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Defining key metrics for your company
Growth Hacker, User Acquisition Expert
You define the metrics that matter based on the industry you are in and your idea of success.
Growth-rate can mean traffic, revenue, or users. What matters most to you?
Find your north star. Define the one KPI that people rally around at a company level.
Lesson: Scaling User Growth with Maud Pasturaud
Step #2 Metrics Matter: Defining key metrics for your company
You define success and sometimes based on the industry. For example, if I have to look at engagement for a social product and I want to become the next SnapChat, I need to look at what SnapChat is doing in terms of engagement and growth. Those are good in proxies and what they define success is probably relevant for me to define success.
Another example is for Jetsetter, which is in another company I with work. It was a number of nights booked, which is standard in the hotel industry. So there are some of those who are very specific.
Net Promoter Score is one that I really like, and its a bit intangible. So basically it is very important, it tells you how much your users love your product. So that has different meanings, it means if they love your product, they're going to come back and they're going to tell their friends about it. So, when you're really delighted, you'll have more increased likelihood of referring your friends to it. Net Promoter Score is simply asking in a survey to your users, how likely are you to recommend the product to your friends or to people around you on a scale of 1 to 10.
So it's a very basic thing to do. First, even before you have product market fit to continue and realize what is the value and how much value people are getting from your product. Its important to continue to do it, to continue to take the pulse in how of a quality product, the quality of the product you're delivering.
An example is Gilt, Gilt Group. Their whole growth was based on referral and you're inviting a friend to Gilt Group and you're getting credit back into your account. So people needed to feel excited about the product and so that Net Promoter Score was very, very high at the beginning. That's very good metrics, a bit intangible again, it's not something you can measure. You're asking people to tell you how they feel basically.
Another one is retention, obviously it's very important. Retention, you have to define what's important and what does retention mean? So on average, a user comes back every six days to look at your product. You need to look at retention within those brackets of days. There is in general, for web or mobile products you're going to look at retention on day 1, on day 7, on day 30 and every month after that.
So if I had a user coming into Secrets, and I wanted to know the percentage of them coming back the next day, the percentage of them coming back on day 7, and 30, etcetera. And you just follow those curves and you make sure, you understand that retention pattern. And what that means is, you will eventually be able to model out what that retention looks like. And hopefully it flattens out, going back to the top of the curve. So this is a very important metric. Retention rates, day 1, 7, 30 and every month after that.
Another that is important is obviously growth rate. So, growth rate, there's a lot of, I remember it wasn't necessarily very known before, but a lot of companies in Silicon Valley really focused on week over week or month over month growth. So what matters is, you're driving such growth that you almost have to isolate it on a week-by-week basis. InstaCard is one of the companies that look at their growth on a week-by-week basis, which is insane. If you're able to drive 10% growth on a week-by-week basis, this isn't crazy. Another one, Shyp recently said that they're 20% month over month. So this is very important for your business. You want to make sure that you're making progress.
And growth rate can mean, it can mean revenue, it can mean users. So there's also a lot of gray area there on the metrics that you see out there around growth rate because it means something different. If you get traffic increase and your ultimate goal is to get revenue, it doesn't mean as much. So we try to focus on what matters most to the business.
There's also what we call the K Factor. So K Factor is out of one user that comes to your platform, how many other users are joining as a direct result? So it's very linked to Net Promoter Score. Net Promoter Score is more users giving you feedback. The K Factor is something that you can actually measure. So again, if I take the example of Gilt, I could model out and I knew that on average one person was bringing on X other users through this invite system. And so that was a Net Promoter Score that was very high.
And so you need to make sure that you can track it to the best of your abilities because it could be word of mouth. But often you also build the mechanics within the product for the users to invite their friends. You want to make it easy for them. So that's another way you can track it.