During my time at RPM Ventures, I have learned the importance of data and how to use it. Investors look for metrics related to performance, or for pre-product companies, an understanding of what metrics will be tracked and how data will be used to make decisions. For entrepreneurs at any stage, understanding data and using metrics to make data-driven decisions are key to building your company and raising money.
I’ve worked on a number of data-related projects at RPM Ventures. I ran through some raw marketing data from one of our companies and pulled out some general pearls of wisdom we could use to inform future marketing efforts. This kind of analysis helps increase effectiveness by showing us which efforts have the greatest impact, and thus, where we should spend our money and time. I also put together a cohort analysis for one of our portfolio companies. And before that, I did some research about metrics for SaaS businesses, and comparable company metrics for another one of our portfolio companies. Years of attending board meetings and pitches have also provided me the opportunity to learn which metrics to track, when to track them, how to track them, and why they’re important.
The metrics that are most important for you to track depends on your business (i.e. business model, stage, goals, and so forth). In general, though, data is powerful and great for informing decisions. Take marketing, for example. Marketing metrics provide information to improve effectiveness of marketing campaigns and optimize marketing spending. What are some examples of metrics you can track? Before I list out some examples, let’s take a look at the typical digital advertising “funnel”:
At the top of the funnel are: (1) the people who see your ad, marketing campaign, and email message—the total initial reach you have. From there, it trickles down to the number of those people who take action, which is why you need a strong call-to-action (2). Those people who click will come to whatever page you put in front of them, which may or may not have another call to action (3), such as, “Give us your email address,” or, “Buy now.” And as the funnel image implies, as more steps are added, more visitors fall off the wayside. The goal is to get as many people through the funnel through possible. How can you do that? The formula is simple: Test. Measure. Iterate. Rinse and repeat.
Throughout the funnel process, there are opportunities to run experiments and track metrics to optimize the funnel and maximize the number of folks making their way through the funnel. If you haven’t heard of Click Through Rate (CTR) and Cost of Customer Acquisition (COCA), definitely do some homework. These metrics are critical “funnel metrics.” There are a slew of others you’ll want to know, like Lifetime Value (LTV), Average Sales Price (ASP), and Churn.
Given the funnel example from above, here are some straightforward ways to experiment and track metrics:
- Experiment with different ways to attract people (i.e. blog posts, paid advertising, social media activity, email marketing, etc.)
- Test “Call to Action” messages
- Analyze “Call to Action” messages, design, and language
Of course, running these experiments and testing results is only useful if you do something with the findings. Use the resulting metrics to make adjustments to marketing messaging, ad spend allocation, and so forth.
There is power in metrics, as long as you analyze and use them effectively!