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