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©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software

Growth Hacking for Lean Startups: How to Get, Keep and Grow Customers

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Page 1: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 2: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Todd Wyder, CEO of Pathfinder Software, is obsessed with creating great software that users love, and he is also very passionate about building the Chicago-tech community, currently serving as organizer for both the Chicago Product Management Association and the Chicago Lean Startup Circle.

Over a decade of delivering successful software applications, providing clients with the technology to enable business breakthroughs and competitive advantage. Companies hire Pathfinder to design, develop and deliver Healthcare software products faster and better than they can do themselves.

Page 3: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

You have found a really painful problem

Page 4: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

You discovered a target market who has that problem

Page 5: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

You have created a solution that customers tell you really solves the problem

Page 6: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

So, you build your MVP and invite your first customers to use it

Page 7: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Then what happens?

Page 8: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Nothing

Page 9: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

So, you buy some Adwords and get more sign ups. Then, what happens?

Page 10: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

1 2 3 4 5 6 70

2

4

6

8

10

12

14

16

Product Usage

Page 11: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Why?

Page 12: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Your product sucks & you don’t know why

Page 13: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

The Trough of Sorrow

Page 14: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Most startup founders focus heavily on product but most of a startup's risk lies in distribution

Dave McClure

Page 15: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Marketing

CustomerDevelopment Data

GrowthHacker

Page 16: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

AcquisitionBring prospective customers to your site

Page 17: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

ActivationSign up

Page 18: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

RetentionEngage users

Page 19: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Referral

Page 20: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Seven Steps to become a Growth

Hacker

Page 21: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

1. No Beta!!!

Page 22: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

2. Install Analytics

Page 23: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Google Analytics is Worth What You Pay For It

People, not page views, buy software

Page 24: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Don’t Focus on Acquisition When Activation and Retention are Low

Visited Site Signed Up Activation Billed

2,177

14 3 1

0.6% 21.4% 33.3%0.0%

Page 25: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

3. Create a Dashboard

Page 26: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

4. Perform A/B testing

LinkBaitPro

Get Started

LinkBaitPro

Get Started

A B

Page 27: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

What to/Not to Test

LinkBaitPro

Get Started

For recreational use only. Do not staple or paper clip. All models over 18 years of age. Prize not redeemable for cash value. If condition persists, consult your physician. No user-serviceable parts inside.

Test theHeadline

Image vs.Video

Call to actiontext and color

Don’t spend alot of timetestingthe copy

Page 28: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Classic A/B Testing

I’m on Twitter Follow me on Twitter

Follow me on Twitter You should follow me On twitter

You should follow me On twitter

You should follow me On twitter here

You should follow me On twitter here

56%

38%

27%

115%173%

Page 29: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 30: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

User States

1.Login

2.Upload Photos

3.Tag Photos

4.Share Photos

5.Comment on Others photos

Page 31: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

5. Create Interventions

Signed Up Login Uploaded Photos

TagPhotos

2,177

366

413

16.8% 11.2% 7.3%0.0%

• Email

• In App

Page 32: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 33: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 34: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 35: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Bugsnag captures errors from your web and mobile applications. The first email they send to new signups is very simple, but has been yielding great results.

Hey {{ first_name }},

I'm James, CEO of Bugsnag. I wanted to reach out to see if you need any help getting started.

Cheers,

James

Surprise Personal Email

Page 36: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Bad

We've missed you on CouchSurfing! It's been a long time since we've seen you around! The last time you logged into CouchSurfing was four months ago.

Props to Segment.io

Page 37: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

The Last Email You Will Ever Send

A lot has changed since you left – so we'd like to offer you another FREE trial!

Come back to Netflix and enjoy newly added TV shows & movies – for free. Now including Wii, PS3, Xbox 360, iPhone, iPad,

Android and more.

Questions? 1-888-357-1516 / 24 hours a day

Page 38: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

In App Intervention

Page 39: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 40: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 41: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

6. Preform Cohort Analysis

Page 42: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Track User States Across Cohorts

Page 43: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Onboarding

Page 44: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

7. Determine the OMTM

At least 7 friends within 10 days of signing up

Getting a new user to link a device and add a file

Once a user follows 30 people, they’re more or less active forever

If someone comes back a day after signing up for a game, that is a leading indicator of them becoming an engaged and paying user.

