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The 7 Metrics of Highly Effective Marketers by Dan Olsen

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Talk on the key Marketing metrics to track and analyze that I gave at Silicon Valley Product Camp on March 23, 2013.

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Page 1: The 7 Metrics of Highly Effective Marketers by Dan Olsen
Page 2: The 7 Metrics of Highly Effective Marketers by Dan Olsen

My#Background#

!  Educa/on#!  BS,#Electrical#Engineering,#Northwestern#

!  MS,#Industrial#Engineering,#Virginia#Tech#

!  MBA,#Stanford#

!  20#years#of#Product#Management#Experience#!  5#years#at#Intuit,#led#Quicken#Product#Management#

!  Led#Product#Management#at#Friendster#

!  CEO#&#Cofounder#of#YourVersion,#�Pandora#for#your#realM/me#news�#

!  Product#consultant:#Box,#YouSendIt,#Epocrates#

!  Speaker,#Author#“42#Rules#of#Product#Marke/ng”#

#Will#post#slides#to#hTp://slideshare.net/dan_o##

Page 3: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Quick#Audience#Poll#

!  Do#you#work#in:#

!  B2B#

!  B2C#

!  Size/stage#of#company#

!  Small/early#stage#

!  MidMsize/stage#

!  Large/later#stage#

!  Marke/ng#Channels#

!  SEM#

!  Display#Ads#

!  Affiliate#

!  Social#Media#

!  Analy/cs#Tools#

!  Google#Analy/cs#

!  Omniture#

!  KISS#Metrics#

!  Others?#

!  Other#

!  GA#conversion#goals#

!  Landing#page#op/miza/on#

!  A/B#tes/ng#

!  Cohort#analysis#

#

Copyright#©#2013#Olsen#Solu/ons#

Page 4: The 7 Metrics of Highly Effective Marketers by Dan Olsen

7#Marke/ng#Metrics#Framework#

Acquisi/on# Conversion# Mone/za/on# Reten/on#

Copyright#©#2013#Olsen#Solu/ons#

1.  New visitors 2.  Cost per acquisition

3. Conversion rate 4. Customer acquisition cost 5. Retention rate 6. Average revenue/user 7. Lifetime value (LTV)

Page 5: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Equa/on#of#Your#Business#

!  (see#my#other#talks#on#SlideShare)#

! Profit#=#Revenue#–#Cost#

! To#op/mize#marke/ng,#best#to#look#at#this#

on#a#“per#customer”#basis#

!  Profit/customer=Revenue/customer#–#Cost/customer#

!  We#want#to#maximize#profit/customer#

!  We#want#to#acquire#new#customers#in#a#profitable#way#

Copyright#©#2013#Olsen#Solu/ons#5#

Page 6: The 7 Metrics of Highly Effective Marketers by Dan Olsen

The#Customer#Conversion#Funnel#

New#

Visitors#

(prospects)#

Customers#

(revenueM

genera/ng)#

Page 7: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##1:#New#Visitors#

!  Job##1#for#Marke/ng#is#to#get#new#

visitors#(prospec/ve#customers)#to#learn#

about#our#product#

! Unique#Visitors#vs.#Visits#

! Unique#=#mul/ple#visits#by#same#person#

only#count#once#(for#that#/me#period)#

Copyright#©#2013#Olsen#Solu/ons#

Page 8: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Unique#Visitors#vs.#Visits#

Copyright#©#2013#Olsen#Solu/ons#

!  Graph#of#visits#&#visitors#

!  Note:#2#yMaxis#scales#

!  25,044#Visits#

!  By#5,878#Unique#Visitors#

!  =#4.26#visits#per#visitor#

Page 9: The 7 Metrics of Highly Effective Marketers by Dan Olsen

New#vs.#Returning#Visitors#

Copyright#©#2013#Olsen#Solu/ons#

!  You#want#to#separate#New#vs.#Returning#Visitors#

!  Click#“Advanced#Segments”#in#Google#Analy/cs#

Page 10: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Sources#of#New#Visitors#

