jason nazar_ marketing metrics that matter most - the accelerators - wsj

June 4, 2014, 10:24 AM ET

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JASON NAZAR: Over the last eight years at Docstoc, our team has launched dozens ofproducts. And now as part of Intuit, we’re continuing the tradition with a variety of newproducts for small businesses, including Quickbooks Self-Employed. In each of theselaunches I ask my team to put together a simple dashboard of a small set of metrics for ourpaid and free products that let me know the success of our efforts. For startup entrepreneurs,you can also track these metrics with Google analytics.

Paid Product Metrics

Customer Acquisition Cost / Cost Per Acquisition

The customer acquisition cost or cost per acquisition is the basic marketing cost to acquire acustomer. For example, if it costs $1,000 on Google paid search to get 500 people to visityour site and five of those people purchase an item, your CAC is $200 ($1,000/5). CAC is aderivative of your cost per click (CPC) or the costs to drive a visitor to your app and yourconversion rate. In many cases, before the sale is complete, you’ll also measure your costper lead (CPL) as in-between step in order to collect data about the user to remarket to them.

Conversion Rate

The conversion rate is measuring the percentage of people that interact withyour product that eventually end up buying. The key here is to break downeach step of the conversion funnel.For example:

a) What percent of your site visitors bounce before taking any action?

b) What percent of your app visitors register?

c) What percent of your registered users add an item to cart or sign up for a free trialsubscription?

d) What percent of your carts/free trials convert into paid customers?

Lifetime Value

Jason Nazar: Marketing Metrics that MatterMost

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Lifetime value is the sum of all the payments you expect to receive from a customer over theirlifetime interaction with your business. LTV is most typically attributed to subscriptionbusinesses with predictable recurring revenue. However, LTV is also a function of averageorder value (AOV), where you have a commerce site that sells items individually; in this casethe LTV is the sum of the total expected number of AOVs. Products like Netflix have lowmonthly cancellations and have a very high LTV with loyal customers that stay active for twoyears or more.

In a growing tech business, you ideally want to have a ratio of 3:1 or greater of LTV/CAC. Inthese cases, your marketing efforts are meaningfully multiplied by the margin thosecustomers will provide.

Net Promoter Score

The net promoter score is the most common measurement of the quality of the productexperience. By asking this one question of your customers: “How likely is it that you wouldrecommend [Company X] to a friend or colleague?” you derive a net negative or positivescore that tells you how pleased people are with your service. Companies like SurveyMonkeyhave good free tools to measure your NPS.

Free Product Metrics

Traffic/Registered Users/Engagement

The basic key performance indicators of any free digital products typically consist of:

Traffic: The number of unique visitors that use the product in a given period of time.

Registered users: The number of people that sign up to use the service that can be marketed to on

an ongoing basis.

Engagement: The measurement of how much and often a user engages with a product, typically

measured by “time on site/app” and “average visits”.

Viral Co-Efficient

The viral co-efficient is my holy grail metric and the truest measure of how quickly yourapplication will grow. VCE attributes a number (typically a decimal) to a product to determinehow many of its users drive additional adoption. A VCE of 0.5 means each user drives theadoption of 0.5 additional users. So your first 100 users, will drive an additional 100 users(the first 100 users drive an additional 50 users > those 50 users in turn drive 25 users > 12users…). Any VCE of one or higher is incredibly powerful because in theory any set of usersyou get provides you a never-ending stream of new users. This metric is so critical becauseit’s the best predictor of growth, social-dating app Tinder for example has an off-the-chartsVCE.

Cost Per Vistor

Cost per visitor is similar to CPC addressed above. CPV is a simple way to look at the


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blended cost of driving visitors to your free product (search engine marketing, email, social).In many cases, you won’t have the budget to sustainably drive thousands or millions ofvisitors to a product that has no direct revenue associated with it. But at first it’s common topay for some of these users in order to validate the value and viral nature of the product.Making sure you have low cost ways to drive traffic to your free application is critical whenyou first launch.

Make it a habit to review these metrics on a daily or weekly basis, look at the trends monthafter month, and you and your business will benefit greatly.


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jason nazar_ marketing metrics that matter most - the accelerators - wsj

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