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Single Customer Cash Flow

Explanation: In many SaaS businesses, this also translates into a cash flow problem, as they may only be able to get the customer to pay them month by month. To illustrate the problem, we built a simple Excel model which can be found here. In that model, we are spending $6,000 to acquire the customer, and billing them at the rate of $500 per month.

Single Customer Cumulative Cash Flow

Customer Retention (Churn)

Explanation: In the early days of a SaaS business, churn really doesn't matter that much. Let's say that you lose 3% of your customers every month. When you only have a hundred customers, losing 3 of them is not that terrible. You can easily go and find another 3 to replace them. However as your business grows in size, the problem becomes different. Imagine that you have become really big, and now have a million customers. 3% churn means that you are losing 30,000 customers every month! That turns out to be a much harder number to replace. Companies like Constant Contact have run into this problem, and it has made it very hard for them to keep up their growth rate. Ron Gill, NetSuite: One oft-overlooked aspect of churn is that the churn rate, combined with the rate of new ARR adds, not only defines how fast you can grow the business, it also defines the maximum size the business can reach (see graph below).

Impact of Success on P&L/Cash Flow

Explanation: However, even though there is a trough in the short-term, eventually there is enough profit/cash from the installed base to cover the investment needed for new customers. At that point the business would turn profitable/cash flow positive - assuming you don't decide to increase spending on sales and marketing. And, as expected, the faster the growth in customer acquisition, the better the curve looks when it becomes positive. Ron Gill, NetSuite: "If plans go well, you may decide it is time to hit the accelerator (increasing spending on lead generation, hiring additional sales reps, adding data center capacity, etc.) in order to pick-up the pace of customer acquisition. The thing that surprises many investors and boards of directors about the SaaS model is that, even with perfect execution, an acceleration of growth will often be accompanied by a squeeze on profitability and cash flow. As soon as the product starts to see some significant uptake, investors expect that the losses / cash drain should narrow, right? Instead, this is the perfect time to increase investment in the business. which will cause losses to deepen again. The graph illustrates the problem. Notice in the example graph that the five customer per month model ultimately yields a much steeper rate of growth, but you have to go through another deep trough to get there. It is the concept of needing to re-enter that type of trough after just having gotten the curve to turn positive that many managers and investors struggle with. Of course this a special challenge early-on as you need to explain to investors why you'll require additional cash to fund that next round of acceleration. But it isn't just a startup problem. At NetSuite, even as a public company our revenue growth rate has accelerated in each of the last three years. That means that each annual plan involves a stepping-up of investment in lead generation and sales capacity that will increase spending and cash flow out for some time before it starts yielding incremental revenue and cash flow in. As long as you're accelerating the rate of revenue growth, managing and messaging around this phenomenon is a permanent part of the landscape for any SaaS company.

Unit Economics: Hubspot Example

Explanation: HubSpot's unit economics were recently published in an article in Forbes. You can see from the second row in this table how they have dramatically improved their unit economics (LTV:CAC ratio) over the five quarters shown. The big driver for this was lowering the MRR Churn rate from 3.5% to 1.5%. This drove up the lifetime value of the customer considerably. They were also able to drive up their AVG MRR per customer. Brad Coffey, HubSpot: "In 2011 and early 2012 we used this chart to guide many of our business decisions at HubSpot. By breaking LTV:CAC down into its components we could examine each metric and understand what levers we could pull to drive overall improvement. It turned out that the levers we could pull varied by segment. In the SMB market for instance we had the right sales process in place - but had an opportunity to improve LTV by improving the product to lower churn and increasing our average price in the segment. In the VSB (Very Small Business) segment, by contrast, there wasn't as much upside left on the LTV (VSB customers have less money and naturally higher churn) so we focused on lowering CAC by removing friction from our sales process and moving more of our sales to the channel."

Impact of Faster Growth on P&L/Cash Flow

Explanation: If we experience a cash flow trough for one customer, then what will happen if we start to do really well and acquire many customers at the same time? The model shows that the P&L/cash flow trough gets deeper if we increase the growth rate for the bookings.

Guidelines for Churn

Explanation: If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business. At 2% monthly churn, you are losing about 22% of your revenue every year. That is nearly a quarter of your revenue! It's a clear indication that there is something wrong with the business. As the business gets bigger, this will become a major drag on growth. We recommend that you work on fixing the problems that are causing this before you go on to worry about other parts of your business. Some of the possible causes of churn are: 1) You are not meeting your customers expectations. -The product may not provide enough value - Instability or bugginess 2) Your product is not sticky. It might provide some value in the first few months, and then once the customer has that value, they may feel they don't need to keep paying. To make your product sticky, try making it a key part of their monthly workflow, and/or have them store data in your product that is highly valuable to them, where the value would be lost of they cancelled. 3) You have not successfully got the customer's users to adopt the product. Or they may not be using certain of the key sticky features in the product. 4) Your sales force may have oversold the product, or sold it to a customer that is not well suited to get the benefits 5) You may be selling to SMB's where a lot of them go out of business. It isn't enough that what you're selling is sticky. Who you're selling it to must also be sticky. 6) You are not using a pricing scheme that helps drive expansion bookings The best way to find out why customers are churning is to get on the phone with them and ask them. If churn is a significant part of your business, we recommend that the founders themselves make these calls. They need to hear first hand what the problem is, as this is so important for the success of the business. And they are likely to be the best people to design a fix for the problem.

What questions can/should you ask when Comprehending the context of situation in a design question?

"5 W's and H" (* = "3 W's and H") - What is it? * - Who is it for? * - Why do they need it? * - When is it available? - Where is it available? - How does it work? *

Netflix Retention

"Netflix has now captured 52% of US broadband households, and in the last year, only 9% of its subscriber base has canceled."

