisit Site (or landing page, or external widget)100%$.01AcquisitionDoesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks)70%$.05ActivationHappy 1st Visit(views X pages, stays Y sec, Z clicks)30%$.25ActivationEmail/Blog/RSS/Widget Signup(anything that could lead to repeat visit)5%$1ActivationAcct Signup(includes profile data)2%$3RetentionEmail Open / RSS view -> Clickthru3%$2RetentionRepeat Visitor (3+ visits in first 30 days)2%$5ReferralRefer 1+ users who visit site2%$3ReferralRefer 1+ users who activate1%$10RevenueUser generates minimum revenue2%$5RevenueUser generates break-even revenue1%$25

    *

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • Founder/CEO

    Q: Which Metrics? Why?

    A: Focus on Critical Few Actionable Metrics

    (if you dont use the metric to make a decision, its not actionable)

    Hypothesize Customer Lifecycle & RefineChoose ~5 Conversion steps (tip: Less = More)Delegate Each Key Metric to someone to OWN

    *

  • Product / Engineering

    Q: What to Build? Why?

    A: Build Features that Increase Conversion (= Value)

    Wireframes = Conversion StepsMeasure, A/B Test, Iterate FAST (daily/weekly)Optimize for Conversion Improvement80% on existing feature optimization20% on new feature developmentJust guess, then A/B test A LOT.

    *

  • Marketing / Sales

    Q: What channels? Which users? Why?

    A: High Volume (#), Low Cost ($), High Conversion (%)

    Design & Test Multiple Marketing Channels / Campaign ThemesSelect & Focus on Best-Performing Channels & Themes (best = #, $, %)Measure *deeper* down Conversion funnel, not just site / landing pageTest & Optimize; Segment & Select, Target Channels & [email protected] deepest possible level (ideally $$$)Low-Hanging Fruit: 1) Blogs, 2) SEO/SEM, 3) Landing Pages, 4) Automated Emails

    *

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • Q: Business Model?

    Business Model can be one of the following:

    OK: Get Users (= Acquisition, Referral)

    BETTER: Drive Usage (= Activation, Retention)

    BEST: Make Money (= Revenue*)

    * ideally profitable revenueNote: *eventually* need to turn Users/Usage -> Money
  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • MAARRRketing Plan

    Marketing Plan = Target Customer Acquisition Channels3 Important Factors = Volume (#), Cost ($), Conversion (%)Measure conversion to target customer actionsTest audience segments, campaign themes, Call-To-Action (CTAs) Match Channel Costs to Revenue Potential Est. Conversion + Revenue PotentialAvg Txn Value (ATV), Ann. Rev. Per User (ARPU), Cust. Lifetime Value (CLV)Design channels that cost
  • Example Marketing Channels

    disclaimer: estimates of vol, cost/user, time & effort are subjective actual costs are dependent on your specific business

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • 4 Types of Measurement

    Qualitative: Usability Testing / Session MonitoringWatch users, guess problems & solutions from small # of usersQuantitative: Traffic Analysis / User EngagementTrack users, usage, conv %'s for empirical sample # of usersComparative: A/B, Multivariate TestingCompare what users do in one scenario vs anotherMeasure which copy/graphics/UI are most effectiveCompetitive: Monitoring & Tracking CompetitorsTrack competitor activity & compare against yours (if possible)Compare channels, keyword traffic, demographics, user sat, etc.

    (see slide notes for links to tools & vendors)

    *

    Qualitative: SurveyMonkey (surveys), CrazyEgg (heatmap), TechSmith Morae / UserVue (ux recording), RobotReplay, TapeFailure.
    Quantitative: Google Analytics (free), MyBlogLog, ClickTracks, Index Tools, Visual Sciences / Webside Story, Omniture, WebTrends, etc.
    Comparative: Google Website Optimizer, SiteSpect, Optimost, Offermatica, Vertster, Kefta.
    Competitive: Quantcast, Compete.com, Alexa, Hitwise, Comscore, Nielsens.

    see more info at:
    http://webanalyticsassociation.com/ (WAA)
    http://kaushik.net/ (Avinash Kaushik)
    http://grokdotcom.com/ (Eisenbergs)

    http://www.emetrics.org/ (Jim Sterne)

  • Quantitative & Comparative Measurement

    Conversion Criteria:best-performing (%) channels / campaigns / copylargest-volume (#) channels / campaigns / copylowest-cost ($) channels / campaigns / copyMeasurement Components:Audience Segment (young women, regional metro, older singles)Channel Source (social network, SEM, organic, PR, etc)Campaign Theme / Brand Promise (find a job, learn to cook)Landing Page & CTACopy & Graphics

    *

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • Web 2.0: Yeah, Were Special*

    Web Services, Ajax, Flash, Tags, FeedsOnline reach is very broad (1B+ users worldwide)HW/SW Infrastructure Cost is low (open source)Customer Acquisition Cost is low (blogs, SEO, email/viral)User Participation is high (UGC/LGC)Referral Potential is high (if you dont suck)Monetization is non-zero (you hope)Online Metrics are available (if you measure)

    * as in Special Olympics

  • AARRRgenda

    Startup Metrics for Pirates (AARRR!)Questions for Pirates & FoundersWhat is a Business Model?What is a Marketing Plan?More About MetricsWeb 2.0: Whats So Special?Summary

    *

  • Why You Should Be A Web 2.0 Entrepreneur

    Pirate! AARRR!

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