In the previous post I explained I want to take a more data-driven approach when it comes to product development. But which metrics should I look at?
Ultimately the goal of a business is to generate a profit. Setting aside costs, we can just focus on revenue for now. In case of WIP, that's our monthly recurring revenue or MRR.
But focusing on just MRR isn't really giving us much insight. What's more useful, is looking at what makes up that MRR. Basically that comes down to this:
MRR = number_of_website_visitors × signup_conversion_rate × retention_rate × average_revenue_per_user
Notice how they are all multipliers. That means that if any of those numbers is particularly bad, it brings down the whole thing. It also means that something small like increasing the conversion rate from 2% to 4% (not real numbers) has the same effect on MRR as doubling the amount of website traffic.
As you can see it pays to know which metrics to work on. Knowing these numbers will help us better understand where our weaknesses are and opportunities for growth.
The numbers I mentioned don't tell the full story though. For a more complete picture we want to look at AARRR as pioneered by Dave McClure. Here's what that means for WIP:
- Acquisition: new makers who sign up for WIP
- Activation: get them to actually use the product
- Retention: make sure they keep getting value and don't cancel
- Referral: help them spread the word and refer new members
- Revenue: optimize pricing based on value
Specifically, here's what I plan on tracking:
- How many website visitors do we get (not logged in)
- What percentage vies the join modal
- What percentage actually signs up
- What percentage of users completes at least 10 todos within their first two weeks
- What percentage of users is completing X+ todos per week (will need to figure out good number)
- What percentage cancels their subscription every month (churn rate)
- How many invites does the average user receive (currently really low)
- What percentage of these invites gets given away
- How many of those invites get redeemed (redemption rate)
- What percentage of invited users ultimately signs up to a paid membership
- What's the total MRR
- What's the average revenue per user (ARPU)
- What is the life-time value of a customer (LTV)
They are mostly percentages/rates as those are the most actionable. Absolute numbers like overall signups don't really tells us much, but know what percentage of website visitors ends up signing up does give us a good indication of how well the website converts (regardless of how much traffic we get at any given time), and whether our changes are having the desired effect.
My next step is to calculate some of these metrics so we can start measuring them. I'll follow up with that later.
Let me know in the comments what you think of these metrics and if there's anything else you think I should be measuring. Also let me know what you're measuring for your product.
For more inspiration check out this slideshow
by Hiten Shah.