Marketing Fundamentals: What I Learned from Startups and my MBA. (Part 3)
5 Metrics to track for early-stage startups
You have a tiny budget. Which means you're investing almost nothing in marketing. Which means that your ROI isn’t really significant, your CAC is close to nil, and your CLV is likely unknown. You’re primarily concerned about brand awareness through the use of content marketing, but you know the ultimate goal is to develop a customer base and make some sales.
What metrics are you going to use to track your progress and measure your success? What will help you find ways to improve your messaging and ultimately your product? There are a lot of things you could possibly track with Google Analytics and Facebook Insights, but most of those are either distracting or irrelevant until you start making more sales.
1.) Social Media Engagement
Retweets, likes, shares, and comments aren’t that useful on their own, but when you track how many you get for each piece of content you produce and compare it to your past performance, hopefully it will lead you to identify influential factors on the sharability (read: value) of your content. Maybe certain content (e.g. photos, videos, blog articles) goes over really well. Maybe certain types of posts (e.g. questions, polls, promotions) don’t. Maybe you find that a specific day of the week is really good for engagement. By keeping track of all your stats, you can help choose what content you produce--and how you do it--so you can attract more users.
Many business like to tout the growth of their social media following. While this is certainly not a meaningless statistic, the number of followers you have is far less important that the percent of those followers who are actively engaged (meaning they are retweeting, commenting, liking, or sharing your content).
If you have 100,000 followers it means nothing if none of them are engaged, because each message you send hits around 15% of them and dies (the average Edgerank for a personal Facebook page hovers around 18%, but business pages usually only get 14-15%).
However, if you have even a small number of hardcore followers who constantly interact with your page, each piece of content will hit 15% of them, that 15% will engage, raising the Edgerank of your content (so more of your fans will see it) while also spreading your message to roughly 18% of your followers’ collective networks. Hopefully you’ll get some more engagement from your followers’ extended networks, thereby promoting your brand organically through people who are passionate about what you do. A high percentage of engaged followers is also a sign that the content you're producing is remarkable.
Sentiment is most easily computed through the use of social media. I like to look at it as a ratio of the percentage of positive, negative, and neutral posts. People generally only post if they are excited about something or if they want to complain, so neutral is usually pretty low (but if it is high, then you’re likely pretty boring, and you might need to amp things up a bit).
Addressing negative sentiment is really important, especially for small companies. You're small enough that if people have a bad experience, they are likely to just ignore you rather than make a stink. If they do complain, it’s probably that they want to like you, but experienced some bugs or issues. You should reach out to them because they can help you build a better product and it’s also an opportunity to take an unhappy customer and turn them into a fan.
Spending the time and money to get lots of traffic isn’t that useful if you can’t convert visitors. Even if you’re not selling anything yet, you should be trying to get leads. “Convert” visitors by getting them to sign up for your mailing list, following you on social media, or downloading useful content that promotes your name.
If you want to find your exact churn rate, follow this guide written by shopify.com. If that’s too intense I’m going to give you a simplified version, so that you can just get a handle on what your churn rate might look like.
Churn is most easily calculated for subscription services, and is calculated by the ratio of the number of subscribers who drop / the total number of subscribers, over a specific time period. The time period depends largely on the service in question, and what you're trying to measure. If you’re a monthly service, you’re probably looking at the churn rate per month, but you also might want to look at a few other churn rates: What does you user activity look like? How many subscribers stop becoming active within the first week, the first month, the first three months, the first year, etc. Those trends are unlikely to be captured if you’re only look at churn rate on a month-by-month basis.
If you are losing a lot of subscribers after their first month, it might mean that your customers don’t have the proper tools and/or service to use your product, and you might want to reach out and address that issue. If you see a high drop off after a 6 months or a year, then maybe there is something about the product that needs to be fixed.
Churn rate is harder to calculate if you don’t run a subscription service, but you can get a rough estimate by breaking down your customers by purchasing behavior. Say, for a wild hypothetical example, I worked at a design company that sold themes.
I know from the data that after a customer has purchased their first theme, they usually buy at least one more theme within the next 3 months. I can then define a customer as being part of the “churn” if they have already bought a theme, but have not bought a second after 3 months. Each month I will take the number of customers who bought a theme three months ago but have not bought a second, and divide that by the number of possible “recurring” customers, that is, customers who have already bought at least one theme in the past 3 months.
Depending on how you define a “recurring” customer, and your time period, you can get wildly different churn rates. For most products and services it takes a few years worth of data to get truly meaningful metrics, but the sooner you start tracking the easier it will be to spot patterns.
The Viral Coefficient is a simple mathematical way to determine how likely your product will spread by word of mouth. It’s also considered the largest “bullsh*t” metric by most startup companies. “But what’s the Viral Coefficient?” is a phrase most commonly heard coated in a heavy layer of sarcasm and irony, at least in my experience.
Despite this fact, it’s actually (in my opinion) a pretty important thing to track. It is essentially a measure of how awesome your product is, determined by the likelihood that your users will spread positive word of mouth about it.
A great way to get the data you need to calculate and track the VC is to build “invitations” into your product that have some inherent reward. Coupons are a good way to do this. For example, a friend could invite me to a paid service with a coupon that gives me the first month free. Or you could give a reward to the user inviting friends. Dropbox, for example, gives an extra 2GB of storage to every user who gets a friend to sign up.
The easiest way that I understand how to calculate the Viral Coefficient is:
VC=Invitation Rate * Acceptance Rate.
The invitation rate is the invitations per user. For example, if I had 1000 users and they sent 1250 invitations, my invitation rate is 1000/1250= 1.25 invitations/user
The acceptance rate is the number of signups / the number of invitations. For example if out of those 1250 invitations, 625 people signed up, then my acceptance rate is 625/1250 = 0.5
To calculate the Viral Coefficient, I’d just take 1.25 * 0.5 and get 0.625. That’s not good, because I’m going to need to get a number greater than one if I want my business to keep growing organically.
By breaking down the Viral Coefficient into the invitation rate and the acceptance rate, I can see whether I need to make the product or service inherently more shareable (improve the low invitation rate) or whether I need to improve my product or service to better address my customers’ needs (improve the low acceptance rate).
For most startups, marketing is usually put on the back burner, if it’s on the stove at all. True, the functions of a marketing team at a startup probably look a lot different than the marketing functions of a corporate marketing team, but that doesn’t mean it’s invaluable to track your progress in the same way. Collect information on everything because you don’t know when that data will be relevant, pay attention to your key metrics, and set goals for yourself. This will eliminate the “aimless wandering syndrome” that a large percentage of startups face.
