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.

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 Lean startup metrics Presentation Transcript

  • 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 traffic to see significantresults 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 effect,pull it.Optimise existing features/copy/design (80% existing 20% new)
  • F RAMEWORK
  • ACTIVATION REFERRAL RETENTION REVENUEACQUISITION Dave McClure http://500hats.typepad.com/
  • 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 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 / trafficgenerated(Social media) Cost of effort /traffic 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 ProfitThen 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 they’ll beafter three months?
  • 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.
  • 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 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 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 coeffiecent 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 don’t 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 find out how much profit 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 can’t be automated make asimple spreadsheet and an easyway to update it
  • TIPSDon’t forget to measuremarketingMake metrics a habit
  • T HANKS