Lean Startup Metrics & Analytics
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This document provides an overview of lean startup metrics and analytics. It discusses vanity metrics and how to define actionable metrics like activation, retention, referral, and revenue metrics. It emphasizes the importance of optimizing for learning through testing assumptions with A/B testing and multivariate testing. Frameworks for metrics like AARRR and cohort analysis are presented. Tips include using an innovation accounting approach and focusing on macro metrics that can change with product changes.
![Cancellation Rate
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]](https://image.slidesharecdn.com/leanstartupmetricsandanalytics-120929084139-phpapp01/85/Lean-Startup-Metrics-Analytics-85-320.jpg)
Lean Startup Metrics & Analytics
- 1. (Lean) Startup Metrics & Analytics Nicola Junior Vitto - @njvitto @blomming September 26, 2012 - Better Software - Firenze, Italy
- 2. Entrepreneurship ...Entrepreneurs recognize they are going to have to follow their own internal compass and embrace the uncertainty as part of the journey. - Steve Blank - more on: http://steveblank.com/2009/06/29/agile-opportunism-entrepreneurial-dna/
- 3. Get out of the building (by Steve Blank) Your business assumptions can be wrong Go out and speak with your customers
- 5. Vanity Metrics - Timelines There will always be something up and to the right
- 6. Vanity Metrics - Google Analytics Forget it!
- 7. Vanity Metrics - Google Analytics ...and this could become like a drug...killing you!
- 8. Vanity Metrics - TechCrunch & Co “mDialog raises 5 Million from Blackberry partners” “GroupMe is now sending one Million texts every day” “Google Plus hits 10 Million users in 2 weeks”
- 9. Lean Metrics
- 10. What’s a startup? A startup is first of all an experiment, it is a human institution designed to deliver a new product or service under conditions of extreme uncertainty At its heart, a startup is a catalyst that transforms ideas into product. (From Lessons Learned blog By Eric Ries)
- 11. What’s a Lean Startup? Lean startup is a rigorous process for iterating from Plan A to a plan that works. (by Ash Maurya)
- 12. What Metrics Matter? Example: Facebook on early days 150k users, little revenue Many superior competitors What would indicate their future success?
- 13. What Metrics Matter? Example: Facebook on early days 75% of users visit one or more times per day Within one month of launching on a new campus, can acquire 90% of the students
- 14. What Metrics Matter? Good Metrics (Three A’s) Are Actionable Can be Audited Are Accessible
- 15. Actionable Metric An actionable metric is one that ties specific and repeatable actions to observed results (by Ash Maurya)
- 16. A/B Testing
- 17. A/B Testing - New Blomming home VS Define your Goals
- 18. A/B Testing - Define your goals A/B Testing Goals One single important Goal: % Users that sign-up for the service (as a seller) Secondary Goal: % Buyers that buy something after landing on the homepage
- 20. Multivariate Testing at Google “Yes, it’s true that a team at Google couldn’t decide between two blues, so they’re testing 41 shades between each blue to see whic one performs better. I has a recent debate over wheter a border should be 3, 4 or 5 pixels wide, and was asked to prove my case. I can’t operate in an environment like that.” (by Doug Bowman on Design at Google)
- 21. Multivariate Testing at Google
- 22. Multivariate Testing at Google
- 23. Multivariate Testing at Google Google Bing
- 24. Multivariate Testing at Google “That blue was worth at least $80M” (by Paul Ray - Product Manager at Bing)
- 25. Funnels
- 26. David Cancel’s Funnel The Problem: 98% of people who visit your site, leave never to return
- 27. David Cancel’s Funnel 2% “The average conversion rate in the United States of America wheter you’re selling elephants or iPods” (by Avinash Kaushik - Analytics Evangelist, Google)
