Lean startup metrics
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My presentation on Lean Startup Metrics given at Lean Startup Machine on the 4th Feb and Startup Weekend on the 25h Jan.
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Lean startup metrics
- 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/
- 7. F UNNELS
- 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