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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...
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 traffic to see significantresults that are not tri...
WHAT TO A/B TESTEvery new feature should gointo A/B testing.If has negative or no real effect,pull it.Optimise existing fea...
F   RAMEWORK
ACTIVATION                                       REFERRAL                    RETENTION                                    ...
DON’T 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 affiliate sales of lush dog collars.
G GIE CO LRDO Key business drivers are: Advertising and affiliates need large traffic/page views so growth and retention are key
ACQUISITION              VISITACQUISITION          SIGN-UP                     CREATEACTIVATION           PROFILE         ...
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        ...
T MY DR ILLR ENMarketplace to rent/buy drills fromyour neighbour (AirBnB for drills)Takes a small percentage of thetransac...
T MY DR ILLR EN  Key business drivers are:  Two sided business model  means acquisition of both  lenders and borrowers and...
ACQUISITION              VISIT               LENDER       BORROWERACQUISITION    SIGN-UP       SIGN-UP               SEARC...
ONE KEY METRICThere is generally only one keymetric you need to concentrateon at a time. Such as referral orsign-up conver...
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 r...
MEASURING COST OF VISITSCost per click (site visit)Cost of campaign / trafficgenerated(Social media) Cost of effort /traffic ge...
MEASURING COST OFACQUISITIONCost of one visit / conversionrate = Cost of an acquisitionAcquisition could be paid foracquis...
DIFFERENT CHANNELS CAN HAVEDIFFERENT CONVERSION RATES
MARKETING CHANNELSPer channel track:ScaleCostConversionOptimise and scale channelswith best Cost of Acquisition(CoA) and p...
ACQUISITIONCost of Acquisition < CustomerLifetime ProfitThen scale acquisition at asimilar or lower rateA/B test acquisitio...
ACQUISITION INCLUDING REFERRAL If it costs £3 to acquire a customer through advertising But that customer brought in 2 oth...
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 ho...
ACTIVATION AT FACEBOOK(i) having more than one session asa new user, and entering basicprofile information.(ii) how often a...
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 ...
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 ...
VIRAL COEFFICIENT - EXAMPLE  Viral coefficient =Refferals x click through x conversion    5 x 0.2 x 0.5 = 0.5
VIRAL COEFFICIENTA viral co-effiecient greater than1 means that every customergets more than one othercustomer on averageThe...
VIRAL COEFFICIENTMeasure automatically for allyour in built referralmechanisms.Give customers unique inviteURLs and track ...
VIRAL CYCLE TIMEThe average time taken for areferral to turn into a customerWith the viral coeffiecent andviral cycle time y...
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   ...
NET PROMOTER SCORE Survey a small percentage of your customers by email weekly Record who you sent to so you don’t repeat ...
NET PROMOTER SCORE NPS is not a direct measurement that translates to key metrics Can act as a leading indicator of other ...
R   EVENUE
MAKING MONEY Key for any business is to find out how much profit they make for every customer and scaling the number of cust...
LIFETIME CUSTOMER VALUE How much money you make for every customer you acquire For some this is a single transaction For s...
CANCELLATION RATE Is the percentage number of customers who cancel in any given month compared to total (paying) customers...
LIFETIME CUSTOMER VALUE (LTV) LTV = monthly revenue x no months in lifetime No months = 1 / cancellation rate LTV = monthl...
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 Coho...
LIFETIME CUSTOMER VALUE (LTV) r = short-term cancellation rate (e.g. 0.15) p = long-term cancellation rate (e.g. 0.03) s =...
T   IPS
TIPSConcentrate on macro metricsEverything you do should be anattempt to change a metricMeasure if it didTry to use as few...
TIPSAutomate it and put it in adashboardIf it can’t be automated make asimple spreadsheet and an easyway to update it
TIPSDon’t forget to measuremarketingMake metrics a habit
T   HANKS
Lean startup metrics
Lean startup metrics
Lean startup metrics
Lean startup metrics
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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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Transcript of "Lean startup metrics"

  1. 1. LEAN STARTUP METRICS @STUECCLES 4th Feb 2012
  2. 2. I NEVER FELT LIKE I WAS LEARNINGANYTHING IMPORTANT
  3. 3. “An actionable metric is one that ties specific andrepeatable actions to observed results.” ASH MAURYA http://www.ashmaurya.com/
  4. 4. EVENT BASED TRACKING
  5. 5. F UNNELS
  6. 6. SIMPLE SIGN-UP FUNNEL
  7. 7. EXTENDED SIGN-UP FUNNEL
  8. 8. A/B TESTING
  9. 9. +152%
  10. 10. A/B TESTING USER MAP ON HOMEPAGE
  11. 11. GOOGLE BING
  12. 12. “THAT BLUE WAS WORTH $80M AT LEAST” PAUL RAY - PRODUCT MANAGER BING
  13. 13. AN INTUITIVE LEAPLOCALMAXIMA PROPS @BOKARDO FOR LAST FEW SLIDES
  14. 14. @37SIGNALS
  15. 15. WHAT TO A/B TESTShort Answer: EverythingLonger Answer: That you haveenough traffic to see significantresults that are not trivaloptimisations (HINT you are notBing/Google)
  16. 16. 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)
  17. 17. F RAMEWORK
  18. 18. ACTIVATION REFERRAL RETENTION REVENUEACQUISITION Dave McClure http://500hats.typepad.com/
  19. 19. DON’T TRY TO MEASURE TOO MUCH
  20. 20. E XAMPLES
  21. 21. SAY HELLO TO OUR 3 FICTIONAL STARTUPS
  22. 22. G GIE CO LRDO Social Network for Dog Lovers. Makes money through advertising and affiliate sales of lush dog collars.
