Metrics The Data Duck Chases and Why
Trial-Customer Conversion Rate
- What it is: This tells us the rate at which (free) trial users convert to paying customers.
- This number is a starting point to forecast paying customers. It provides insights into the trial experience. It’s helpful to track trials as a funnel and understand conversions at various milestones. As with most other metrics, it’s a good idea to track this by cohort.
What it's the percentage of users that continue to be active, or continue to pay, from one period to the next.
This is a strong indicator of the health of the product we craft for you and your business. This indicator will help you understand whether growth is coming from new users/acquisitions or via engagement from your existing users. This is also an input in estimating the lifetime value of a customer. Look at retention across cohorts to notice any changes over time or user segments. The period is usually Months, Quarters and Years.
What it is: almost the opposite of retention rate. It’s the percentage of users that stopped being active or stopped paying, from one period to the next.
How to use it: The applications are the same as for retention rate. Some of our clients focus on the retention rate while some prefer to see the churn rate.
DAU, WAU, MAU
- What it is: Daily Active Users (DAU), Weekly Active Users (WAU) and Monthly Active Users (MAU) are commonly used acronyms. They measure active users within a given time period.
- How to use it: These metrics provide a high level indicator of how active your users are over a period of time. However, they’re often inputs into other metrics as well, while will be discussed later.
Note: The definition of ‘active’ may differ based on the product/business you operate in.
- What it is: Stickiness measures how often users engage with your product.
- How to use it: This gives you an idea of customers returning to use your product and therefore if they value it. This is a good indicator of the growth of a business. The way we calculate this is product dependent. For a product which is to be used daily, DAU/MAU will give you the Stickiness Ratio. While it’s difficult to have benchmarks here, a change over a period of time should give you useful insights as to how your product/business is progressing. Tracking this via cohorts or user segments will provide deeper insights.
What it is: Cohort retention measures if a group of users (cohort) continues to use your product or pay for your service over a period of time.
How to use it: This is similar to retention rate, however, is specific to a group of users – e.g. Customers acquired in Q1. The advanced use of this is to understand change in behaviour of specific user groups (e.g. Light vs Heavy or High Income vs Low Income). This can then be mapped with various product/business changes made to understand the impact of those decisions. We use DAU, WAU, MAU on the basis of your product fit.
- What it is: Time in app measures how long a user spent in your app over a period of time.
- How to use it: This metric helps provide trends in usage time. Interpretation of this is app dependent. For a shopping app, the more time might be better. However, high time spent on a bill payment app might indicate customers experiencing problems.
User or customer satisfaction metrics
Customer Satisfaction Score (CSAT)
- What is it: CSAT is an indicator of customer happiness or satisfaction, typically based on a short survey.
- How to use it: CSAT can be used as an indicator of the satisfaction of your users. You may target the questions on specific parts of the experience (e.g. Quality of Customer Support, Speed of Delivery etc.) and therefore get customer feedback on your areas of focus. We use tools like Betafi to conduct this. Check them out www.betafi.co
Percentage of Support Tickets to Active Users
- What is it: A measure of the percentage of support tickets created keeping in mind the active user base for a given period of time.
- How to use it: This metric can give a good indicator of how much customer support is needed and is an indicator of the customer experience you provide.
Business Metrics – the things we recommend our clients measure to check business health
Monthly Recurring Revenue (MRR)
- What is it: Measures the monthly subscription (hence, recurring) revenue.
- How to use it: This is a core metric to measure how revenue is changing over a period of time to aid forecasting and give an indicator if a business is growing or not.
Customer Lifetime Value (CLV, LTV)
What is it: Customer Lifetime Value, (aka Lifetime Value), measures the revenue you will get from a customer over the lifetime that they remain a customer.
How to use it: You consider the annual revenue from a customer, account for the average lifetime of a customer in years. This gives you a sense of how much revenue you’re going to make. This information is useful to plan for profitability, user acquisition budgets and planning for a longer-term than just a quarter or a financial year.
Cost of Acquisition (COA, CAC)
What it is: COA measures the total of all costs spent on acquiring a customer, including marketing and sales.
How to use it: COA is an important metric we track to understand your trends, how to plan for growth and profitability.
Average Revenue Per Unit (ARPU)
What is it: A metric that measures the average revenue from each customer.
How to use it: The ARPU will have a direct impact on pricing, discounts/promotions, further, any key business decisions should be mapped alongside the ARPU over a period of time.
Cash Burn Rate
What is it: A measure of how much cash a company consumes in a given time period, typically monthly or yearly.
How to use it: Many businesses aren’t profitable at an early / growth stage. Knowing the runway available is very important from a business planning perspective. Cash burn is also looked at by investors to get the health of the business.
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