Metrics-Driven Marketing Strategy

Metrics-Driven Marketing Strategy (+ a little Product Strategy too) Dave McClure Visiting Lecturer Stanford Facebook Class (CS377W) 11/15/07

Summary
Marketing Plan / Strategy = Target Customer Acquisition Channels
3 Important Factors = Volume, Cost, Conversion
Focus on conversion to target customer lifecycle actions
Measure as deep down the conversion funnel as possible
Estimate Customer Lifecycle, Conversion, Revenue Potential
Hypothesize Customer Lifecycle & Critical Conversion Points
Estimate Conversion , Revenue Potential when designing marketing plan
Understand “Annual Rev. Per User” (ARPU) & “Customer Lifetime Value” (CLV)
Match Marketing Channel Costs to Customer Revenue Potential
Design channels that costs <20-50% of target ARPU / CLV
*NOTE: “Cost” has multiple meanings
actual dollars
marketing costs
product development time & resources
time
profit vs cashflow

Agenda
Quick Review of Pirate Metrics
Example Mktg Channels
Brainstorm 3 Scenarios

Customer Lifecycle: 5 Steps
A cquisition : users come to the site/page/app from various channels
A ctivation : users enjoy 1 st visit: "happy" user experience
R etention : users come back, visit site multiple times
R eferral : users like product enough to refer others
R evenue : users conduct some monetization behavior
AARRR!

Facebook App / User Conversion Your App 3. RETENTION Emails Feeds, Profiles 4. REFERRAL Passive: Feeds & Profiles Active: Initial App Invites Invites App Directory Feeds App Cross-Marketing Profile Ads 5. Revenue $$$ Ads, Lead Gen, Subscriptions, etc Canvas Pages App Cross-Marketing 2. Activation CTA, Copy & Graphics 1. ACQUISITION

Conversion Dashboard (example below; customize for your use) $2 3% Email Open / RSS view -> Clickthru Retention $10 1% Refer 1+ users who activate Referral $3 2% Refer 1+ users who visit site Referral $5 2% Repeat Visitor (3+ visits in first 30 days) Retention $25 1% User generates break-even revenue Revenue $3 2% Acct Signup (includes profile data) Activation $1 5% Email/Blog/RSS/Widget Signup (anything that could lead to repeat visit) Activation User generates minimum revenue Happy 1 st Visit (views X pages, stays Y sec, Z clicks) Doesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks) Visit Site (or landing page, or external widget) User Status $5 2% Revenue $.25 30% Activation $.05 70% Acquisition $.01 100% Acquisition Est. Value Conv % Category

Questions / Focus by Role
Founder / CEO:
What do you measure & why? Who’s responsible?
Product Manager / Developer:
How do you choose what to build?
Marketing
What channels do you choose / who do you target?

Founder/CEO
Q: What metrics do you watch? WHY? Who’s responsible?
Hypothesize Customer Lifecycle & Refine
Choose 5-10 conversion steps
Less, not More is better
Q: minimal necessary & sufficient metrics rqd to make decisions?
can you simplify to top 3? just 1?
Delegate each Metric to someone (not you) to OWN
Focus on conversion improvement; measure & iterate
NOTE: if you measure something, it should tell you something…
Use “Is it Actionable?” test to determine whether or not to track a metric

Product
Q: how do you choose what to build (or NOT build) ?
Choose features for conversion improvement
80% on existing feature optimization
20% on new feature development
Just guess, then A/B test … A LOT
Measure conversion improvement
Rinse & Repeat

Marketing
Q: what channels / who do you market to?
Design & Test Multiple Mktg Channels
Select & Focus on Channels with:
High Volume
High Conversion
Low Cost
Measure *deeper* down the conversion funnel, not just to website / landing page
Segment & Select channels & customers by conversion @ deepest possible level (ideally $$$)

Agenda

Example Marketing Channels disclaimer: these estimates of vol, cost/user, time & effort are highly subjective & very dependent on your specific business med/hi (reports, co-branding) Med/hi med/hi (capture metrics, generate reports) med-high depends on partner, size of customer base, conversion Biz Dev / Partner low/zero (med = prof contest site) Med low/med (depends on contest, site, campaign) low/med small unless big prize $ (don’t, keep it under $5K) Contest low/zero if no system; Med/hi if integrated SFA High med-high med-high depends on target demographics Telemktg low/zero Med/hi medium Med/hi depends on geography Direct / radio Med/hi (production cost) High Med-high High Potentially large (if you spend) TV low/med low Low for FB social networks; med/hi for normal sites low/zero depends on CTA; size of accessible social networks / # users Viral / Referral low/med (landing pages = med) Low/med Low/med (depends on your marketing) Depends depends on your keywords SEM med/hi (depends on complexity) med Low/med low/med Depends on CTA; size of accessible sites, level of adoption + bloggers Widget med/hi (depends on rqd tracking & reporting) med/hi med/hi (need to build affiliate program, capture metrics, generated reports) Med/hi depends on economics Affiliate / Lead Gen low/zero med medium (develop story, build contacts) Med/hi depends on your business & audience & news PR Low (redirects/co-brand?) low low depends depends on keywords, domain costs domains med/hi low/zero Medium (depends on your search geeks) Low/zero depends on your keywords SEO low/zero (med = CMS, prof design) low/med Low (if just you blogging); med (if you're setting up big CMS / evangelizing to other bloggers) low/med Depends on # blogs in your segment, competitive scenario Blogs / Bloggers low/med (med = create templates) low/med Low low/med depends on CTA, size of your house lists, email signups Email Prod Effort Mktg Effort Time to implement Cost/user Volume Channel

Conversion Measurement
Conversion Criteria:
best-performing (%) channels / campaigns / copy
largest-volume (#) channels / campaigns / copy
lowest-cost ($) channels / campaigns / copy
Measurement Components:
Audience Segment (age, region, profession, interest)
Channel Source (social network, SEM, organic, PR, etc)
Campaign Theme / Brand Promise (“save money”, “get cool stuff”)
Landing Page & CTA
Copy & Graphics

Agenda

Scenario I
Example: Lightweight Facebook App
Consumer target: people who poke, are frisky ;)
Customers are worth: $0-5?
currently advertising revenue
potential for sponsorship, e-commerce revenue
Company has ZERO funding / marketing budget
limited ability to raise capital
limited budget mostly from ad revenue
Questions:
how to design marketing channels?
Significant viral potential?
Conversion to long-term customer potential?
Marketing potential off-FB?

Scenario II
Example: Consumer Website (low-end)
Consumer target: pet owners
Customers are worth $5-25
mostly advertising, sponsorship revenue
some e-commerce revenue
Company has modest funding / marketing budget
raised $XM in capital / not yet at break-even
spending $X00K / year on marketing
Questions:
Email marketing?
SEO/SEM keyword opportunities?
Blogging / Affiliate opportunites?

Scenario III
Example: Consumer Website (high-end)
Consumer target: people tracking their money/finances
Customers are worth $25-100+
significant lead-gen & advertising
potential for lots of e-commerce revenue
Company has funding / marketing budget
raised $XXM in capital; approaching break-even / profitable
significant >$XM spend on marketing; known customer economics
Questions:
SEO/SEM potential?
Direct Marketing potential?
Biz Dev opportunities?
Viral may be less important if large vol of profitable leads

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Metrics-Driven Marketing Strategy

by Dave McClure on Nov 15, 2007

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Metrics-Driven Marketing Strategy — Presentation Transcript