Top growth jargons you'll need ✨
21 key metrics if you are new to growth.
The deadline to join GrowthX Live immersion closes on August 8th.
The 8 week live experience covers 4 key pillar → user acquisition, onboarding, retention & the beast - monetisation
We’ll cover following Jargons —
If you are new to growth or know someone who is - this is foundational to understand and use in your day to day life as a growth manager / growth PM / growth marketer.
Customer Acquisition Metrics 💰
1. Customer acquisition cost (CAC)
If you spend $50,000 on marketing and sales efforts in a given month & acquire 100 new customers who experience core value of your product, your customer acquisition cost would be = $50,000 / 100 = $500
For example, If Swiggy spends $50,000 on marketing & acquires 100 customers who order a pizza for the first time CAC will be $500
2. Conversion rate (%)
The percentage of website visitors that complete a desired action, such as making a purchase / filling out a form. By drilling down into your conversion rate at various stages of the funnel, you can understand the bottleneck at different stages of your acquisition funnel. Here’s a few examples —
3. Cost per Lead 🤑
Cost Per Lead (CPL) is the average cost of generating a qualified lead for your product or service. It is commonly used in digital advertising campaigns, particularly in pay-per-click (PPC) advertising. It is also frequently used in B2B businesses where it’s a sales-heavy GTM.
For example, if a PPC advertising campaign costs $1,000 and generates 100 qualified leads, the CPL would be $10. Please note these leads may or may not convert to do a purchase or a core action on the product. That’s what differentiates them from CAC we spoke about earlier.
4. Time to Convert ⏲️
Time to convert measures the amount of time it takes for a lead to become a paying customer. It's calculated by subtracting the date a lead was acquired from the date the lead made their first purchase or became a customer.
If the time to convert is longer than expected, it may indicate that there are bottlenecks in the sales process that need to be addressed. It also helps you really understand how to optimise TOFU/ MOFU/ BOFU on marketing initiatives.
5. Customer Lifetime Value (CLTV)
Simply put - the total amount of revenue a business can expect to generate from a single customer over the entire duration of their relationship. Its sort of “FUGAZI” (imaginary) when a company is just started to monetise.
It is a key metric in evaluating the long-term profitability of a business and in making decisions related to customer acquisition, retention, and marketing.
For example - if your average purchase value is $50, customers make an average of 5 purchases over their lifetime, and the average customer lifespan is 3 years, the CLTV would be: CLTV = $50 x 5 x 3 = $750
User Engagement Metrics 🌪️
1. Daily/weekly/monthly active users ✋🏼
Simply put - the number of unique users who interact with a product or service on a daily/weekly/monthly basis.It is a key metric in evaluating the long-term profitability of a business and in making decisions related to customer acquisition, retention, and marketing.
For example - Whatsapp would measure daily active users as its core metric apart from messages per user exchanged every single day. Not every product should/can optimise for having daily active users.
On the other hand, Airbnb might want to measure MAU considering most users only travel few times a year & so on.
Plus, the definition of “active” should be always related to “experiencing core value prop of your product” for WhatsApp that is “exchanging messages” & for Airbnb that is “booking a stay”.
2. Stickiness 🍢
Simple put - the ratio of monthly active users (MAU) to daily active users (DAU). This ratio is known as the "stickiness ratio" & provides a measure of how often users are returning to a product on a daily basis.
For example, if a product has 10,000 monthly active users and 1,000 daily active users, the stickiness ratio would be: Stickiness ratio = 10,000 / 1,000 = 10
3. Activation Rate 🖱️
Simple put - the percentage of users who have completed a specific action signifying their adoption of the product. This action is often referred to as the "activation event" & is the first time a user experiences product's value.
Some common examples of activation events include 👇🏼
- Completing the product registration process
- Uploading custom content to the product
- Making a purchase or a subscription
- Creating a profile or adding information to the account
- Inviting others to use the product
For example, let's say you are measuring the activation rate of a mobile app that requires users to create a profile to start using it. In a given week, 500 users signed up for the app, and 300 of them completed the profile creation process. The activation rate for that week would be: Activation rate = (300 / 500) x 100 = 60%
4. Session length 📏
Session length refers to the amount of time a user spends actively using your product during one session. A session starts when a user opens the product and ends when the user closes or exits the product.
Different product companies measure this differently. For example Google Adsense allows marketers set their own definition of a session. Mathematically, Session length = End time - Start time = 10:30 AM - 10:00 AM = 30 minutes.
5. Feature Usage 👊🏼
It refers to the frequency and intensity with which users interact with specific features or functionalities of your product. A feature could be anything from a simple ‘randomize’ button on Netflix to a full-blown feature on a SaaS app.