  23. 23. G GIE CO LRDO Key business drivers are: Advertising and affiliates need large traffic/page views so growth and retention are key
  24. 24. ACQUISITION VISITACQUISITION SIGN-UP CREATEACTIVATION PROFILE POSTACTIVATION COMMENT PICTURES SHARE INVITE REFERRAL PICTURES FRIENDS REVENUE BUY COLLAR
  25. 25. IL ES AM BAAGProject management tool for Agilestartups.Makes money through monthlysubscriptions. Has a free trial period.
  26. 26. IL ES AM BAAGKey business drivers are:Conversion to paid usage andcancelation rates
  27. 27. ACQUISITION VISITACQUISITION SIGN-UPACTIVATION CREATES PROJECT UPGRADES REVENUE PAID CANCELS REVENUE ACCOUNT
  28. 28. T MY DR ILLR ENMarketplace to rent/buy drills fromyour neighbour (AirBnB for drills)Takes a small percentage of thetransaction between two parties
  29. 29. T MY DR ILLR EN Key business drivers are: Two sided business model means acquisition of both lenders and borrowers and transactions per user
  30. 30. ACQUISITION VISIT LENDER BORROWERACQUISITION SIGN-UP SIGN-UP SEARCHES SEARCHESACTIVATION BORROWERS LENDERS BORROW REVENUE DRILL
  31. 31. ONE KEY METRICThere is generally only one keymetric you need to concentrateon at a time. Such as referral orsign-up conversion orcancellation rate.
  32. 32. A CQUISITION
  33. 33. TRACKING MARKETINGCHANNELSGoogle AdwordsBannersSocial MediaPartnershipsPRBloggingAnything that links to your site!
  34. 34. TRACKING MARKETINGCHANNELSUse unique urls (trackingparameters) on every url youcreate/give-out/pay forUse bit.lyUse HTTP referrers to group PR
  35. 35. MEASURING COST OF VISITSCost per click (site visit)Cost of campaign / trafficgenerated(Social media) Cost of effort /traffic generated
  36. 36. MEASURING COST OFACQUISITIONCost of one visit / conversionrate = Cost of an acquisitionAcquisition could be paid foracquisition or free sign-upUnfortunately not that simple
  37. 37. DIFFERENT CHANNELS CAN HAVEDIFFERENT CONVERSION RATES
  38. 38. MARKETING CHANNELSPer channel track:ScaleCostConversionOptimise and scale channelswith best Cost of Acquisition(CoA) and potential to Scale
  39. 39. ACQUISITIONCost of Acquisition < CustomerLifetime ProfitThen scale acquisition at asimilar or lower rateA/B test acquisition channels tooptimise
  40. 40. 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
  41. 41. A CTIVATION
  42. 42. SURE THEY SIGNED-UP BUT DID THEY LIKE IT?
  43. 43. 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?
  44. 44. 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.
  45. 45. ACTIVATION METRICS OFTEN DRIVE OTHER METRICS IN REFERRAL, RETENTION, REVENUE
  46. 46. R ETENTION
  47. 47. RETURNING USERSTracking unregistered users thatreturn often (useful for contentsites with advertising)Tracking registered users thatreturn and take some sort ofaction.
  48. 48. COHORT METRICS - CREATEDPROJECT
  49. 49. COHORT METRICS - CAME BACK
  50. 50. R EFERRAL
  51. 51. REFFERAL MECHANISMSSocial Media SharingInvite a friend type mechanicsApp ReviewsWord of mouth
  52. 52. VIRAL COEFFICIENTThe average number ofcustomers each customer refers
  53. 53. VIRAL COEFFICIENT - EXAMPLEEach Doggiecollr customerinvites 5 other customers byemail20 % click on that email link50 % of those users convert intocustomers
  54. 54. VIRAL COEFFICIENT - EXAMPLE Viral coefficient =Refferals x click through x conversion 5 x 0.2 x 0.5 = 0.5
  55. 55. VIRAL COEFFICIENTA viral co-effiecient greater than1 means that every customergets more than one othercustomer on averageTherefore your product willgrow virally
  56. 56. VIRAL COEFFICIENTMeasure automatically for allyour in built referralmechanisms.Give customers unique inviteURLs and track conversions
  57. 57. VIRAL CYCLE TIMEThe average time taken for areferral to turn into a customerWith the viral coeffiecent andviral cycle time you candetermine your viral growth
  58. 58. NET PROMOTER SCORE Number of people who would recommend your product to a friend. A single question survey
  59. 59. 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
  60. 60. 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
  61. 61. NET PROMOTER SCORE NPS is not a direct measurement that translates to key metrics Can act as a leading indicator of other metrics
  62. 62. R EVENUE
  63. 63. MAKING MONEY Key for any business is to find out how much profit they make for every customer and scaling the number of customers
  64. 64. 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
  65. 65. 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]
  66. 66. LIFETIME CUSTOMER VALUE (LTV) LTV = monthly revenue x no months in lifetime No months = 1 / cancellation rate LTV = monthly revenue / cancellation rate
  67. 67. LIFETIME CUSTOMER VALUE (LTV) For example: If £20 a month and cancelation rate is 10% a month LTV = £200
  68. 68. LIFETIME CUSTOMER VALUE (LTV) Often not that simple. Short term cancellation rates are much higher than long term Use Cohort Analysis to determine
  69. 69. 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
  70. 70. T IPS
  71. 71. TIPSConcentrate on macro metricsEverything you do should be anattempt to change a metricMeasure if it didTry to use as few tools aspossible
  72. 72. TIPSAutomate it and put it in adashboardIf it can’t be automated make asimple spreadsheet and an easyway to update it
  73. 73. TIPSDon’t forget to measuremarketingMake metrics a habit
  74. 74. T HANKS
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