Customer acquisition is usually the foremost topic on a founder's mind. This week was full of workshops, focused on various aspects of this topic. We also heard one of the most powerful Founder Stories of the program.
First, let's talk about the workshops:
Put on by a pair of growth and product specialists, this included a bunch about frameworks that you can use, and some example case studies. Here are the quick takeaways, and resources to learn more:
- Engagement is your biggest problem.
- What type of product do you have? Hourly? Daily? Weekly? Monthly?
- Avoid vanity metrics at all costs; examples include total signups, bounce rate, Facebook fans, etc.
- The metric you should measure: your product's authentic usage metric.
- One of the best frameworks to use: AARRR (Acquisition, Activation, Retention, Referral, Revenue).
- Acquisition: the volume of users who convert.
- CAC: Customer acquisition cost = sum of all sales & marketing expenses / number of new customers added.
- How to acquire? Check out the Traction framework.
- Activation: the rate at which new signups use the product.
- Retention: the rate at which users come back.
- Referrals: the rate at which users refer your product.
- Viral coefficient: i*c = k-factor, where i = invites sent per customer, c = invitees that convert (percentage)
- BUT, don't do a viral marketing campaign until your product doesn't suck.
- Revenue: figure it out.
- Look to users who are engaged (use metrics).
- Talk to users who aren't (talk to them - do I need to say that again?).
The way to measure all these things? Separate into cohorts. That means separate users by when they activated (there are alternatives, but his is where to start). Do this by day, week, month, whatever timeline makes sense for your business. This is critical to gain real insights.
- AARRR - Pirate Metrics - Dave McClure
- Lean Analytics - Alastair Croll & Benjamin Yoskovitz
- Hooked - Nir Eyal & Ryan Hoover
- Traction - Gabriel Weinberg & Justin Mares
- The Elements of User Onboarding - Samuel Hulick
- Startup Playbook - David Kidder
Customer Acquisition & Retention
This was an awesome workshop, and was presented from the perspective of a VC (ie. from the perspective of someone who is objective and knows what matters in a business).
- First questions you can expect from an investor:
- Where do you get your customers?
- How are you converting?
- What's your CAC (customer acquisition cost)?
- What's your retention like? How much do people purchase? What does that make your LTV (lifetime value)?
- What's your payback period?
- You should aim for a LTV:CAC ratio of 3 (and payback period of 12 months or less for subscription/SaaS).
- For consumer businesses, you must have a good k-factor (viral coefficient).
- Easiest way to lower CAC is to concentrate on the end of the funnel - conversion rate.
- Over time, you should see CAC going down until roughly constant, at which point your marketing should go all in on channels that work (pour fuel on the fire).
- Cohort analysis is key to telling the story of how customer segments are performing. You can segment by time, marketing source, sales rep, etc.
- This will tell you if you're getting better.
- Cohort analysis is the way to measure churn/retention in your business.
- Churn rate = % of customers/users leaving the service month-over-month.
- Lifetime = 1 / churn rate.
- LTV (lifetime value) = Lifetime * transaction size * gross margin.
This was one of the most valuable presentations I've seen, and I can't emphasize enough how important cohort analysis, customer acquisition cost and lifetime value are to your business. They are literally the metrics which determine whether it works or not.
How to Spend $50 on Facebook
This presentation was by Larry Kim from Wordstream, and I say that because a version of the deck is available here. You should definitely follow Larry on Twitter too. I won't go into too much detail, because you can look at his deck, but here are the highlights:
- 0.1% of content gets 1000+ shares.
- Reality: content and social is broken.
- Use social (paid advertising) as a catalyst or accelerant.
- ie. use it to boost your content initially (catalyst).
- OR, use it to boost content that is taking off organically (accelerant).
- Paid social is the most scalable content promotion.
- Use Twitter as a judge for your content (need good following).
- Then post this to other networks (only your best content).
- The better you know your target market, the better your marketing and remarketing will be.
- Push your hard offers through remarketing.
- FB Custom Audiences is best way to advertise through Facebook.
- Compile list of industry influencers to advertise your posts on Twitter/Facebook.
- Content social networks can be powerful for your posts (Hacker News, LinkedIn Pulse, Digg, Medium, Reddit).
- For all this to work, you need interesting, compelling, emotional trigger content.
Check out the full presentation for more!
This week featured Jake and Joe from Rocketbook - which you should definitely check out (and buy one) - and they were two of the best stories of the cohort, though for very different reasons.
Jake is a naturally funny storyteller, and has had some hilarious experiences. There were a few main takeaways I got from Jake's stories:
- The importance of tinkering. I've talked about this before, but building your own things, side projects, and generally "messing around" is a great habit. Paul Graham has talked about this before as well.
- The importance of, and opportunities that come from, taking chances and doing things that are uncomfortable.
- The power of having a great network, and finding people who will advocate on your behalf; this is how you will get disproportionately large opportunities.
Transgender Issues and the Remarkable Lemay Family
The second presentation was from Joe Lemay, and it was on a subject I had no previous knowledge that Joe was involved in.
It was easily among the most moving stories I've seen from the founders, and I'm hoping to dedicate a separate post to the subject.
In the meantime, I'll give the high-level story, and then let you check out the rest of the story as told by Joe and his wife, Mimi.
The short of it is this: when Joe and Mimi's son, Jacob, was four, they transitioned him to a boy.
Obviously, this was a big decision for Joe and Mimi. I know how great Joe is, though I've never met Mimi, but their story has been documented on Mimi's blog, and a specific post was published by the Boston Globe. They also did a segment with NBC, and in total it's estimated their story has reached more than 50 million people.
I consider myself a very tolerant, and, living in the United States, especially lately, with issues surrounding gender definitions for bathrooms, and exposure to the same-sex marriage issue here, I've begun to think more about these issues.
That being said, I also know that I hadn't thought about transgender issues with any depth. It's an uncomfortable topic for many, but, as with many things, I believe it's an issue of fearing what we don't understand.
These videos will help. I was extremely moved by Joe's chat with us about how he and his family have dealt with it. I already knew Joe was a great friend, but the way in which he and Mimi dealt with this issue is remarkable and inspiring. I hope to extend this into a later post, once I have some more time to research the issues.