Copyright#©#2013#Olsen#Solu/ons#

Free

P

aid

•  Press#

•  Organic#Search#

•  Word#of#Mouth#&#Viral#

•  Social#Media#

•  Referral#/#barter#

•  Display#ads#

•  Search#engine#marke/ng#(SEM)#

•  Affiliate#

•  Conferences#

New#Visitors#

10#

Page 11: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##2:#Cost#per#Acquisi/on#

Copyright#©#2013#Olsen#Solu/ons#

Page 12: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Cost#Per#Acquisi/on:#Display#Ads#

!  Cost#per#Acquisi/on#(CPA*)#is#how#much#you#pay#to#get#a#new#visitor#to#your#site#

!  Say#you#buy#100,000#banner#ad#impressions#for#$100#

!  That’s#a#CPM#(cost#per#thousand)#of#$1#

!  Say#those#100,000#banner#ad#impressions#lead#to#1,000#people#clicking#through#to#your#site:#

clickthrough#rate#(CTR)#of#1%#

!  Your#CPA#would#be#$100#/#1,000#visitors#=#$0.10#

!  CPA#for#display#ads#=#CPM#/#(CTR#*#1000)##

Copyright#©#2013#Olsen#Solu/ons#

*Note:#CPA#can#also#mean#“Cost#per#Ac/on”#

Page 13: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Cost#Per#Acquisi/on:#PPC#

!  Google#AdWords#lets#you#“pay#per#click”#(PPC)#

!  So#your#CPA#is#your#“cost#per#click”#(CPC)#

!  Due#to#AdWord’s#dynamic#pricing,#need#to#look#at#

your#Average#CPC##

!  CPC#can#vary#by#keyword,#ad#copy#&#landing#

Copyright#©#2013#Olsen#Solu/ons#

Page 14: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##3#Conversion#Rate#

Copyright#©#2013#Olsen#Solu/ons#

Prospects# Customers#

100%#

x%#

Page 15: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Landing#Page#Op/miza/on#

Copyright#©#2013#Olsen#Solu/ons#15#

!  A/B#Tes/ng#tools#!  Google#Website#Op/mizer#

!  Op/mizely#

!  Visual#Website#Op/mizer#

!  Others?#

Page 16: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Osen#Track#Conversion#Rates#for#Different#Ac/ons#

! Most#businesses#don’t#just#have#“new#

visitors”#and#“revenueMgenera/ng#

customers”#

! You#may#have#

! “Free#users”:#registered#but#using#free#/er#

! A#prospect#gives#you#their#email#address#

! Can#track#the#conversion#rate#for#each#

ac/on#

Copyright#©#2013#Olsen#Solu/ons#

Page 17: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Google#Analy/cs#Goal#Funnel#Visualiza/on#

Copyright#©#2013#Olsen#Solu/ons#

Page 18: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##4:#Customer#Acquisi/on#Cost#

!  “CAC”#for#short#

! CAC#is#the#average#cost#for#a#revenueM

genera/ng#customer#

! So#it#takes#into#account#both#your#cost#of#

acquiring#a#prospect#and#your#conversion#

rate#for#conver/ng#prospects#to#revenueM

genera/ng#customers#

! CAC#=#CPA#/#Conversion#Rate#

Copyright#©#2013#Olsen#Solu/ons#

Page 19: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##5:#Reten/on#Rate#

! Reten/on#rate#tracks#what#%#of#your#customers#are#s/ll#ac/ve#over#/me#

Copyright#©#2013#Olsen#Solu/ons#

~80% never use app again

Curve eventually flattens out

Page 20: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Cohort#Analysis#

Copyright#©#2013#Olsen#Solu/ons#20#

Page 21: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Cohort#Analysis:#Data#