- 29. David Cancel’s Funnel The Solution: To find, engage and convert more of your website visitors into customers
- 30. Online Marketing is shifting
- 31. Online Marketing Paradigm Shift by David Cancel
- 32. Online Marketing Paradigm Shift by David Cancel
- 33. Online Marketing Paradigm Shift by David Cancel
- 34. Online Marketing Paradigm Shift Internet Marketing 3.0 (different goal) by David Cancel
- 35. Lifecycle Marketing by David Cancel
- 36. Optimize
- 37. Optimize for learning Optimize for learning by creating a data-driven marketing framework
- 38. Optimize for learning Analytics & A/B Testing are also not exactly the answer
- 39. Optimize for learning Use quantitative & qualitative data to test *your* assumptions
- 40. Optimize for learning The point of testing is to prove or disprove assumptions quickly
- 41. Optimize for learning Pay attention to “overtesting” using Multivariate testing because it generally takes too long
- 42. The Local Maxima Problem
- 43. Frameworks
- 44. AARRR
- 45. AARRR Dave McClure’s Startup Metrics for Pirates is a good framework for thinking about macro metrics
- 46. AARRR - Model
- 47. AARRR - Conversions Example
- 48. AARRR - Different orders (example) 1. Activation, Retention (happiness) 2. Revenue (sustainability) 3. Acquisition, Referral (virality) (this is the Ash Maurya or 37signals order: “Charge from day one”)
- 49. Acquisition
- 50. Tracking Marketing Channels Google Adwords Banners Social Media Partnerships PR Blogging ...anything that links to your site!
- 51. Tracking Marketing Channels Use unique urls (tracking parameters) on every url you create/give-out/pay for Use bit.ly Use HTTP referrers to group PR
- 52. Measuring Cost of Visits Cost per click (site visits) Cost of campaign / Traffic generated (Social media) Cost of effort / Traffic generated
- 53. Measuring Cost of Acquisition Cost of one visit / conversion rate = Cost of an Acquisition Acquisition could be paid for acquisition of free sign-up ...unfortunately is not so simple
- 54. Marketing Channels Per channel track: Scale Cost Conversion Optimise and scale channels with best Cost of Acquisition (CoA) and potential to Scale
- 55. Acquisition Cost of Acquisition < Customer Lifetime Profit Then scale acquisition at a similar or lower rate A/B test acquisition channels to optimise
- 56. Acquisition including Referral If it costs €3 to acquire a customer through advertising But a customer brought in 2 other customers through referral The COA of that channel is €1
- 57. Activation
- 58. Activation Sure, they signed-up!!!
- 59. Activation Sure, they signed-up!!! BUT did the like it???
- 60. Activation at Facebook (i) which data points predict whether a user will stay? (ii) if they stay, which data points predict how active they’ll be after three months?
- 61. Activation at Facebook (i) which data points predict whether a user will stay? having more than one session as a new user and entering basic profile information. (ii) if they stay, which data points predict how active they’ll be after three months? how often a user was reached out by others, frequency of third party application use, and how available a user was on the site.
- 62. Activation at Facebook “At the time, I heard many people criticize Facebook’s early investors, claiming that Facebook had ‘no business model’ and only modest revenues relative to the valuation offered by its investors...” “...Facebook was different, because it employed a different Engine of Growth. It paid nothing for customer acquisition, and its high engagement meant that it was accumulating massive amount of customer attention every day.” (Eric Ries - The Lean Startup)
- 63. Activation Metrics Activation metrics often drive other metrics in Referral, Retention, Revenue
- 64. Retention
- 65. Returning Users Tracking unregistered users that return often (useful for content sites with advertising) Tracking registered users that return and take some sort of action.