Some common methods include -
1. Number of times a feature is accessed
2. Measuring the time spent on a feature
3. Tracking the completion of specific action
6. Retention Rate 🫂
A retained user is someone who keeps coming back to use the product again & again within as long as the user has a natural use case for the product.
For example, if a product has 10,000 users at the beginning of the month and 8,000 of those users continue to use the product by the end of the month, the Month 1 retention rate would be 80%.We cover a lot more in-depth on retention in week 3 of Immersion program (everything from how to look at cohorts, define user journeys & retain the most profitable users learn more here).
Revenue Metrics 🤑
1. Revenue Growth Rate
The most common way to calculate the Revenue Growth Rate is to compare the revenue in the current period to the revenue in the same period of the previous year.
Revenue growth rate = [{(Revenue in Current Period) - Revenue in Previous Period)} / (Revenue in Previous Period)] x 100.
For example, if a company had revenue of $1 million in the first quarter of last year, and revenue of $1.2 million in the first quarter of this year, the Revenue Growth Rate would be calculated as follows: [(1,200,000 - 1,000,000) / 1,000,000] x 100 = 20% This means that the company's revenue grew by 20% from the first quarter of last year to the first quarter of this year.
2. Gross Revenue
Gross revenue, also known as gross sales, is the total amount of money a business generates from its sales or other sources of income before deducting any expenses or taxes.
- Pick a time period (say FY 2024-2025)
- Identify all operating revenue.
- Identify all income from interest/ rental revenue.
- Sum up the two and you have gross revenue.
3. Net Revenue/ Net sales
Net Revenue is =
{ Gross Revenue - Cost of Goods Sold - Operating Expenses - Other Expenses }→ Cost of goods sold refers to the direct costs associated with producing and delivering the products or services sold by your business. In a digital-first business, this could mean the costs of tools, servers, etc.
→ Operating expenses refer to the expenses incurred in running the day-to-day operations of the business, such as rent, utilities, and salaries.
→ Other expenses include any other expenses that are not included in the cost of goods sold or operating expenses, such as interest expenses or taxes.
3. ARPU (Average Revenue Per User)
A metric used to measure the average amount of revenue generated by each user or customer during a given period of time. For example, if a company generates $10,000 in revenue in a month and has 1,000 users during that same month, the ARPU would be $10 ($10,000 / 1,000).
4. Monthly Recurring Revenue (MRR)
A metric used to track the recurring revenue generated by a business on a monthly basis. MRR is commonly used by businesses that have a subscription-based model or a recurring billing model.
For example, let's say your business has 200 active customers paying $50 per month for a subscription service, and 50 active customers paying $100 per month for a recurring billing service.
MRR = (200 x $50) + (50 x $100)
MRR = $10,000 + $5,000
MRR = $15,000
5. Annual Recurring Revenue (ARR)
ARR = MRR X 12 if churn is zero. But in real world churn is never 0. Say for a business Month 12 retention is 90%. This means MRR will have a 90% retention. In that case by month 12 ARR will = 90% X 12 X MRR
Do not confuse Annual recurring revenue (ARR) with Annualised revenue run rate (ARRR). The later is completely different - Revenue run rate (RRR) and annual recurring revenue (ARR) are different in that ARR includes only recurring revenue while ARRR includes any revenue. ARR is used for subscription-based purchases during a period of time and does not include one-time purchases.
Customer Satisfaction Metrics 💙
1. Net Promoter Score (NPS)
NPS is based on a single question: "On a scale of 0-10, how likely are you to recommend this product/service to a friend or colleague?”. Users are then categorized into 3 buckets —
Promoters (score 9-10) : Customers who are highly satisfied with the product and are likely to recommend it to others.
Passives (score 7-8): Customers who are satisfied with the product, but are not as enthusiastic as promoters. They may be more likely to switch to a competitor.
Detractors (score 0-6): Customers who are not satisfied with the product and are likely to discourage others from using it.
For example, if you received 100 survey responses, with 50 promoters, 30 passives, and 20 detractors, you would calculate the NPS as follows:Promoter percentage = (50/100) x 100 = 50%
Detractor percentage = (20/100) x 100 = 20%
NPS = Promoter percentage - Detractor percentage
NPS = 50% - 20% = 30The NPS for this survey would be 30. Please ensure you are collecting enough survey responses out of all customers who used your product before making a decision based on NPS.
2. Customer Satisfaction Score (CSAT)
CSAT score is calculated based on a survey question that asks customers to rate their satisfaction with a product or service on a scale of 1 to 5 or 1 to 10.
For example, if a survey of 100 customers results in an average satisfaction score of 4.5 out of 5, the CSAT score would be calculated as follows:CSAT = (Number of satisfied customers / Total number of customers surveyed) %
CSAT = (90 / 100) x 100 = 90%Therefore, the CSAT score for this survey would be 90%.
Insightful piece 👌
Sure why not very insightful Thanks