Copyright#©#2013#Olsen#Solu/ons#

Page 22: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Churn#

! Churn#is#just#an#alterna/ve#way#of#talking#about#customer#reten/on#

! Reten/on#=#customers#staying#ac/ve#

! Churn#=#customers#leaving#

! Churn#rate#=#1#–#Reten/on#Rate#

! So#if#90%#of#your#customers#remain#

ac/ve#monthMtoMmonth,#your#monthly#

churn#rate#is#10%#

Copyright#©#2013#Olsen#Solu/ons#

Page 23: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Metric##6:#Average#Revenue#Per#User#

!  “ARPU”#for#short#

! Measured#over#a#specific#/meframe,#e.g.,#

calendar#month#

! Take#total#revenue#for#the#month#and#

divide#it#by#the#number#of#customers#you#

had#that#month#

! Say#you#had#$100k#in#revenues#and#50k#

users,#your#ARPU#would#be#$2/user#

Copyright#©#2013#Olsen#Solu/ons#

Page 24: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Annual#ARPU#for#Tech#Companies#

Copyright#©#2013#Olsen#Solu/ons#

Page 25: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Profit#=#Revenue#M#Cost#

#

##

#

# # ##

#

# # ##

#

##

#

##

#

##

#

#

#Unique#Visitors##x##Ad#Revenue#per#Visitor#

#

##

#

##

#

##

#

##

#

##

#

#

##

#

# # #Impressions/Visitor##x##Effec/ve#CPM#/#1000#

#

# # ##

#

##

#

##

#

##

#

#

##

#

# # ##

#

# # #Visits/Visitor##x##Pageviews/Visit##x##Impressions/PV#

#

##

#

##

#

##

#

#

##

#

# # ##

#

# # ##

#

##

#

#

##

Copyright#©#2013#Olsen#Solu/ons#

ARPU#for#Adver/sing/Publishing#Model#

Page 26: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Your#ARPU#Will#Vary#by#Customer#

Copyright#©#2013#Olsen#Solu/ons#

!  Look#at#Quality#vs.#Quan/ty#

!  May#have#to#pay#more#to#acquire#higher#ARPU#users#

!  Try#to#iden/fy#how#your#high#ARPU#customers#are#different#from#your#low#ARPU#customers:#channel,#industry,#product#usage,#demographics#

25#

Page 27: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Life/me#Value#(LTV)#

!  Life/me#value#of#a#customer#represents#

how#much#value#the#average#customer#will#

generate#for#your#company#

!  LTV#=#ARPU#x#Avg#Customer#Life/me#x#Gross#Margin#

!  Average#Customer#Life/me#

!  How#long#your#average#customer#is#ac/ve#and#generates#

revenue#

!  Equals#1#/#churn#rate.#5%#monthly#churn#M>#avg#life#20#months#

!  Gross#Margin:#the#%#of#revenues#les#over#aser#

subtrac/ng#the#cost#of#providing#the#product/service#

Copyright#©#2013#Olsen#Solu/ons#

Note:#for#simplicity,#this#LTV#equa/on#ignores#the#“cost#of#capital”#

Page 28: The 7 Metrics of Highly Effective Marketers by Dan Olsen

LTV#Example#

! ARPU#=#$10#/#customer#per#month#

! Monthly#reten/on#rate#is#80%#M>#churn#rate#

is#20%#M>#avg#customer#life#=#5#months#

! Gross#margin#=#40%#

!  LTV#=#ARPU#x#Avg#Customer#Life/me#x#Gross#Margin#

!  LTV#=#$10/mo#x#5#months#x#40%#

!  LTV#=#$50#x#40%#=#$20#

!  So#the#average#customer#is#worth#$20#to#us#

#Copyright#©#2013#Olsen#Solu/ons#

Page 29: The 7 Metrics of Highly Effective Marketers by Dan Olsen

You#Want#LTV#>#CAC#

!  Say#LTV#is#$20#

!  But#it#cost#us#$30#(CAC)#to#get#the#user:#LTV#–#CAC#=#20#–#30#=#M10###no#good!#