Marketing analytics strateigy is a ____________________ kind of process

"rinse, lather, repeat"

eCommerce Facts

# Global Purchasers: 1.6B Total Global Sales: $1.92T Total USA Sales: $390B Avg. Annual eCommerce $/User: $1,200 USA Shipping Volume: 10B

Monetization Metrics

# Paid Users Avg Rev/User Avg Rev/Paying User Avg Rev/Daily Active User Lifetime Value Conversion Rate to Paying

conversion rate

# of app visitors who complete an action divided by total # of app visitors

Market Entry Framework: Competitive Env

# of competitors, their partner ecosystem, access to distribution channels, differentiated products

Click through rate (CTR)

# of users who clicked an ad divided by # of times the ad was delivered (the impressions). measures the percentage of people who clicked on an ad to arrive at a destination-site. Hey

Gmail Monthly Cost per User (storage & bandwidth)

$0.05

Average Cost-per-thousand-impressions for Android Banners

$0.15-$1.50

Avg CPM Android Banners

$0.15-1.50

Average Cost-per-thousand-impressions for iOS Banners

$0.20-$2.00

Global Average Annual E-Commerce Revenue per User

$1,189

Global Total Online Sales

$1.915T

Google Annual Rev

$100B

Google Annual Revenue

$110 billion

CPM Video Ad

$12.80

Cost-per-thousand-impressions for Video Ad

$12.80

US GDP

$16.8T

Global Ecommerce Sales

$2 trillion

Average Cost-per-click on Google Search Ads Overall

$2.14

Avg CPC Google Search Ads

$2.14

Twitter Annual Ad Revenue

$2.5B

CPM Display Ad

$2.80

Cost-per-thousand-impressions for Display Ad

$2.80

Apple Annual Revenue

$215 billion

Global IT SaaS Spending

$246B

Global CRM Software Revenue

$26.3B

Facebook Annual Ad Revenue

$26.8B

Facebook Annual Ad Revenue

$27 billion

Global Enterprise Resource Planning Software Revenue

$34B

Total IT Spending on Enterprise Software

$350 million

Total IT Spending on Enterprise Software

$351B

Cloud Infrastructure Spending

$36 billion

Cloud Infrastructure Spending

$36B

USA Total Online Sales

$390B

USA Ecommerce Sales

$400 billion

Snapchat Annual Ad Revenue

$404.5M

GSuite Pricing Plans

$5 and $10 per month per user

US median household income

$53,000

US Median Household Income

$53K

Traditional Data Center Infrastructure Spending

$60 billion

Google Annual Profit

$60B

Traditional Data Center Infrastructure Spending

$61B

Google Annual Ad Revenue

$79.4B

Google Annual Ad Revenue

$80 billion

Rate of Adoption

% of healthy users

Churn rate =

(# customers lost during given period of time) / (# customers started with during given period of time)

What are two ways to look at the CAC ratio and what does each tell you?

(1) (Annualized Q2 MRR)*(subscription GM%) / (Q1 S&M expense) -> this method tells you the % of your prior quarter's S&M that will be recovered from NTM profits of the customers you signed up (magic number / sales efficiency metric) (2) Inverse of (1) -> this method tells you the payback period of the S&M investment (i.e. how many months/years will it take to recover S&M investment for a given quarter based only on the annualized GM for the next quarter)

Name 5 SaaS metrics you need to track in each segment of your business

(1) ARPA / ARPU (2) Net MRR churn (3) Gross MRR churn (4) LTV:CAC (5) Months to recover CAC

Four reasons why churn is important

(1) Acquiring customers is time and capital intensive, and the investment becomes meaningless if customers don't stay (2) It alerts you that there is something wrong with your product or your customer service (3) Churn becomes progressively more problematic as the company scales (4) High churn means you must spend more on new customers to compensate... negative churn will drive your business without acquiring a single new customer

5 C's of Cloud Computing (metrics)

(1) CMRR (2) Cash Flow (3) CAC (4) CLTV (5) Churn

What are the three types of churn?

(1) Customer / logo churn: measures the number of customers you lose over a period of time (2) Gross dollar churn: measures the total lost revenue both from customers leaving and downgrading (3) Net dollar churn: equals gross dollar churn less the gains from expansion (i.e. upselling, cross-selling, adding more paid users)

4 things needed to calculate LTV:CAC

(1) Customer acquisition cost ($) (2) Avg. MRR per customer (3) MRR churn (4) Software gross margin % Use 2,3,4 to calculate LTV

How does a SaaS company achieve negative churn?

(1) Expand revenue from your current product (i.e. charge more for more usage) (2) Cross-sell existing customers new products (3) Up-sell customers by convincing them to buy higher quality versions of products

Name three main trends driving software innovation

(1) Increasing verticalization of software solutions (2) Improvements in prescriptive software (3) Digitalization of previously non-software industries

Why do you like working in the tech sector?

(1) Pervasiveness of tech innovation across other industries (2) Fundamental impact on humans (3) Most interesting sector to learn about from intellectual standpoint

BRAND EQUITY INDEX

(Effective Market Share) x (Relative Price) x Durability

ROIC

(Gain on investment - Cost of Investment)/ Cost of Investment (Value - Initial Investment)/ Initial Investment

Breakeven formula

(P-VC)*Q = FC

How do you calculate the RICE score of a product/feature?

(Reach * Impact * Confidence) / Effort

What is the formula for Margin?

(Revenue generated by the customer) - (variable cost it takes to deliver the good or service to the customer)

Return on marketing investment formula is

(Revenue x Contribution Margin) / Marketing spending

Clicks

(SERP) - ad is shown - people see ad (Ad Rank) - people decide to click on ad

Cost

(SERP) - ad shown - ad clicked - CPC determined by quality score

Impression

(SERP) - users enter queries - keywords/ads eligible to match queries - high ad rank of keywords (bid X qs)

Net MRR Churn rate

(SUM of Churn & Contraction MRR - SUM of Expansion & Reactivation MRR) / MRR at start of period.

Gross MRR Churn rate

(SUM of Churn & Contraction MRR) / MRR at start of period

Revenue (Conversions x AOV)

(Website) - impression - click - cost - conversion - higher AOV - higher revenue

Conversion

(Website) - impression - click - purchase

Conversation Volume/Volume per Rep

(sometimes called "tickets") is the amount of conversations you are receiving or your reps are responding to on a regular basis. This could be an average, or a total for the amount over the past year, month, week or day. You can also determine how many conversations each of your reps is responding to.

Pirate Metrics (AARRR)

* Acquisition * Activation * Retention * Revenue * Referral

CLICKS framework

* Comprehend and clarify the situation * List metrics * Identify tradeoffs * Choose North Star metric and justify * KPIs — what drives this metric * Summarize

CIRCLES framewok

* Comprehend the situation (5Ws) * Identify customers and segment * Report customer needs / customer journey * Cut (prioritize) * List solutions * Evaluate tradeoffs * Summarize the recommendation

10 Principles of Good Design

* Innovative * Useful (utility) * Aesthetic * Understandable (ease of use) * Unobtrusive * Honest * Long-lasting * Thorough / detailed * Environmentally friendly * As little design as possible

4Ps & 3Cs of Marketing

* Product * Price * Place * Promotion * Customers * Company * Competitors

RICE

* Reach - how many people will this impact? * Impact - how much will this move the needle? * Confidence - how confident in success? * Effort - how long will it take?

