Customer Metrics

What works?

Creating a Data Driven Product Organization

1. Establish a dashboard

2. Build a funnel

3. Manage retention

1. Establish a dashboard

Key Goals

Growth

Profitability Monthly Recurring Revenue

Key Goals CashMonths to recover Cost of Customer

Acquisition

ProfitabilityCustomer Acquisition

Cost (CAC)

Lifetime Value (LTV)

Revenue

Expenses

COGS

Revenue per Employee

Expenses per Employee

Micro-Economics(per customer profitability)

Overall Profitability(Accounting)

Profitability per Employee

Profitability

Monthly Recurring Revenue

Services Revenue

Key Metrics

< 3 XCustomer

Acquisition Cost (CAC)

Lifetime Value (LTV)

Months to recover CAC < 12 Months

Customer Profitability

Customer Profitability

CAC

LTV

Average Monthly Revenue Per Customer

Average Customer Lifetime

Cost to Serve

Number of Deals closed

Total Cost of Sales and Marketing

Funnel Metrics

Marketing Program Costs

Level of Touch Required

Personnel Costs

% Churn Rate

2. Build a funnel

Dave McClure’s Funnel

David Cancel’s FunnelNote: this is too pretty for him

Long term users>1 year – 1%

Paying Users - 2%

Active Users – 4%

Log in to account – 8%

Sign up for trial – 10%

Website Visitors – 100%

Drill Down on the Funnel

• Look at the metrics by customer segments (cohorts)

• Look at the metrics by campaign source• Look at the ROI

Number of Raw Leads

Conversion to paying Customers

Cost per Lead

ROI per Marketing Program

Marketing Program Costs

Conversion

• “2% is the average conversion rate in the United States of America whether you're selling elephants or iPods.”

Avinash Kaushik - Analytics Evangelist, Google

• In general, software companies expect 1%-3% of customers using the free version of their software to upgrade.

TrialPay’s 2011 REPORT: BEST PRACTICES IN ACQUIRING SOFTWARE CUSTOMERS

What is the #1 thing you can do to optimize the funnel?

3. Manage retention

Retention

• Increasing retention (LTV) directly decreases CAC

• Moving from 1% to 2% retention doubles revenue and halves CAC

Renewals

Customer Satisfaction

Cohort Analysis

Churn Rate

Product Issues

Net Promoter Score

Customer Surveys

Product Usage Map

Customer Satisfaction

• Best indicator of customer satisfaction is Net Promoter Score

• Ask 1 question – "How likely is it that you would recommend our company to a friend or colleague?" on a scale from 0-10

• 3 groups– Promoters (9 or 10)– Passives (7 or 8)– Detractors (0 – 6)

• NPS = % Promoters - % of Detractors

Cohort AnalysisMonths after starting usage

Cohort

1 2 3 4 5 6 7

Jan 85% 75% 65% 62% 69% 58% 55%

Feb 87% 78% 70% 67% 63% 55%

Mar 88% 84% 79% 75% 71%

Apr 92% 89% 86% 82%

May 93% 90% 85%

Jun 94% 90%

July 96%

Churn stabilizes in

month 4

Improvement in first month

churn

Managing Cohorts

• Determine the actions that repeat customers perform

• Create interventions to drive customers to perform the actions

• Create a flow (funnel) to see how the actions work together to change churn

• Measure the results• Experiment until you get the results you want

Cohort Funnel

Sign In

Search for wines

Review wines

Share your wine list

Sign in email

Flow steps Interventions

Send user to search page after login

Review reminder banner ad

Share pop up

Cohort Flows Flow steps

Cohort Sign In Search Review Share

Jan 85% 75% 65% 62%

Feb 87% 78% 70% 67%

Mar 88% 84% 79% 75%

May 93% 90% 85%

Jun 94% 90%

July 96%

What tools can you use to do this?

• If you are Daddy Warbucks:– Coremetrix– Omniture

• If you are a cheapskate like me:– Google Analytics– Kissmetrics– Performable– MixPanel

Issues With Analytics Tools

• You need to know what you are doing before you do it

• You need technical ability to set them up• Setting up the funnels is not intuitive and

takes a lot of time• Only the big guys have specific retention

functionality

Be Sticky!

http://www.besticky.com

Resources and Props

• I stole heavily from:– For Entrepreneurs (much more info on metrics)

http://www.forentrepreneurs.com/saas-metrics/– David Cancel http://davidcancel.com/

• Other shout outs– Dave McClure http://500hats.typepad.com/– Brant Cooper http://market-by-numbers.com/

• Help us out and take the survey http://www.besticky.com/