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

2. 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##

3. Quick#Audience#Poll
#
! Do#you#work#in:# ! Analy/cs#Tools#
! B2B# ! Google#Analy/cs#
! B2C# ! Omniture#
! Size/stage#of#company# ! KISS#Metrics#
! Small/early#stage# ! Others?#
! MidMsize/stage# ! Other#
! Large/later#stage# ! GA#conversion#goals#
! Marke/ng#Channels# ! Landing#page#op/miza/on#
! SEM# ! A/B#tes/ng#
! Display#Ads# ! Cohort#analysis#
! Affiliate# #
! Social#Media# Copyright#©#2013#Olsen#Solu/ons#

4. 7#Marke/ng#Metrics#Framework#
Acquisi/on# Conversion# Mone/za/on# Reten/on#
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)
Copyright#©#2013#Olsen#Solu/ons#

5. 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#
5# Copyright#©#2013#Olsen#Solu/ons#

6. The#Customer#Conversion#Funnel
#
New# Customers#
Visitors# (revenueM
(prospects)# genera/ng)#

7. 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#

8. Unique#Visitors#vs.#Visits
#
! Graph#of#visits#
&#visitors#
! Note:#2#yMaxis#
scales#
! 25,044#Visits#
! By#5,878#
Unique#Visitors#
! =#4.26#visits#
per#visitor#
Copyright#©#2013#Olsen#Solu/ons#

9. New#vs.#Returning#Visitors
#
! You#want#to#separate#New#vs.#Returning#Visitors#
! Click#“Advanced#Segments”#in#Google#Analy/cs#
Copyright#©#2013#Olsen#Solu/ons#

10. Sources#of#New#Visitors
#
Free • Press#
Organic#Search#
New#Visitors#
•
• Word#of#Mouth#&#Viral#
• Social#Media#
• Referral#/#barter#
• Display#ads#
Paid
• Search#engine#
marke/ng#(SEM)#
• Affiliate#
• Conferences#
10# Copyright#©#2013#Olsen#Solu/ons#

11. Metric##2:#Cost#per#Acquisi/on#
Copyright#©#2013#Olsen#Solu/ons#

12. 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)##
*Note:#CPA#can#also#mean#“Cost#per#Ac/on”#
Copyright#©#2013#Olsen#Solu/ons#

13. 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#

14. Metric##3#Conversion#Rate#
100%#
x%#
Prospects# Customers#
Copyright#©#2013#Olsen#Solu/ons#

15. Landing#Page#Op/miza/on#
! A/B#Tes/ng#tools#
! Google#Website#Op/mizer#
! Op/mizely#
! Visual#Website#Op/mizer#
! Others?#
15# Copyright#©#2013#Olsen#Solu/ons#

16. 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#

17. Google#Analy/cs #
Goal#Funnel#Visualiza/on#
Copyright#©#2013#Olsen#Solu/ons#

18. 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#

19. Metric##5:#Reten/on#Rate#
! Reten/on#rate#tracks#what#%#of#your#
customers#are#s/ll#ac/ve#over#/me#
~80%
never use
app again
Curve
eventually
flattens out
Copyright#©#2013#Olsen#Solu/ons#

20. Cohort#Analysis
#
20# Copyright#©#2013#Olsen#Solu/ons#

21. Cohort#Analysis:#Data#
Copyright#©#2013#Olsen#Solu/ons#

22. 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#

23. 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#

24. Annual#ARPU#for#Tech#Companies
#
Copyright#©#2013#Olsen#Solu/ons#

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

26. Your#ARPU#Will#Vary#by#Customer
#
! 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# Copyright#©#2013#Olsen#Solu/ons#

27. 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#
Note:#for#simplicity,#this#LTV#equa/on#ignores#the#“cost#of#capital”#
Copyright#©#2013#Olsen#Solu/ons#

28. 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#

29. 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#

30. What#You’d#Like#to#See#Over#Time#
! 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#
Copyright#©#2013#Olsen#Solu/ons#

31. Ra/o#of#LTV#to#CAC:
#
Real#data#from#HubSpot#
30# Copyright#©#2013#Olsen#Solu/ons#

32. 7#Marke/ng#Metrics#Framework#
Acquisi/on# Conversion# Mone/za/on# Reten/on#
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)
Copyright#©#2013#Olsen#Solu/ons#

33. How#to#Track#Your#Metrics#
! Track#each#metric#as#daily#/me#series#
# New# New# Conv# Ad#
…#
Date# Visitors# Customers# Rate# 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#
…#
! Ra/o#metrics#make#it#easy#to#compare#
applesMtoMapples#over#/me#(Conversion#rate,#
CPA)#
Copyright#©#2013#Olsen#Solu/ons#

34. 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?#
Metric#A# Metric#B# Metric#C#
Good#ROI# Bad#ROI# Great#ROI#
Return#
Return#
Return#
Investment# Investment# Investment#
Copyright#©#2013#Olsen#Solu/ons#

35. Op/miza/on#through#Itera/on:
#
Con/nuous#Improvement #
Measure#
the#metric#
Analyze#
Learning# the#metric#
Gaining#knowledge:#
• #Messaging# Iden/fy#top#
• #Channel# opportuni/es#
to#improve#
• #Customer#
• #Acquisi/on#costs#
Design#&#develop##
the#enhancement#
Implement#the#
enhancement#
34# Copyright#©#2013#Olsen#Solu/ons#

36. Op/mizing#Signup#Page#Conversion#Rate#
Daily Signup Page Yield vs. Time
New Registered Users divided by Unique Visitors to Signup Page
100%
90%
80%
Daily Signup Page Yield
70%
60%
50%
40%
30% Started requiring
registration
20%
Changed Added questions
messaging to signup page
10%
0%
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 10/1
0
35# Copyright#©#2013#Olsen#Solu/ons#