Porter's 5 Forces

* Rivalry among competitors * Threat of new entrants * Threat of substitute products * Bargaining power of buyers * Bargaining power of suppliers

STP

* Segmentation: Grouping customers or buyers * Targeting: Choosing segments that would appreciate and seek out the product's benefits * Positioning: Develop detailed product positioning and marketing mix for the segment

A versus B

- A and B are are identical except for one variation that might affect a user's behavior - Dependent variable: conversion rate (e.g., number of order placement/traffic) - Identical to a between-subjects design

What are the three parts you should keep in mind when Comprehending a situation of a design question?

- Context - Goals & Metrics - Constraints

What are some common constraints & assumptions to clarify in a design problem?

- Deadlines. When do we have to achieve our goal? - Resources. How much money, engineers, and other resources do we have to achieve the goal? - Scalability. How many visitors are we expecting? What's the distribution of read vs write operations? What kind of write operations are we expecting? Is it lightweight like text updates, or is it substantial like video upload? - Platform. Is it for web, iOS, or other? - Geography. Which country or region is this for? Are there technology constraints such as limited device penetration or slow, inconsistent Internet access? Are there regulatory constraints?

What are the best design principles to cite when critiquing?

- Innovation - Utility - Ease of Use - Sense of Honesty

Customer Experience Examples

- Lexus airbag recall experience at Lexus of Watertown - New Hampshire EZ-Pass experience - JetBlue in flight experience (Orlando to Boston) - Amazon bicycle-seats return experience - Zappos Bogs rainboots exchange experience

What is likely to occur if you attract, retain and develop THE RIGHT customers?

- Lower churn rate - Higher customer satisfaction - Higher profitability

What kind of solutions should you avoid when thinking big for a design question?

- Me too ideas. - Integration ideas.

ab testing vs bandit

- More efficient: they move traffic towards winning variations gradually, instead of forcing you to wait for a "final answer" at the end of an experiment - Faster: samples that would have gone to obviously inferior variations can be assigned to potential winners

What qualities would you look for in a good SaaS investment opportunity?

- Niche or fragmented industry with potential for lots of M&A activity and future consolidation - Targeted / vertical end-market w/ large but focused TAM opportunity - Defensible IP rights or other barriers to entry / replication - Highly recurring revenues (90%+) - High operating leverage (i.e. ability to earn outsized profits as customer base grows) - High FCF conversion (i.e. profits being generated are acually converted to FCF and not absorbed by high NWC, CapEx, or interest payments) - Good SaaS metrics: 90%+ gross MRR retention, <12 month CAC payback period, >3.0x LTV:CAC

What does the RICE acronym stand for?

- Reach. How many people will be impacted? - Impact. What's the benefit of that user story from low to high? - Confidence. What's the probability of success? - Effort. How much time will it take?

What are some common goals & metrics to clarify in a design problem?

- Revenue - User acquisition - User retention - Market share - Customer satisfaction - Conversion rate - Basket size

What are a few "bonus" criteria that can help to make prioritization more complete?

- Strategic Importance - Probability of Success - Workaround Availability

10 elements of customer delight

- Understanding the 10 key elements can assess company's success at delivering them and taking the action needed to transform - 10 elements create a service design and delivery report card to help measure how successful company is in creating a superior experience with and for you customers - Assessment created to set priorities for improvement 1. Empathy 2. Expectations 3. Emotions 4. Elegance 5. Engagement

5W's and H

- What is it? - Who is it for? - When is it ready? - Where will it be available? - Why should I get it? - How does it work?

Power of Customer Experience

- beyond product: more than goods (physical products), more than services (intangible products) - beyond customer service - beyond interactions - beyond present time

Devices and Connectivity

- can increase the opportunity for, amount of, and types of interactions - smartphones, tablets, digital voice assistants (amazon echo, google home)

Companies with Strong Focus on Customer Experience

- disney - benihana - amazon - apple - google - costco

AB testing cons

- easy to get wrong - most winning AB test results are illusory

Why is customer experience important?

- enhance differentiation / distinction - reduce price sensitivity - reduce friction in exchange - increase loyalty - increase speed and efficiency for customers - increase profits

Wider Span of Customer Experience

- the greater the opportunity for interaction with or availability to consumers the wider the span of the customer experience which can be engaged by marketers

Customer Experience Gets Great Attention

- top priority across industries - Chief Experience Officers (CXO) - Qualtrics evolved from offering a survey tool to offering: experience management system - customer experience - brand experience - product experience - employee experience

When & Where do Customer Experiences Occur

- touchpoints between consumer & organization, or organization-related content/entities - communication media (TV, Radio, etc.) - retail and online stores - websites - social media - influencers

Examples of analyzing metrics

-Analyzing Website Metrics using Google Analytics -Analyzing Email Marketing Campaign Metrics -Facebook video campaign metrics

Support Metrics

-Brand metrics -Customer Metrics -Digital Marketing Metrics -Development Metrics

Brand Metrics

-Brand recall -Brand recognition -Depth -Breadth

Phase 2: Analyze the Metrics

-Companies must implement systems to track the important metrics ~Web Analytics ~Marketing Automation Dashboards -Compare current state to benchmarks ~Historical Trends ~Industry Average Performance -Most important step is to determine the root cause of why metrics perform the way they do

STRATEGIC METRICS

-Companies need an overview of the potential revenue available within the market -For market entry and exit: Market size and marketing growth should be measured -Return on Marketing Investment (ROMI): ROMI = (Marketing Revenue * Contribution Margin) / Marketing Spending

5 metrics to track for Facebook video campaign metrics

-Engagement -Reach -Likes and Follows -Video Retention -Click Through Rate (CTR) -Can be accessed through your business page

Quality Metrics

-Ensure that companies produce high quality products and services -Includes certifications, training, employee involvement, etc. ~Hospitals often conduct ongoing training for surgical staff to ensure that they are constantly delivering top-quality healthcare

Implementation process

-Ensure the success of the campaign -Coke→ using their data, generated over 300 customizable responses -Carefully and regularly monitor results and making adjustments when necessary

Evaluation process

-Evaluate whether a campaign has met its goals or not Coke→ social reach, over 22-million, increase happiness exposure by 200% -Determine how many resources should be spent in the future, if any

Phase 1: Identity Metrics

-Have a goal in mind -Come up with a question you need the data to answer -Metrics help bring meaning to the data -Metrics are quantifiable measures used to track the status of a marketing process -Metrics help determine if goals are being achieved

How do you improve the user experience?

