This topic is taken from a conversation, The Basics of Growth-User Acquisition, between Andrew Chen, Jeff Jordan, and Sonal Chokshi on the a16z Podcast. Cheers for the valuable knowledge.
Digital marketers and founders involved in the thick of marketing often focus so heavily on the “state of acquiring” that they forget to frame growth in terms of the bigger picture.
And who’s to blame them?
With demanding monthly targets of growing by certain amount of revenue, margin, or users, it’s natural to concentrate so heavily on the survival task of “keep getting people in the door!”
That said, even if the marketers are in a state of “acqui or die,” if people are walking right out the back door upon getting in, then the money and energy has been pointless.
So let’s breath, pause, and see the trees for the forest instead.
The following 4 metrics are paramount for a startup’s livelihood and should be kept a pulse on constantly (NOTE: the following will need some adaptation to your customer, industry, and business model).
#1: Monthly Active Users
What is MAU? Simply defined is the number of unique users who have performed a desired action in an app over the past 30 days.
The reason why this is important is because it gives you a general sense of how the app is performing and if the product is able to attract and keep users.
Taken a step further, net MAU provides a “total keep” perspective of unique users engaging with the app every month:
New user acquired + reengaged – churned = net MAU
#2: Gross Merchandise Value
Often used by e-commerce companies, GMV is defined as total sales over a specific time period (think 30 days). For a platform like Uber, this could be defined as total revenue from rides (before fees and taxes).
#3: Blended Cost of Acquiring a Customer
We all know CAC (the cost of acquiring 1 customer), but blended CAC takes this simple metric to an elevated level.
What’s the cost to acquire a customer on a paid basis PLUS what free users you acquire?
Taking Jeff Jordan’s example in the a16z episode, if you paid $100 to acquire each of 100 customers (i.e. $10,000), but 100 additional customer came in organically, then blended CAC is $50 (although your CAC is $100).
Once again, big picture.
The most simple yet potent metric: how often does a customer come around? Once a month? Once a day?
Figuring out an average frequency of your customer base can help steer product and marketing decisions so to cater to the customer as much as possible.
Do you have growth metrics you live by? Share them below and add to the conversation.
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