!  If#it#only#costs#$10#CAC:#LTV#–#CAC#=#20#–#10#=#+10###good#

!  Knowing#your#LTV#can#help#you#jus/fy#

marke/ng#budget#

!  Average#profit/customer#=#LTV#–#CAC#

!  So#we#want#LTV#>#CAC#

! Many#companies#use#the#ra/o#LTV/CAC#Copyright#©#2013#Olsen#Solu/ons#

Page 30: The 7 Metrics of Highly Effective Marketers by Dan Olsen

What#You’d#Like#to#See#Over#Time#

Copyright#©#2013#Olsen#Solu/ons#

!  LTV#increasing#as#you#improve#your#value#proposi/on,#pricing,#&#customer#reten/on#

!  CAC#decreasing#as#you#op/mize#your#marke/ng:#segments,#channels,#messaging#

Page 31: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Ra/o#of#LTV#to#CAC:#Real#data#from#HubSpot#

Copyright#©#2013#Olsen#Solu/ons#30#

Page 32: The 7 Metrics of Highly Effective Marketers by Dan Olsen

7#Marke/ng#Metrics#Framework#

Acquisi/on# Conversion# Mone/za/on# Reten/on#

Copyright#©#2013#Olsen#Solu/ons#

1.  New visitors 2.  Cost per acquisition

3. Conversion rate 4. Customer acquisition cost 5. Retention rate 6. Average revenue/user 7. Lifetime value (LTV)

Page 33: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Copyright#©#2013#Olsen#Solu/ons#

How#to#Track#Your#Metrics#

!  Track#each#metric#as#daily#/me#series#

!  Ra/o#metrics#make#it#easy#to#compare#applesMtoMapples#over#/me#(Conversion#rate,#CPA)#

#

Date#

New#

Visitors#

New#

Customers#

Conv#

Rate#

Ad#

Spend# CPA# CAC#…#

10/8/12# 10,000# 200# 2.0%# $200# $0.02# $1.00#

10/9/12# 10,000# 300# 3.0%# $600# $0.03# $2.00#

…#

Page 34: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Copyright#©#2013#Olsen#Solu/ons#

Iden/fying#the#“Cri/cal#Few”#Metrics#

!  What#are#the#metrics#for#your#business?#

!  Where#is#current#value#for#each#metric?##

!  How#many#resources#to#“move”#each#metric?#!  Employee#/me,#money#

!  Which#metrics#have#highest#ROI#opportuni/es?#

Return#

Investment#

Return#

Investment#Return#

Investment#

Metric#A#Good#ROI#

Metric#B#Bad#ROI#

Metric#C#Great#ROI#

Page 35: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Copyright#©#2013#Olsen#Solu/ons#

Op/miza/on#through#Itera/on:#Con/nuous#Improvement#

Measure#

the#metric#

Analyze#

the#metric#

Iden/fy#top#

opportuni/es#

to#improve#

Design#&#develop##

the#enhancement#

Implement#the#

enhancement#

Learning#

Gaining#knowledge:#

• #Messaging#

• #Channel#

• #Customer#

• #Acquisi/on#costs#

34#

Page 36: The 7 Metrics of Highly Effective Marketers by Dan Olsen

Copyright#©#2013#Olsen#Solu/ons#

Op/mizing#Signup#Page#Conversion#Rate#

Daily Signup Page Yield vs. TimeNew Registered Users divided by Unique Visitors to Signup Page

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1/31 2/14 2/28 3/14 3/28 4/11 4/25 5/9 5/23 6/6 6/20 7/4 7/18 8/1 8/15 8/29 9/12 9/26 10/10

Dai

ly S

ignu

p P

age

Yie

ld

Changedmessaging

Added questionsto signup page

Started requiringregistration

35#