-Human centered design principles - User labs for small group qualitative direction -Develop a hypothesis around a new design that says "I believe [insert design change] will [insert improvement to experience and relation to goal]. I will know this is successful if [insert some metric of success]. -Test hypothesis by executing task analysis against new designs in User Labs with a few users. They will provide rich qualitative direction to help refine design.

Customer Lifetime Value

-Informs companies about how much a customer is worth to them. -Especially important for companies like Netflix, where they want customers to continue to subscribe to its services. -These metrics focus on the LONG TERM value a single customer brings to the company.

What are marketing analytics metrics?

-Metrics are measures of a data-driven project to maximize effectiveness. -Marketing analytics metrics allow marketers to maximize marketing returns on investment (ROI) and minimize marketing costs. -Marketing analytics metrics assess a marketing analytics strategy.

Phase 3: Take Improvement Actions

-Most difficult step in the process -Changes aren't always obvious so marketers use analytical and creative skills to develop solutions ~A/B testing allows marketers to make isolated changes until the best performing marketing effort can be achieved -Invest their resources in areas that need the most improvement

Design process

-Often starts with exploratory research -Coke→ custom built listening software -Find out what is going on; likes, shares, comments -Form hypotheses about which strategies work well and which do not

Design

-Starts with exploratory research -Social media analytics (likes, retweets, shares, etc.)

Marketing analytics strategy

-Success of campaigns need to be measured -How much money to spend on them -How to improve outcomes -Marketing analytics is a continuous function of measuring results of campaigns

The Ethics of Marketing Analytics Metrics

-The "personalized shopping experience" doesn't sound like a bad thing. Do you think it is a good one? -Many companies are able to retrieve and predict personal customer information and do with it as they please. Does this make you uncomfortable? Why or why not? -What some unethical ways you believe companies are able to get personal information on customers to support their metrics?

Brand Recall

-The ability to retrieve a brand from memory. When you think of soda, you think of Coke, Sprite, etc... ~When you think of fast-food, you think of McDonalds, Taco Bell, etc... -Brand recall guides our decisions every day.

Customer Profit

-The profit a company makes off a customer or customer group over a period of time -Seeks to acknowledge customer value

ID Customers

-Think of a few personas, pick 1 -Think of demographics (age sex income location) -Think of user behaviors (go to class, take notes)

Implementation

-Time to do everything to ensure success of campaign -AB Tests are useful doing this stage

Digital Marketing Metrics

-Total conversions -Impressions -Total Reach -Conversion rate -Micro Conversion Rate -Conversion Funnel Rate -Lead to Close Ratio -Total Visits -Unique Visitors -New Sessions -Site Time -Direct Traffic -Referrals -Organic traffic -Social traffic -Bounce rate -Click through rate (CTR) -Customer Retention rate (CRR) -Customer Acquisition Cost (CAC) -Open Rate -Mobile Traffic

What channels can be used for showing digital offers? Which channel will be more useful and why?

-Web, mobile and email channels can be used for showing digital offers because their outreach, CTR and conversion rates can be tracked digitally -The more you can allocate your marketing budget into lower CAC channels, the more customers you can obtain for a fixed budget amount

Comprehend Situation

-What is it for -Who is it for -Why do they need it -How does it work

Overview of Metric Types

-strategic metrics -support metrics

1/18

.055

1/17

.058

1/15

.067

1/11

.09

1/9

.11

1/8

.12

1/7

.14

1/6

.16

1/20

0.05

1/12

0.083

CTR Google Display Ads

0.35%

Click-through-rate for Google Display Ads

0.35%

Average Conversion Rate Display Ads

0.89%

Innovation Metrics

0Measure a company's ability to innovate and develop a mix of new offerings -Measure levels of breakthrough products, next generation products, major enhancements, minor enhancements and corrections

Customer Lifetime =

1 / Churn Rate

What are the 3 steps of the *"marketing analytics process":*

1 Identify the metrics 2 Analyze the metrics 3 Take improvement actions

Population of Africa

1 billion

Avg Conversion Rate Display Ads

What is a powerful way to visualize a customer persona? What are each of the elements?

1) A 2x2 matrix. 2) - [name], the [persona] (maybe a stick-figure) - Behaviors - Demographics - Needs & Goals

The 3 Keys to Success in SaaS:

1) Acquiring Customers 2) Retaining Customers 3) Monetizing Customers

What are the high-level areas to talk through when answering a design question?

1) Goals & Constraints 2) User & Use Cases 3) Prioritize Use Cases 4) Brainstorm Solutions (5) Summarize

How should you approach any product design critique?

1) Revealing your design criteria, capping it to three. 2) Explaining how the product may or may not meet your criteria. 3) Being specific, offering evidence, and contrasting with similar products.

How should you summarize your product/feature design recommendation?

1) Tell the interviewer which product or feature you'd recommend. 2) Recap on what it is and why it's beneficial to the user and/or company. 3) Explain why you preferred this solution vs others. 4) Note any actions you'd take to explore this idea further.

Every product design answer should (3):

1- ID up to 3 design criteria 2- Explain how prod lives up to design criteria 3- Be specific, use evidence, contrast w/similar prods

9 Design Criteria (top 4 first)

1- Innovative 2- Usefulness 3- Unobtrusive 4- Honest 5- Aesthetic/minimalist 6- Understandable 7- Long-Lasting 8- Environmentally Friendly 9- Through down to last detail

Summarize Design

1- Product/feature recommending 2- What it is, why is it beneficial 3- Why this solution over others

2 general product design tips

1- Think big and extreme, not small/mundane 2- Practice thinking of 2-3 solutions on spot, but present 1 indepth

3 Pillars of Design

1. *Feasibility* - How technically possible is the feature given the resources and tools you currently have? 2. *Desirability* - Do your customers actually want it? 3. *Viability* - How does this feature relate to or support your overall strategy and the requirements of the market?

What 3 pieces of information are needed to calculate the SIMPLE CLV formula?

1. Annual profit per customer 2. Retention rate 3. Cost to acquire

What are the 4 steps to calculating CLV?

1. Confirm formulas (COGS, gross profit) 2. Calculate customer 'lifetime' per segment (i.e. how long customer stays with you) 3. Calculate CLV per segment (total profit, probability make successive purchases, value of future revenue) 4. Apply (i.e. set budget)

CUSTOMER METRIC What are the two main complications in CONTRACTUAL situations?

1. Contracts that cover two or more people --> firm must select standard definition of customer (i.e. household) 2. Treatment of customers with multiple contracts with single firm --> avoid double counting

What are the two sides of customer value?