Page 45: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Post Launch Stages

1. Stickiness

USER

DISENGAGED USER

ENGAGEDUSER

REACTIVATE

TRIAL OVER

PAYING CUSTOMER

DISSATISFIED

RESOLUTION

DISENGAGED

REACTIVATE

CANCEL CANCELACCOUNT CANCELLED OR

BILLING INFO EXPIRES

Free userdisengagement

PaidConversion

SupportData

ReactivatonRate

FreemiumChurn

TrialAbandonment

Rate

Disengagement

Page 46: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Post Launch Stages

1. Stickiness

2. Traffic

USER

DISENGAGED USER

ENGAGEDUSER

REACTIVATE

TRIAL OVER

PAYING CUSTOMER

DISSATISFIED

RESOLUTION

DISENGAGED

REACTIVATE

CANCEL CANCELACCOUNT CANCELLED OR

BILLING INFO EXPIRES

Free userdisengagement

PaidConversion

SupportData

ReactivatonRate

FreemiumChurn

TrialAbandonment

Rate

Disengagement

PAID DIRECT SEARCH WOM

Customer Acquisition Cost

VISITOR

FREEMIUM/TRIAL OFFER

ENROLLMENT

Long funnel health

INHERENTVITALITY

INVITE OTHERS

Viral coefficientViral rate

Page 47: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Post Launch Stages

1. Stickiness

2. Traffic

3. Revenue

USER

DISENGAGED USER

ENGAGEDUSER

REACTIVATE

TRIAL OVER

PAYING CUSTOMER

DISSATISFIED

RESOLUTION

DISENGAGED

REACTIVATE

CANCEL CANCELACCOUNT CANCELLED OR

BILLING INFO EXPIRES

Free userdisengagement

PaidConversion

SupportData

ReactivatonRate

FreemiumChurn

TrialAbandonment

Rate

Disengagement

PAID DIRECT SEARCH WOM

Customer Acquisition Cost

VISITOR

FREEMIUM/TRIAL OFFER

ENROLLMENT

Long funnel health

INHERENTVITALITY

INVITE OTHERS

Viral coefficientViral rate

UPSELLING

CAPACITY LIMIT

FORMER USERS FORMER CUSTOMERS

Tiering

UpsellingRate

Unpaid Churn Rate Paid Churn Rate

User Lifetime Value Customer Lifetime Value

Page 48: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Post Launch Stages

1. Stickiness

2. Traffic

3. Revenue

PAID DIRECT SEARCH WOM INHERENTVITALITY

Customer Acquisition Cost

VISITOR

FREEMIUM/TRIAL OFFER

ENROLLMENT

USER

INVITE OTHERS

DISENGAGED USER

ENGAGEDUSER

REACTIVATE

TRIAL OVER

PAYING CUSTOMER

UPSELLING

CAPACITY LIMIT

DISSATISFIED

RESOLUTION

DISENGAGED

REACTIVATE

CANCEL CANCELACCOUNT CANCELLED OR

BILLING INFO EXPIRES

FORMER USERS FORMER CUSTOMERS

Long funnel health

Free userdisengagement

PaidConversion Tiering

UpsellingRate

SupportData

ReactivatonRate

FreemiumChurn

TrialAbandonment

Rate

Disengagement

Unpaid Churn Rate Paid Churn Rate

User Lifetime Value Customer Lifetime Value

Viral coefficientViral rate

Page 49: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

• Measure engagement

• DAU/WAU – What does active mean?

• Segment

• New Functionality• Does it improve stickiness?• How do we measure that?

