Metrics-Driven Marketing Strategy(+ a little Product Strategy too)

Dave McClure

Visiting Lecturer

Stanford Facebook Class (CS377W)

11/15/07

Summary• Marketing Plan / Strategy = Target Customer Acquisition Channels

– 3 Important Factors = Volume, Cost, Conversion– Focus on conversion to target customer lifecycle actions– Measure as deep down the conversion funnel as possible

• Estimate Customer Lifecycle, Conversion, Revenue Potential – Hypothesize Customer Lifecycle & Critical Conversion Points– Estimate Conversion , Revenue Potential when designing marketing plan– Understand “Annual Rev. Per User” (ARPU) & “Customer Lifetime Value” (CLV)

• Match Marketing Channel Costs to Customer Revenue Potential– Design channels that costs <20-50% of target ARPU / CLV– *NOTE: “Cost” has multiple meanings

• actual dollars• marketing costs• product development time & resources• time• profit vs cashflow

Agenda

• Quick Review of Pirate Metrics• Example Mktg Channels• Brainstorm 3 Scenarios

Customer Lifecycle: 5 Steps

• Acquisition: users come to the site/page/app from various channels

• Activation: users enjoy 1st visit: "happy" user experience

• Retention: users come back, visit site multiple times

• Referral: users like product enough to refer others

• Revenue: users conduct some monetization behavior

AARRR!

Facebook App / User Conversion

Your App

3. RETENTION

Emails

Feeds, Profiles

2. Activation

CTA, Copy &

Graphics4. REFERRAL

Passive: Feeds & Profiles

Active: Initial App Invites

1. ACQUISITIONInvites

App Directory

Feeds

App Cross-Marketing

Profile

Ads

5. Revenue $$$

Ads, Lead Gen, Subscriptions, etc

Canvas Pages

App Cross-Marketing

Conversion Dashboard (example below; customize for your use)

Category User Status Conv % Est. ValueAcquisition Visit Site

(or landing page, or external widget)100% $.01

Acquisition Doesn't Abandon (views 2+ pages, stays 10+ sec, 2+ clicks)

70% $.05

Activation Happy 1st Visit(views X pages, stays Y sec, Z clicks)

30% $.25

Activation Email/Blog/RSS/Widget Signup(anything that could lead to repeat visit)

5% $1

Activation Acct Signup(includes profile data)

2% $3

Retention Email Open / RSS view -> Clickthru 3% $2

Retention Repeat Visitor (3+ visits in first 30 days)

2% $5

Referral Refer 1+ users who visit site 2% $3

Referral Refer 1+ users who activate 1% $10

Revenue User generates minimum revenue 2% $5

Revenue User generates break-even revenue 1% $25

Questions / Focus by Role

• Founder / CEO: – What do you measure & why? Who’s responsible?

• Product Manager / Developer: – How do you choose what to build?

• Marketing– What channels do you choose / who do you target?

Founder/CEO

Q: What metrics do you watch? WHY? Who’s responsible?

• Hypothesize Customer Lifecycle & Refine– Choose 5-10 conversion steps

• Less, not More is better– Q: minimal necessary & sufficient metrics rqd to make decisions?– can you simplify to top 3? just 1?

• Delegate each Metric to someone (not you) to OWN • Focus on conversion improvement; measure & iterate

• NOTE: if you measure something, it should tell you something…– Use “Is it Actionable?” test to determine whether or not to track a metric

Product

Q: how do you choose what to build (or NOT build) ?

• Choose features for conversion improvement– 80% on existing feature optimization– 20% on new feature development

• Just guess, then A/B test… A LOT• Measure conversion improvement• Rinse & Repeat

MarketingQ: what channels / who do you market to?

