- Effective marketing is a science.
In order to pinpoint a strategy, report on results,
and evaluate opportunities for improvement,
well, you need to be capturing and analyzing data.
And there's no excuse to rely on basic metrics
like website traffic and the number of conversions each day.
You see, we live in a world that is data-driven.
We have the tools and resources to measure,
well, anything we want.
And reviewing analytics as part of your day-to-day
will help you become a better marketer
and provide you with ideas
on how to further improve your marketing strategy.
Well, that said,
the real issue tends not to be a lack of data,
but rather, a lack of focus.
There's no time for a 10-page report
of all the business metrics.
So, to avoid information overload,
you want to focus on the metrics that matter most
to your marketing vision, customer needs, and company goals.
What metrics you actually measure in these areas
will depend on the stage that your business is in
and those goals.
Now, before we look at what metrics
we'll want to pay attention to,
let's quickly talk about
the five critical areas to any business.
The first is acquisition,
which is converting your consumer.
Then activation,
which is users having a good first-time experience.
Then we have retention,
essentially keeping the customer.
Referral, this is customers telling their friends.
And then revenue, all of the money that you're bringing in.
Dave McClure, a venture capitalist and angel investor,
described these areas as the pirate metrics,
named because, well,
when you take the first letter of each of the stages,
it sounds like, well, a pirate.
AARRR, matey!
Now, the goal is to identify a key metric
from each of those areas,
and this really depends on where you are
in your business stage.
For a brand-new product just entering the market
before you've really proven out any product/market fit,
well, you can get away with focusing
on qualitative metrics.
For example, acquisition.
Think about, how are customers finding you?
Activation, what are those customers saying?
Retention, why are customers leaving or not leaving?
Referral, would customers share this with their friends?
And then revenue essentially is, how are we making money?
Now, as you move towards the tail end of introduction,
you want to start looking
at the foundational qualitative metrics.
So, for acquisition,
this will be the number of conversions.
For activation, this might be a time and a product
or your customer support ticket volume.
Retention is your churn rate.
Who's leaving?
And referral is going to be the number of conversions
from a referral source.
And then revenue,
well, you're going to start looking
at your actual monthly revenue.
Once you're starting to invest actual marketing spend,
you'll want to increase your focus,
layering in more metrics.
For acquisition, think about conversion rate
and cost per acquisition.
For activation, it's really about understanding
that customer lifetime value.
For retention it's your churn rate.
For recapture, perhaps your email open rate.
For referral, perhaps you have
an affiliate program growth rate.
And revenue, well, now you can get complex
by looking at your compound monthly or annual growth rates.
The goal is to make sure you're looking
at your metrics daily
and that you have metrics that cover
the five critical business areas.
Your key metrics should act as the vital signs
to help you understand the overall health of your product
and serve to influence the changes you make
to your marketing strategy.