1. Customer profitability 2. Customer experience

What 3 things do you need to calculate a unit margin?

1. Define a unit 2. Determine (variable) costs 3. Selling price (to first level)

What are the 3 stages in a campaign life cycle:

1. Design of a marketing campaign 2. Implement 3. Evaluate if a campaign has met its goals .

What are your top 3 SaaS metrics and why?

1. Gross revenue retention - because it measures how well you retain revenue from a customer cohort w/o the impact of cross-selling and up-selling, which can obscure churn 2. CAC payback period - measures how long until you start making money from your customers (and can be inverted to give you your CAC ratio / magic number / sales efficiency metric) 3. LTV:CAC - because it gives you a sense of how worthwhile your CAC spend is in the grand scheme of your customer lifetime

Marketing Analytics Strategy

1. Identifying the metrics 2.. Analyze the metrics 3. Take improvement actions

Prioritization Methods

1. Impact / Effort Matrix 2. Feasibility, Desirability, Viability 3. ROI Analysis 4. Theming 5. RICE 6. Kano Model

Kundenbeziehungsprozess

1. Kontaktprozess / Awareness Aufgabe: Produkt platzieren, Potenzielle Kunden erkennen E Business: Online Werbung, Big Data Analytics 2. Auftragsgewinnungsprozess / Consideration Aufgabe: Präferenzen erzeugen, Vorzüge aufzeigen E Business: Big Data Analytics, Email Info 3. Kaufprozess / Purchase Aufgabe: Kaufzeitpunkt erkennen, Angebot E Business: Elektronisches Angebot, Email Information 4. Nutzungsprozess / Consumption Aufgabe: Verhinderung von Enttäuschung, Service, Zufriedenheit erzeugen E Business: Service Webseite, Kundenforum, Email 5.a Neuauftragsgewinnungsprozess / Reconsideration Aufgabe: Präferenzen erhalten, Infos über Updates E Business: Big Data Analytics, Web Forms, Angebote 5.b Abwanderungsprozess / Dissatisfaction Aufgabe: Verhinderung, Analyse der Gründe, Beschwerdemanagement E Business: Analyse der Kundenhistorie aus Datenbank 5.c Rückgewinnungsprozess / Reconsideration Aufgabe: Auswahl der Rückgewinnungstargets, Kundenvertrauen wiederherstellen E Business: E Kundendialog, Service Webseite, Incentives

Divide each development project into:

1. Low cost 2. Customization 3. Quality-oriented development 4. Responsiveness 5. Product innovation

What are the 3 strategies for CUSTOMER PROFITABILITY?

1. Reward 2. Grow 3. Fire

What are the 2 calculation methods for CLV?

1. SIMPLE FORMULA (quick, best for high CLV) 2. COMPLETE FORMULA (year-by-year basis, discount rate, changing revenue/costs over time)

What are the 3 parameters of the CLV calculation?

1. constant margin 2. constant retention 3. discount rate

Consumer Buying Behavior

1. problem / need recognition 2. search behavior 3. alternative evaluation 4. purchase behavior 5. post purchase behavior

6 stages of the digital marketing funnel

1. visit 2. captivate 3. decide 4. order 5. pay 6. bind

Active Gmail Users

1.1 billion

Africa Population

1.2B

China population

1.3 billion

Population of China

1.3 billion

India Population

1.3B

China Population

1.4B

Asia Pacific Social Network Users

1.5 billion

WhatsApps users

1.5 billion

Asia Pacific Social Network Users

1.5B

WhatsApp Number of Users

1.5B

Philly Population

1.5M

Global Ecommerce Shoppers

1.6 billion

Global Number of Users Purchasing via E-commerce

1.61B

Facebook users

1.8 billion

Asia Number of Internet Users

1.8B

Facebook Number of Users

1.8B

Population of Vietnam

100 million

Spotify Paid Subscriber Base

100M

USA Parcel Shipped Volume

10B

___% of customer churn could be prevented by simple company outreach. ___% of customer churn is preventable if the customer issue was resolved at the first engagement.

11% 67%

Japan Number of Internet Users

118M

If you conduct a multivariate test in which 3 versions of an image are being tested with 4 versions of a headline, what is the total number of variations you will be testing?

___% of companies are able to successfully upsell or cross-sell to NEW customers

12%

iOS Global Market Share

12.5%

Japan Population

126M

US Percent Over the Age of 65

13%

US percentage over age 65

13%

Households in U.S

130 million

Population of Mexico

130 million

11 x 12

132

Brazil Number of Internet Users

139M

Middle East Number of Internet Users

141M

13 x 11

143

12 x 12

144

Netflix Paid Subscriber Base

148M

12 x 13

156

12 x 14

168

13 x 13

169

Africa Social Network Users

170M

12 x 15

180

13 x 14

182

13 x 15

195

14 x 14

196

Instagram Number of Users

WeChat Number of Users

Picture storage size

2 MB

CTR Google Search Ads

Click-through-rate for Google Search Ads

US GDP Growth

Total iOS Apps in App Store

2.2M

US Avg People per Household

2.5 people

US People per Household

2.5 people

Total Android Apps

2.6M

Avg Conversion Rate Search Ads

2.7%

Average Conversion Rate Search Ads

2.70%

Chicago Population

2.7M

Global smartphone install base

2.8 billion

Global Smartphone Install Base

2.8B

Population of Australia

20 million

GDP of US

20 trillion

_____ of customers provide _____ profitability

20%; 80%

How many people do you need to test and what is the margins of error at a 95% confidence level

200-7.1% 500-4.5% 1000-3.2% 2000-2.2%

US smartphone install base

226 million

USA Smartphone Install Base

226M

US Percent Under the Age of 18

23%

US percentage under age 18

23%

Hulu Paid Subscriber Base

27M

US internet users

286 million

USA Number of Internet Users

286M

Pinterest Number of Users

291M

Person per household

Population of Chicago

3 million

love and hate model

3 questions to ask about every journey stage Love - what do customers love? what about different customers? Hate - what do they hate? What do different customers hate?

Types of A/B testing

3 types: split test (normal A/B testing), multivariate test, and multi-page test

Global internet users

3.2 billion

Global Number of Internet Users

3.2B

US Average Time Spent per Day on Mobile

3.7 hours

Los Angeles Population

3.9M

Total number of businesses in the United States

30 million

US Percent with Bachelor's Degree

30%

US percentage with Bachelor's degree

30%

Snapchat usres

300 million

India Smartphone Install Base

300M

Snapchat Number of Users

300M

US Population

300M

US Population

320 million

North America Number of Internet Users

320M

Twitter Number of Users

321M

United State Population

323M

Population of the United States

325 million

Population of U.S.