• Design & Test Multiple Mktg Channels• Select & Focus on Channels with:

– High Volume– High Conversion– Low Cost

• Measure *deeper* down the conversion funnel, not just to website / landing page

• Segment & Select channels & customers by conversion @ deepest possible level (ideally $$$)

Agenda

• Quick Review of Pirate Metrics• Example Mktg Channels• Brainstorm 3 Scenarios

Example Marketing ChannelsChannel Volume Cost/user Time to implement Mktg

EffortProd Effort

Viral / Referral

depends on CTA; size of accessible social networks / # users

low/zero Low for FB social networks;med/hi for normal sites

low low/med

Email depends on CTA, size of your house lists, email signups

low/med Low low/med low/med (med = create templates)

Blogs / Bloggers

Depends on # blogs in your segment, competitive scenario

low/med Low (if just you blogging); med (if you're setting up big CMS / evangelizing to other bloggers)

low/med low/zero(med = CMS, prof design)

SEO depends on your keywords Low/zero Medium(depends on your search geeks)

low/zero med/hi

SEM depends on your keywords Depends Low/med(depends on your marketing)

Low/med low/med (landing pages = med)

Contest small unless big prize $ (don’t, keep it under $5K)

low/med low/med(depends on contest, site, campaign)

Med low/zero(med = prof contest site)

Widget Depends on CTA; size of accessible sites, level of adoption + bloggers

low/med Low/med med med/hi (depends on complexity)

domains depends on keywords, domain costs depends low low Low (redirects/co-brand?)

PR depends on your business & audience & news

Med/hi medium (develop story, build contacts)

med low/zero

Biz Dev / Partner

depends on partner, size of customer base, conversion

med-high med/hi (capture metrics, generate reports)

Med/hi med/hi (reports, co-branding)

Affiliate / Lead Gen

depends on economics Med/hi med/hi (need to build affiliate program, capture metrics, generated reports)

med/hi med/hi (depends on rqd tracking & reporting)

Direct / radio depends on geography Med/hi medium Med/hi low/zero

Telemktg depends on target demographics med-high med-high High low/zero if no system;Med/hi if integrated SFA

TV Potentially large (if you spend) High Med-high High Med/hi (production cost)

disclaimer: these estimates of vol, cost/user, time & effort are highly subjective & very dependent on your specific business

Conversion Measurement• Conversion Criteria:

– best-performing (%) channels / campaigns / copy– largest-volume (#) channels / campaigns / copy– lowest-cost ($) channels / campaigns / copy

• Measurement Components:– Audience Segment (age, region, profession, interest)– Channel Source (social network, SEM, organic, PR, etc)– Campaign Theme / Brand Promise (“save money”, “get cool stuff”)– Landing Page & CTA– Copy & Graphics

Agenda

• Quick Review of Pirate Metrics• Example Mktg Channels• Brainstorm 3 Scenarios

Scenario I• Example: Lightweight Facebook App• Consumer target: people who poke, are frisky ;)• Customers are worth: $0-5?

– currently advertising revenue– potential for sponsorship, e-commerce revenue

• Company has ZERO funding / marketing budget– limited ability to raise capital– limited budget mostly from ad revenue

• Questions:– how to design marketing channels?– Significant viral potential?– Conversion to long-term customer potential?– Marketing potential off-FB?

Scenario II• Example: Consumer Website (low-end)• Consumer target: pet owners• Customers are worth $5-25

– mostly advertising, sponsorship revenue– some e-commerce revenue

• Company has modest funding / marketing budget– raised $XM in capital / not yet at break-even– spending $X00K / year on marketing

• Questions:– how to design marketing channels?– Email marketing?– SEO/SEM keyword opportunities?– Blogging / Affiliate opportunites?

Scenario III• Example: Consumer Website (high-end)• Consumer target: people tracking their money/finances• Customers are worth $25-100+

– significant lead-gen & advertising– potential for lots of e-commerce revenue

• Company has funding / marketing budget– raised $XXM in capital; approaching break-even / profitable– significant >$XM spend on marketing; known customer economics

• Questions:– how to design marketing channels?– SEO/SEM potential?– Direct Marketing potential?– Biz Dev opportunities?– Viral may be less important if large vol of profitable leads