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Metrics that Matter

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By now you've probably heard enough times the importance of metrics. In the initial stages of a startup there isn't a lot of data, so we need to get some! There are some crucial initial steps you need to take to get set and collect metrics. In this talk I'll present how to take an initial snapshot, setup some initial metrics to track your progress, align them with milestones, and how you can use those metrics to guide your decision making and spend your limited time wisely.

Metrics that Matter

  1. 1. Metrics that Matter Poornima Vijayashanker EIR @ 500 Startups October 21, 2014 1
  2. 2. Agenda • What are metrics and analytics • Methods of collecting metrics • Types of metrics • One metric that matters 2
  3. 3. What are metrics? 3
  4. 4. “ A business metric is any type of measurement used to gauge some quantifiable component of a company’s performance such as ROI, churn rate, etc. ” 4
  5. 5. “ Analytics is the discovery and communication of meaningful patterns in data. ” 5
  6. 6. Why do we need analytics & metrics? 6
  7. 7. Uncertainty. 7
  8. 8. A startup is an experiment. 8
  9. 9. Experiments needs a hypothesis & results! 9
  10. 10. Vanity metrics. 10
  11. 11. Almost anything you read on TechCrunch. 11
  12. 12. “ We send out 10M emails daily! ” “ We received 1M likes overnight! ” 12
  13. 13. What are good metrics? 13
  14. 14. 1. Comparative 2. Understandable 3. Ratio 14
  15. 15. What will I do differently based on this information? - Lean Analytics ” “ 15
  16. 16. Total sign ups - Vanity Metric vs. Total active user - Actionable Metric 16
  17. 17. Qualitative vs. Quantitative 17
  18. 18. Sometimes you have to pick up the phone! 18
  19. 19. KPIs: Key Performance Indicator 19
  20. 20. Leading vs. Lagging 20
  21. 21. Cohort A/B Multivariate Similar groups over time. Lots of data. Testing all variables at once. 21
  22. 22. Average revenue for 5 months as we add features, and refine product. January February March April May Total Customers 1,000 2,000 3,000 4,000 5,000 Avg Revenue Per Customer $5.00 $4.50 $4.33 $4.25 $4.50 Table 2-1 from Lean Analytics. 22
  23. 23. What is this data telling us? 23
  24. 24. Cohort Analysis of revenue data. Horizontal axis are cohorts (e.g. January cohort). Month of Use January February March April May New Users 1000 1000 1000 1000 1000 Total Users 1000 2000 3000 4000 5000 Month 1 $5.00 $3.00 Cohort $2.00 Analysis $1.00 $0.50 Month 2 $6.00 $4.00 $2.00 $1.00 Month 3 $7.00 $6.00 $5.00 Month 4 $8.00 $7.00 Month 5 $9.00 Table 2-2 from Lean Analytics. Spending less initially. Spending increases. 24
  25. 25. AARRR 25
  26. 26. Marketing Metrics Product Metrics Customer Metrics Pricing Metrics 26
  27. 27. Marketing Metrics Product Metrics Customer Metrics Pricing Metrics 27
  28. 28. Need to figure out appropriate metric for each. website Market Channels e-mail campaigns offline social media 28
  29. 29. Possible Reach in Channel Actual Reach Sign Up for Trial Active Paying Long Term Paying Funnel per Channel 29
  30. 30. Marketing Metrics Product Metrics Customer Metrics Pricing Metrics 30
  31. 31. Sign up for product Try out product Actively use product Convert to Paid Refer more users Funnel for Product 31
  32. 32. Funnel depends on type of product. 32
  33. 33. Services that are used constantly but with a specific purpose. Daily 33
  34. 34. Frequently used products with a number of use cases. Daily 34
  35. 35. Less frequently used product with a specific use case. Yearly? Possibly monthly. 35
  36. 36. Frequency of use (engagement), use case, and appeal impact adoption. 36
  37. 37. What features trigger conversions? 37
  38. 38. How can you create an experience that will set off those triggers? 38
  39. 39. Install it! 39
  40. 40. • Understand place of features in your product. • Look at the frequency of their usage. • Does one feature lead to the usage of another • Can you constrain UX to improve adoption? • Can issues reported or requests be monetized? 40
  41. 41. Marketing Metrics Product Metrics Customer Metrics Pricing Metrics 41
  42. 42. •# of customers •Recency •Retention Rate (churn rate) •LTV (lifetime value) •Customer Acquisition Costs •Customer Profitability •Net Promoter Score 42
  43. 43. •Prospects •First-time Buyers •Early Repeat Buyers •Core Customers •Core Defectors 43
  44. 44. Oh it ain’t no lie, your churn rates make the users go BYE BYE BYE! “ ” - Sean P. 44
  45. 45. One metric that matters. 45
  46. 46. • Most important question you have. • Draw a line. • Focuses entire company. • Encourages a culture of experimentation & small failures. 46
  47. 47. •How many new customers do you need? •How many new customers per week (per acquisition channel) do you think define a level of success? • Level of success being that which gets you to the next stage. 47
  48. 48. Take a snapshot today! Marketing & product. 48
  49. 49. Marketing activities change. $0 $1K $5K $10K $10K $100K Customer costs change. 49
  50. 50. Exercise! 50
  51. 51. Exercise #1 • Come up with 1 metric. • Ask yourself, “How will our current activities meet or achieve that metric?” • Cut out the activities that don’t or put them on the back burner. • Email me your metric and activities (poornima@500.co) or come to my office hours on Friday @ 12-1pm. 51
  52. 52. Review • What are metrics and analytics • Methods of collecting metrics • Types of metrics • One metric that matters 52
  53. 53. Appendix. 53
  54. 54. Metrics based on business model • E-Commerce Site • Get to shopping cart. • Reduce abandonment! • SaaS • Monthly subscription • Conversion v. cancellation rate • Marketplace • transaction fee • connecting buyers & sellers • Mobile App • discovery • in-app purchases • upgrading to paid app • Media • engagement with content 54

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