330 million

US Corporate Tax Rate

35%

Africa Number of Internet Users

353M

iOS US Market Share

36.5%

Latin America Number of Internet Users

385M

4P's of Marketing (Marketing Mix)

4 P's framework help product manager & marketers in putting the right product in the right place, at the right price, at the right time. Product Pricing Promotion Place

Asia population

4 billion

Population of Asia

4 billion

Generation Breakdown

4 bucks 25% each [Gen Z] 0-15 [Gen Y] 15-30 [Gen X] 30-45 [BB + Other] 45+

LA population

4 million

Population of LA

4 million

Asia Population

4.4B

Population of Canada

40 million

Population of South America

400M

Europe Social Network Users

412M

7*6

South America Population

423M

India Number of Internet Users

462M

8*6

Global Mobile Share of Web Traffic

50.30%

US Percent Married Adults

52%

7*8

Apple Music Paid Subscriber Base

56M

Americas Social Network Users

599M

Number of YouTube Videos Watched Every Day

It is ____ times more expensive for companies to attract new customers than to keep existing customers.

6-7 times

Pandora Paid Subscriber Base

6.8M

Population of Italy

60 million

Americas Social Network Users

600 million

GDP per capita in U.S.

60K

Median Household Income

60K

Android US Market Share

61.7%

Europe Number of Internet Users

636M

Japan Smartphone Install Base

63M

___% of companies are able to successfully upsell or cross-sell to EXISTING customers.

65%

UK Population

65M

___% of consumers who switched brands did so because of poor service ___% of customer churn due to poor service was preventable.

66% 85%

Seattle Population

687K

Global population

7 billion

World Population

7.4B

Population of the United Kingdom

70 M

Population of Thailand

70 million

US Smartphone Penetration

70%

US smartphone penetration

70%

Google employees

70,000

China smartphone install base

700 million

Seattle population

700,000

China Smartphone Install Base

717M

China internet users

731 million

China Number of Internet Users

731M

Europe Population

739M

Europe population

740 million

Brazil Smartphone Install Base

79M

World Population

Population of NYC

8 million

NYC Population

8.4M

NYC population

8.5 million

Life expectancy in U.S.

US Life Expectancy

80 years

US life expectancy

80 years

Population of Europe

800 million

San Francisco population

800,000

San Francisco Population

806K

Google # of Employees

80k

Android Global Market Share

86.8%

QQ Number of Users

899M

HBO NOW Paid Subscriber Base

NYC population

Middle East Social Network Users

93M

Average Cost-per-click on Display Network

<$1

Avg CPC Display Network

<$1

Scrolling

>Long Scroll - 1 long scroller >Infinite Scroll >Parallax Scrolling - 2D content moves as user scrolls

Data Management

>Search Filters (advanced search) >Settings >Context **e.g. 30 items left, or, because you viewed this item**

What is true? A) People often use A/B tests to test competing marketing ideas in a department B) The value gained from A/B testing usually outweighs potentially frustrating customers C) A/B Testing is not a time to try crazy ideas D) Protect your A/B test from too much input form other departments in the company

Which A/B testing stage typically uses a larger portion of the potential audience? A) Exploitation stage B) Experimental stage C) Bandit stage D) Exploration stage

Which is true about designing A/B tests to extract maximum meaning? A) A and B should have identical content except for the hypothesized elements B) A and B should have different content except for the hypothesized elements C) A should always be the control D) A and B should have two levels each

Which is true of a bandit test? A) It has an adaptive exploitation stage B) It removes people from the exploitation stage C) It is an A/B Test with a hidden exploration stage D) It is an A/B Test but with an extra exploitation stage

Which of the following two hypotheses is constructed correctly? A: "I think a bold font for the 'Blog' button on my homepage will increase the number of visitors who click on it." B: "I want to test the best font for my website"

Which statement is false? A) A/B Tests = real marketing firm's brick and mortar store experiments B) A/B Tests are often automated C) A/B Testa re often run as part of a live marketing effort D) A/B Tests = Split Tests

5Es Framework

A brainstorming checklist for various stages of the UX. Helps build customer journey maps. -Entice. What event triggers a user to enter into the UX funnel? -Enter. What are the first few steps in the UX funnel? -Engage. What task(s) is the user trying to accomplish? -Exit. How does the user complete the task? -Extend. What follow-up actions occur after the user completes the task?

What is the 'Why? Method'?

A brainstorming framework. Challenge the status quo.

What is the 'Attribute Method'?

A brainstorming framework. List all the product attributes. Mix and match to get interesting new combinations.

What is the 'Reversal Method'?

A brainstorming framework. Reversing the situation helps uncover new possibilities.

Loyalty Loop

A continuous process of delivering substantial value and customer experience to keep customers using the product, adopting new features, increasing usage, and renewing.

Free Trial

A customer acquisition strategy that provides a partial or complete product to prospects free of charge for a limited time. Typically, a free trial runs for 14 or 30 days.

Freemium

A customer acquisition strategy that provides access to part of a software product to prospects free of charge, without a time limit. A freemium product does not limit the amount of time a prospect can access the software, but often limits users in some way such as through stripped-back features or allowed amount of usage.

Customer Experience (CX)

A customer's perception about a company, brand, or product, based on all touchpoints, interactions, and engagements

Marketing Plan

A document used to gather information about the marketplace, competition, audience and other factors that is used to determine what channels and tactics should be used to best market a business or product.

Customer Lifecycle

A framework that describes the process a customer goes through when considering, buying, using, and advocating a product or service. There are four critical stages: acquisition, adoption, retention, and expansion.

Product Lifecycle

A framework that helps a company organize its marketing and sales of a product, from introducing it to the market to when sales peak and decline.

Business Objective

A goal that is set for an entire business. An example of this may be for the business to grow their revenue by 5% during the year.

Campaign Objective

A goal that is specific to a campaign running for a determined length of time. An example may be for the campaign to drive 10% more traffic to a webpage during the month the campaign is running over what was driven to the same page the month previously.

Channel Objective

A goal that is specific to a marketing channel. An example my be to increase the number of followers on Twitter by 5% in the next quarter.

Marketing Objectives

A goal that is specific to a marketing function of a business. An example of this may be for . marketing to increase leads by 5% in the next quarter.

What is the CIRCLES Method?

A guideline on what makes a complete, thoughtful response to any design question. It's a memory aid that prevents us from forgetting a step in the interview.