• Lazy registration

Stickiness

Page 50: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Talk to the Customers

Page 51: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Viral Coefficent

Number of Active Users: 1,000

Number of Invites Sent: 100

Invitation Rate (Invites Sent/Active Users) 10%

Acceptance rate (Invites accepted/Invites Sent) If 3 invitees sign up,30%

Viral Coefficient = Multiply Invitation Rate X Acceptance Rate (.1 X .3 = o.o3)

Ideally Viral Coefficient > 1

Necessary for B2C, likely not a good metric for B2B

Page 52: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Virality Inherent

Collaboration

CommunicationPS: I love you,get your free emailfrom http://hotmail.com

Incentivized

Embeddable

Signature

Word of Mouth

Social

Page 53: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Use Platforms

Page 54: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Page 55: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Segmentation

Page 56: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Video

Page 57: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Unit Economics

Page 58: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

BasicsCAC – Customer Acquisition Cost

• Marketing cost/# paying customers

• Costs you spend on marketing

• Include labor

LTV – Life Time Value

• Amount of money you receive while the customer is paying you

• LTV = ARPU * (1/Churn Rate)• 1,000 Customers (not free trial users)• $25,000 Revenue• ARPU is $25• 20% Churn Rate (average length of relationship is 5 months)• LTV = $25 * (1 – 0.02) = $125

Page 59: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Rules of Thumb

LTV > 3 * CAC

CAC needs to be recovered in less than a year (ideally 3 months)

Churn should be 5-7% annually- 0.42-0.58 monthly

Page 60: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

How Churn affects Lifetime

1% 2% 5%0

20

40

60

80

100

120

100

50

20

Lifetime vs Churn RateMonths

Monthly ChurnSource: David Skok Matrix Partners

Page 61: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

How Churn affects LTVLifetime Value

Monthly Churn

Source: David Skok Matrix Partners

Page 62: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Impact of Lowering Churn

Month 1

Month 3

Month 5

Month 7

Month 9

Month 11

Month 13

Month 15

Month 17

Month 19

Month 21

Month 23

Month 25

Month 27

Month 29

Month 31

Month 33

Month 35

$(400,000)

$(200,000)

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Net Profit

Churn 1.25% Churn 2.5%

Month 1

Month 3

Month 5

Month 7

Month 9

Month 11

Month 13

Month 15

Month 17

Month 19

Month 21

Month 23

Month 25

Month 27

Month 29

Month 31

Month 33

Month 35

$(4,000,000)

$(2,000,000)

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

Cumulative Net Profit

Churn 1.25% Churn 2.5%

• Impact of lowering the churn rate is felt more heavily in the later years, as expected• It has a significant impact on the long term profitability of the business

Source: David Skok Matrix Partners

Page 63: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

A Well Balanced Business Model

Monetization(LTV)

Cost toAcquire aCustomer

(CAC)

Source: David Skok Matrix Partners

Page 64: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

The Balancing Act

Monetization(LifeTime Value LTV)

Cost to Acquire a Customer (CAC)

• Viral effects• Inbound Marketing• Free or Freemium• Open Source• Free Trials• Touchless conversion• Inside Sales• Channels• Strategic partnerships

• Scalable Pricing• Cross Sell/Upsell• Product line expansion• Lead Gen for 3rd parties

Source: David Skok Matrix Partners

Page 65: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

The Balancing Act

Monetization(LifeTime Value LTV)

Cost to Acquire a Customer (CAC)

• Viral effects• Inbound Marketing• Free or Freemium• Open Source• Free Trials• Touchless conversion• Inside Sales• Channels• Strategic partnerships

• Field Sales• Outbound

Marketing

• Scalable Pricing• Cross Sell/Upsell• Product line expansion• Lead Gen for 3rd parties

• High Churn Rates• Low customer

satisfaction

Source: David Skok Matrix Partners

Page 66: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Questions

?

Page 67: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Get Hacking!

Page 68: Growth Hacking for Lean Startups:  How to Get, Keep and Grow Customers

©2013 Pathfinder Software

www.PathfinderSoftware.com888-986-2914

@PathSoftpathfinder-software

Need help with the design, development, and launch of your Healthcare or Medical software application? We leverage our experience with FDA and HIPAA compliance to rapidly align your product with government regulations. We increase the rate of success of our clients’ products leveraging Lean Startup + UX + Agile. Call Us Today - 888-986-2914