A friend called me this morning and asked me, what is the 5 most important thing to measure for an online venture?
This is for a startup grant application form he is trying to fill. While I am not an expert in this, here’s what I told him:
Like every businesses, awareness is key before you get any sales. In terms of a web startup, awareness is manifested and reflected as page views. Page views is the number of times a visitor view your a single page on your website. The higher your page views, the higher your awareness, the higher chance you get someone to buy and pay for a product that you are offering.
Click Through Rates/Conversions
Click through rates is the % of visitors who visit your site and click on your product. This is not the same as conversion rate, although both are directly correlated. When a visitor at your site click on one of your product and end up paying for it, the visitor is a converted visitor. A high page views ensure a high a high click through rate, which subsequently increases the conversion rate.
Disclaimer: There are other factors that affects click through rates, notably user experience. Same goes for conversions. There are a lot of factors affecting it too, including pricing and product/market fit.
Customer Acquisition Cost
The third metric which I shared with my friend is customer acquisition cost. In simple terms, it means how much does it cost to get a customer. This is usually calculated as marketing cost/total new customers. Marketing cost includes advertising + commissions + sales person + website. Depending on which industry you are in, customer acquisition cost can be as low as a few dollars (mobile apps) to hundreds of dollars (enterprise software/education).
“Knoweth Where Thy Customers Resideth” – Yongfook, 21 Actionable Growth Hacking Tips.
This should be fairly straight forward. You should always know who your users are and where they come from. Traditional businesses survive on this as well: Think bookstores, restaurants or barber. They are always located at places where there is a huge human traffic flow, and before they open a physical store, they choose the venue based on their target customers and where they usually frequent. The same goes for a website. You should always know who you are targeting, where they come from and how to track them. Google Analytics is a great way to help you determine these: User age group, location, which browser are they using, which language are they on. For user channel, a properly tracked website allows you to see where you are getting your users from. A good understanding of your user demographic and channel will also positively affect your page views and conversions.
The final metric is growth rate. Growth rate for startups are usually very low as they go through a customer development phase. Early adopters make up the initial growth curve and before any startups can reach the legendary hockey stick curve, they have to “cross the chasm”.
Actually, another important metric is user retention/engagement. This metric should come before user growth.