Lean Analytics: Use Data to Build a Better Startup Faster (Lean (O'Reilly))

by Alistair Croll

As you’re validating your problem and solution, ask yourself whether there are enough people who really care enough to sustain a 5% growth rate — but don’t strive for that rate of growth at the expense of really understanding your customers and building a meaningful solution. When you’re a pre-revenue startup at or near product/market fit, your line in the sand should be 5% growth for active users each week, and once you’re generating revenues, they should grow at 5% a week.

Bottom Line Aim for 30% of your registered users to visit once a month, and 10% of them to come daily. Figure out your reliable leading indicators of growth, and measure them against your business model predictions.

but a good rule of thumb is that your acquisition cost should be less than a third of the total value a customer brings you over her lifetime. This isn’t a hard-and-fast rule, but it’s widely cited. Here’s some of the reasoning behind it.

There’s plenty you can do to improve your email open rate. Targeting your mailings by tailoring messages to different segments of your subscriber base improves clicks and opens by nearly 15%. Email open rates change significantly based on the time of day — 3 p.m., as it turns out, is when people are most likely to open something. Few people open emails on the weekend. More links in an email means more clicks. And newer subscribers are more likely to click on a message.

Jason Billingsley recommends testing an individualized send schedule equal to the signup time of the unique user. So, if a user signs up at 9 a.m., schedule to send her updates at 9 a.m. “Most email tools aren’t set up for such a tactic, but it’s a highly valuable test that could yield significant results,” he says. But by far the biggest factor in mailing list effectiveness is simple: write a decent subject line.

Bottom Line An average engaged time on a page of one minute is normal, but there’s wide variance between sites and between pages on a site.

Bottom Line Site speed is something you can control, and it can give you a real advantage. Get your pages to load for a first-time visitor in less than 5 seconds; after 10, and you’ll start to suffer.

Part of the difference comes from the fact that users engage with the online world in three postures: creation (often on a computer with a keyboard), interaction (usually with a smartphone), and consumption (with a tablet). Mixing tablets and mobile phones into a single category is a dangerous mistake.

Bottom Line If you ask for a credit card up front, expect just 2% of visitors to try your service, and 50% of them to use it. If you don’t ask for a credit card, expect 10% to try, and up to 25% to buy — but if they’re surprised by a payment, you’ll lose them quickly. In our preceding example, not having a credit card up front gives you a 40% increase in conversions, provided you can tailor your selling efforts to each segment of your evaluators based on their activity.

Jules Maltz and Daniel Barney of IVP, a late-stage venture capital and growth equity firm, suggest that freemium models work for products that have:[107] A low cost of delivering service to an additional user (i.e., low marginal cost). Cheap, or even free, marketing that happens as people use the product. A relatively simple tool that doesn’t require long evaluations or training. An offering that “feels right” if it’s free. Some products (like homeowner’s insurance) might make prospects wary if they’re offered for free. An increase in value the longer someone uses the product.

Upselling and Growing Revenue Best-in-class SaaS providers are able to grow revenues per customer by 20% from year to year. This comes through additional users added to the subscription, as the application spreads through the organization, as well as a series of tiered offerings and an easy upselling path. Done correctly, the increased revenues from upselling should nearly offset the 2% monthly losses from churn. But these are the best of the best, and they offer a clear path for extracting more money from customers as each customer’s use grows.

Bottom Line Try to get to 20% increase in customer revenue — which may include additional seat licenses — each year. And try to get 2% of your paying subscribers to increase what they pay each month.

There is another reason analytics matter to marketplaces. Sellers seldom have the sophistication to analyze pricing, the effectiveness of their pictures, or what copy sells best. As the marketplace owner, you can help them with this analysis. In fact, you can do it better than they can, because you have access to the aggregate data from all sellers on the site.

Who are your top 10 buyers? Who are your top 10 sellers? What products or categories generate the majority of your revenues? What price ranges, times of day, and days of week experience peak sales? It might seem simple, but making lists of the top 10 segments or categories, and looking at what’s changing, will give you qualitative insights into the health of your marketplace that you can later turn into quantitative tests, and then innovations.

Most organizations of any real size have developed their own software and processes, and they expect you to adapt to them. They won’t change how they work: change is hard, and retraining is a cost. This can increase your deployment costs, because you have to integrate with what’s already in place.

In the B2C world, startups worry less about “Can I build it?” and more about “Will anyone care?” In the enterprise market, the risk is more, “Will it integrate?” Integration with existing tools, processes, and environments is the most likely source of problems, and you’ll wind up customizing for clients — which undermines the standardization you fought so hard to achieve earlier.