Critical Path Method

A method used to estimate the minimum project duration and determine the amount of scheduling flexibility on the logical network paths within the schedule model.

Customer Behavior Index (CBI)

A metric (often normalized) that measures how engaged your prospects and customers are based on their in-product activity and usage.

Key Performance Indicator

A metric that measures if an objective has been met.

Executive Summary

A part of a marketing plan that summarizes the overall plan in a quick and easy to understand way.

Competitive Analysis

A part of a marketing plan where research is done about other businesses with a similar product or service to evaluate opportunities and threats the business my face.

Target Audience Summary

A part of a marketing plan where research is done about potential customers to determine how to best market to them.

Market Analysis

A part of a marketing plan where research is done about the challenges and opportunities of the industry and where a service or product will be doing business.

MRR Churn Rate (a.k.a. Gross Revenue Churn)

A percentage of MRR (Monthly Recurring Revenue) lost from existing customers at the start of the period for which MRR churn is calculated. MRR churn rate is always positive (positive churn rate means the company loses money), because it does not include upsell and cross-sell.

Customer Churn Rate

A percentage of customers lost due to churn (cancellation or failure to renew). It is calculated by dividing the number of churned customers by the number of customers at the start of the period for which churn rate is calculated.

Break-even

A point when a company generates enough revenue from a customer to cover all the costs and expenses it took to acquire this customer.

Engagement Loop

A practice of using insightful in-product usage data, along with engagement tactics, to influence prospects and customers to re-engage with the product and experience more value.

Product-Qualified Lead (PQL)

A prospect that signed up and demonstrated buying intent based on product interest, usage, and behavioral data.

Critical Path Dependency

A relationship where preceding tasks affect succeeding tasks in a sequence of activities.

Customer Journey

A series of all touchpoints a customer has with a company, brand, and product to reach a certain milestone.

Customer Engagement Touchpoint (or Customer Engagement Interaction)

A single moment when a prospect or customer comes in contact with your brand, company, people, product, or message through various channels and devices.

When considering the frequency distribution of search keywords, the 'head' refers to:

A small number of keywords that each drive a large amount of traffic to your website

Conversion

A stage in the conversion funnel where a potential customer purchases the product or services being sold by the company.

Interest

A stage in the conversion funnel where a potential customer shows that they are thinking of purchasing a product or service int he category that the business provides.

Consideration

A stage in the conversion funnel where a potential customer would like to learn more about a company or product and are beginning to select which companies or products best fit their needs.

Awareness

A stage in the conversion funner where a potential customer first learns of a company or product. Stage 1

5 Whys

A technique in which you repeatedly ask the question "Why?" to help peel away the layers of symptoms that can lead to the root cause of a problem

Kano Model

A technique that categorizes customer requirements into three types: 1. basic needs - Does the product work? table stakes 2. performance needs - How efficient is it? stated, more is better 3. attractive needs (delighters) - what makes me love it? unspoken, surprising

Customer Journey

A tool used to help visualize the customer's experience as they interact with a company's marketing and sales efforts.

AARRR: Startup Metrics for Pirates

A very helpful framework by Dave McClure, 500 Startups for a product manager to define success metrics for any product or feature. It'll also help you measure your funnel and enable you to optimize it for the better. Acquisition — where/what channels do users come from? Activation — what percent have a "happy" initial experience? Retention — do they come back and re-visit over time? Referral — do they like it enough to tell their friends? Revenue — can you monetize any of this behavior?

Conversion funnel

A visual model that illustrates the journey of how a potential customer flows through the process of becoming aware of a business or product and into more involved stages until they make a purchase. This model also indicates that there will be more people in the earlier stages and smaller number of people that continue into the later stages.

______ testing is an experiment where two versions of a webpage are shown to users at random in an attempt to determine which one is more effective for reaching a defined goal.

A/B

What is the true arbiter of go vs no-go for a new feature?

A/B Testing

A/B Testing is comparing two versions of something to see which one performs better.

A/B Test (Split test)

A/B Testing, also known as split testing, is a method of website optimization in which the conversion rates of two versions of a page — version A and version B — are compared to one another using live traffic.

Bandit testing

A/B test methods with an adaptive exploitation stage

A/B/N Test

A/B test that tests more than two conditions

Split testing

A/B testing

Split test limitations

A/B testing will not reveal any information about interaction between variables on a single page.

Product Success Metrics acronym

AARM -Acquisition - Sign ups, low bar since many things free now. Lazy registration, bare minimum -Activation - Getting users to fully 'register', do things like upload photo, complete profile, etc -Retention - Getting users to use service often, e.g. adding data , checking feed, inviting others -Monetization - # paid users, avg rev per user

Improve Conversion Rates

AB Test elements of landing page: call to action, tag lines, hero images, button positioning, descriptions, etc. Personalize messaging. Be persistent with visitors who've shown interest. Offer customer support throughout sales process.

Revenue Equation

AOV x Impressions x CTR x CVR

Optimizely user roles

Administrator, Project Owner, Editor, Viewer

The ____________ quality of a product is integral to its usefulness because products we use every day affect our person and our well-being.

Aesthetic

When sheet metal is on a door, suggesting that it is too be pushed, rather than pulled, this is an example of what design principle

Affordance

Design the system for digital offer system for one channel then asked me what I will do to launch digital offers in another channel.

After identifying the data required for app, I would see if there were any available data stores that could be used and identify new stores that we'd need to build. Then I'd find out if any of existing data stores talk to one another (why?) Then I'd build a service layer that would orchestrate the data and do calculations required to present the right data to the user interface. This layer would be built with a service oriented architecture because that allows for faster enhancements and releases to a service. Would leverage a deployment automation tool like Artemis PAR to do 1 click deployments, reduce manual testing and enable deployments without days of lead time. Build UI in components such that each feature is independently modified and released Security? Entitlements engine and proxy service

Lab usability tests can be conducted on which of the following:

All of the choices

Product Engagements

All of the interactions that prospects have inside of your product. See "Non-product engagements."

Non-Product Engagements

All of the interactions that prospects have outside of your product. See "Product Engagements."

When calculating the amount of money a company spends on their social media campaigns, which of the following should be included in that sum:

All of these

Which of the following are *not* features of a good landing page design?

All of these

Which of the following are examples of "Conversions":

All of these

Which research method(s) can be used to measure the impact of your online presence on your offline channels?

All of these

Companies find it hard to measure the value of their social media marketing efforts because:

All of these options

Which of the following must be performed before you can actually analyze data?

All of these options

What are some tips when A/B testing?