- 66. Cohort Analysis
- 67. Twitter Cohorts (example) by Fred Wilson’s blog (more on: http://www.avc.com/a_vc/2009/10/the-cohort-analysis.html)
- 68. Twitter Cohorts (example) by Fred Wilson’s blog (more on: http://www.avc.com/a_vc/2009/10/the-cohort-analysis.html)
- 69. Referral
- 70. Referral Mechanism Social Media Sharing Invite a friend type mechanism App Reviews Word of Mouth
- 71. Viral Coefficient The average number of customers that each customer refers
- 72. Viral Coefficient - Example Each company customer invites 5 other customers via email 20% click on that email link 50% of those users convert into customers
- 73. Viral Coefficient - Example Viral Coefficient = Referrals x click through x conversion 5 x 0.2 x 0.5 = 0.5
- 74. Viral Coefficient A viral co-efficient greater than 1 means that every customer gets more than one other customer on average
- 75. Viral Coefficient A viral co-efficient greater than 1 means that every customer gets more than one other customer on average Therefore your product will grow virally
- 76. Viral Coefficient Measure automatically for all your built in referral mechanism Give customers unique invite URLs and track conversions
- 77. Viral Cycle Time Viral Cycle Time = the average time taken for a referral to turn into a customer With the viral coefficient and viral cycle time you can determine your viral growth
- 78. Net Promoter Score Net Promoter Score: Number of people who would recommend your product to a friend A single question survey
- 79. Net Promoter Score “How likely is it you would recommend my product to a friend or colleague?” 0 1 2 3 4 5 6 7 8 9 10 NPS = % Promoters - % Detractors
- 80. 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
- 81. Net Promoter Score NPS is not a direct measurement that translates to key metrics Can act as a leading indicator of other metrics
- 82. Revenue
- 83. Making Money Key for any business is to find out how much profit they make for every customer and scaling the number of customers
- 84. Lifetime Customer Value How much money you make for every customer you acquire For some this a single transaction For subscription businesses it depends on retention
- 85. Cancellation Rate 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]
- 86. Lifetime Customer Value (LTV) LTV = monthly revenue x n° months in lifetime N° months = 1 / cancellation rate LTV = monthly revenue / cancellation rate
- 87. Lifetime Customer Value (LTV) For example: If €20 a month and cancellation rate is 10% a month LTV = €200
- 88. Lifetime Customer Value (LTV) Often not that simple. Short term cancellation rates are much higher than long term Use Cohort Analysis to determine
- 89. 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 x (s + 1/p) = expected months
- 90. Some Tools
- 94. Customer lifecycle management
- 97. Tips
- 98. OODA Loop
- 99. Innovation Accounting “To improve entrepreneurial outcomes, and to hold entrepreneurs accountable, we need to focus on the boring stuff: how to measure progress, how to setup milestones, how to prioritize work. This requires a new kind of accounting, specific to startups” (Eric Ries - The Lean Startup)
- 100. Innovation Accounting Concentrate on macro metrics Everything you do should attempt to change a metric Try to use as few tools as possible
- 101. One Page Dashboard
- 103. (Lean) Product Development Problem: unknown Solution: unknown
- 105. SCRUM Do you know SCRUM?
- 106. Kanban Board I know: this isn’t an example of an exciting and well done Sprint :)
- 107. (Lean) Product Management Well, trying to connect the dots: what we learnt so far is how the Product Owner can define and prioritize stories at every Sprint in a Startup that wants to be called, you know, Lean! :)
- 108. Learning Boards - Lean Stack We will talk about the Lean Stack of Ash Maurya or other possible “lean mapping” frameworks in a future presentation
- 109. Focus focus focus
- 110. Credits Stuart Eccles - Lean Startup Metrics Joshua Porter - Metrics-Driven Design David Cancel - Data-Driven Marketing Lean Startup Machine - How to measure the metrics that determine real progress (and the others specified directly in the slides when picking some parts of books or blogs)
- 111. The Lean Startup
- 112. Running Lean
- 113. Business Models
- 114. An alternative? Lifestyle business
- 115. Thanks! Blomming.com Company.Blomming.com Magazine.Blomming.com Help.Blomming.com Twitter.com/Blomming Facebook.com/Blomming nicola@blomming.com On FB & Twitter as: njvitto
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