I would like to introduce you to pirate metrics. Dave McClure, a very prominent investor and startup founder in the US, has come up with a way we can measure the success of startups and in specific measure five key metrics that allow us to quantify success and compare our sales process to our customer life cycle, so let's run through it.
It looks at five key areas of measurement: acquisition, activation, retention, revenue, and referral.
Acquisition: How do people actually find you or how do your customers find you?
Activation: How do people actually have their first great experience?
Retention: How do we give them a great, fantastic first experience and manage to get them to keep on coming back?
Revenue: How do we actually get paid?
Referral: How we can get our customers to refer their friends, their family, and other people to our business?
Let's have a closer look into each one and how you can start measuring yours and what you need to know in order to put and set up your metrics.
This is how many people we will actually be able to take and lead to our website or into our shop front. We’ve discussed channels that will help you deliver your product to your customers before. These could be search engine marketing, search optimization, perhaps some Facebook advertising or social media advertising, salespeople etc. What we want to focus on is how do we get more people to try our product or visit our website? In acquisition, there are three key factors we want to look at. We want to choose the channels that bring us the highest amount of users or customers to our website. We want it for the cheapest price and at the highest conversion rate, meaning we want to find the channel that brings us the most traffic to our website, followed by the cheapest cost, followed by the highest conversion rate to actual purchases of our products.
If we've had 1000 people visit our website, how many people actually sign up for our service, purchase our product, or sign up for a free trial? This is activation. We really want to understand the percentage and we can measure that quite easily. What we need to understand that's specific around the digital business is our landing page message. Do we have the right value proposition? Does it capture people? We only have about two to three seconds to really impress people. Once they land on our page, how quick and easy is our signup process? How quick and easy is our purchasing process? We need to make this as simple as possible and as streamlined as possible to keep our metric up and smooth.
How do we get people to keep on coming back. What factors allow us to make people keep on coming back? Now, a good way to do that is through newsletters, drip feeding content, videos, social media pages, and engaging and communicating with our customers on a regular basis. What most companies do is keep in touch with their customers through newsletters. Often they write a monthly newsletter that talks about updates on products, services, events, and other information customers may find beneficial.
That's an easy way to very quickly establish a connection with your customers and maintain that connection in the future. Other companies use the power of video. With YouTube and social media, it's very quick and very easy to establish a connection with your customers through video. Often companies will create videos of how to use their products, how to get more involved, or even how to do things within the industry to a better standard and to more effect.
This is really understanding the purchasing decision around our customers, making it a streamlined process to actually purchase our product off us, whether it's through our website or salespeople, we really want to minimize the amount of steps that a customer has to take in order to get their desired product. Now, if you have a business-to-business solution, really what you'll want to understand is the budget constraints that you will face. Often there are multiple people as part of the purchasing decision, so you need to understand how you can get the revenue from your customers whether that's through a credit card purchase or whether it's a monthly invoice you send through to your companies.
Really understanding your customers and their purchasing behavior will allow you to increase revenue and streamline your process.
A good example of this is the sale of cars at car yards. Car salespeople are very good at this process. Most people will not purchase this car upfront in cash. However, what the car salespeople are good at doing is giving another payment option, meaning that you don't need to pay for the car upfront, but you can rather make payment installments over the coming years.
This is how many times your customers will mention your product to other people. If you think about how much it would cost you to acquire each single customer through social media, salespeople, blogs, videos, and so on, referral is a great, efficient way to reach more customers. The beautiful thing about it is that because another customer of yours is telling other people about your product, you have a very good amount of social proof.
This means that promotion from real customers of your product is a lot more powerful than you as the product owner talking about your own products. A good way to increase your referral metric is by building it into your product.
Have a think about what you can build into your product. If it's a digital product, how you can add on features that allow people to invite their friends or communicate with their friends. If it's a physical product, perhaps look at how they can share it on social media or any competitions/contests you can run for them to share it with other people.
Have a think about how you can do that and have a think about how you can measure each step of the way of the pirate metrics.