Always test both versions simultaneously. Don't conclude too early. Don't surprise regular visitors. Don't let your gut feeling overrule test results.

If you wanted to measure the number of re-shares or re-tweets on a post, you would be measuring the:

Amplification rate

Product-Led Go-To-Market Strategy

An action plan that describes repeatable and scalable processes for how a company acquires, retains, and grows customers, driven by in-product customer behavior, feedback, product usage, and analytics

Go-To-Market (GTM) Strategy

An action plan that describes repeatable and scalable processes for how a company acquires, retains, and grows customers.

initial Value Unit

An engagement or set of engagements that advance the customer through a core use case.

Product/Market Fit

An experimentation process of finding customers in a target market with a problem that your product can address for a price (or total cost of ownership) well below the level of value that's provided in exchange. A broader but related concept, company/market fit, combines pain-product fit and customer-message fit ideas.

Lead

An individual or organization with an interest in what a business is selling. The interest is expressed by sharing contact information, like an email address, phone number or data that will enable the business to continue contacting them.

Customer Experience Strategy

An ongoing process of assessing and managing customer experiences across the customer lifecycle.

Personalized Customer Experience

An ongoing process of designing and delivering targeted messages and experiences that create meaningful customer engagements.

E Marketing Media Campaign

Analyse, Planung, Steuerung, Gestaltung, Durchführung und das Controlling von Online Marketingaktivitäten innerhalb einer Kampagne über digitale Medien und Kanäle zu den Kunden, mit dem Ziel einen unternehmerischen Mehrwert zu generieren. Online Marketing Mix aus: Price Product Placement Promotion

Discounted Cash Flow (Perpetuity)/Valuation/NPV

Annual Cash Flow / (Discount Rate - Growth Rate)

SIMPLE CLV FORMULA CLV =

Annual profit contribution per customer x Average number of years that they remain a customer (-) Less the initial cost of customer acquisition

What does a good design critique include? Why?

Any good design technique includes a scorecard. Why? It's an objective way to determine if a product passes or fails based on predetermined criteria.

Produktvariation

Anzahl der Produkte im Programm konstant Produktpflege Geringfügige Produktänderung (bugfixes) Produktmodifikation Produkt Relaunch, Neue Version bei umfassenden Veränderungen

Produktdifferenzierung

Anzahl der Produkte im Programm vergrößert sich Differenzierung im engeren Sinne Differenzierung für bestimmte Käufersegmente, Mass Customization Differenzierung im weiteren Sinne Differenzierung für den Gesamtmarkt, Produkvarietät

If you wanted to measure the number of promotions (i.e. hearts on Twitter, likes on Facebook, +1s on Google+) of a given post, you would be measuring the:

Applause rate

Report customer needs

As a <role> I want to <goal/desire> so that <benefit>.

What is the biggest challenge in measuring CUSTOMER PROFITABILITY?

Assigning costs to customers -- can use activity-based costing Easy to determine customers' revenue

How many ideas should you shoot for when brainstorming solutions for a design question?

At least TEN. The good ones usually happen between 7-12...

General Creativity Templates

Attribute Dependency, Replacement, Subtraction, Multiplication, Division

Customer Retention Cost (CRC)

Average retention costs should be lower than acquisition costs

Other Internet Facts

Avg. Mobile Screen Time per Day: 3.7 hours Mobile Share of Global Traffic: 50.3% # Youtube Videos / Day: 5B Total iOS Apps: 2.2M Total Android Apps: 2.6M

Average Customer Lifespan

Avg. life span of customer = 1 / churn

A/B tests are... A) More similar to lab experiments than field experiments B) Controlled experiments C) Never field experiments D) Not truly experiments

What is the problem of "local maxima?" * A) A/B Tests fail to test conditions that may have better outcomes B) A/B Tests fail to test conditions that may have better outcomes C) A/B Tests fail to test conditions that will optimize the company's local concerns D) A/B Tests fail to attract local participants

Customer Lifetime Value (CLV) BENEFITS: DRAWBACKS:

BENEFITS: upper limit that helps firms determine what they would be willing to pay to acquire the customer relationship DRAWBACKS: assumptions lead to imprecision

What is backlog?

Backlog represents the total amount of bookings yet to be recognized; backlog moves in the same direction as deferred revenue but isn't necessarily equal (e.g. a customer could pay for 50% of their contract upfront, which would increase bookings by the full contract amount but increase backlog only by 50% of the contract amount)

Monthly Recurring Revenue

Be careful to note that multiplying monthly all-in bookings by 12 to get ARR overstates ARR as it includes non-recurring fees

Why is the churn rate metric important?

Because it is less costly to RETAIN customers than to acquire new customers.

____ will be the major competitive differentiator for brands.

Best-in-class customer experience

Definition E Pricing

Bewusstes Bilden / Einstellen und kontinuierliches Management von Preisen innerhalb ökonomischer Märkte Preismanagement innerhalb des Internets mit Aktualisierung und Beschleunigung

Web Design Patterns: Components (3)

Bookmark & Organization Data Management Scrolling

BRAND METRICS ______ = the ability to retrieve the brand from memory. ______ = the ability to confirm a prior exposure to a brand. ______ = the ease with which a brand comes to mind ______ = is the range of usage scenarios for a brand.

Brand Recall Brand Recognition Depth Breadth

_____ and _____ are especially important for services because consumers do not have as many triggers to remember service brand.

Brand recall and Brand recognition

Breakeven Market Share

Breakeven Volume / Market Size How much of the market would you need to capture to make it worth your investment?

Card Web Layout

Browsing large part of site interaction, but displaying the details for each item would clutter the screen.

Bundling

Bundling entails selling, in a single transaction, two or more items that could conceivably be sold separately. A printed newspaper, for example, is a bundle of news stories, classified ads, comics, obituaries, stock tables, sports scores, etc. Microsoft Office bundles several productivity applications in a software suite. Benefits are capturing a greater share of customers' willingness to pay - two customers buy both products for a lower price each but a great net profit in total to the vendor - each buy A and B separately for $10 each bringing $20 of profit to the firm or each buy A+B in a bundle for $15, bringing $30 of net profit to the firm

Gmail Pricing Plans

Business (15 GB), Unlimited

Which is true? A) A/B Testing is only done for websites and email B) A/B Testing is often done in brick and mortar stores C) A/B Testing is only done in a digital environment D) A/B Testing is only done for direct mail

Which of the following is NOT an A/B Test? A) Split Test B)A/B/N Test C) Optimize Test D) Controlled experiment in the digital world

How do you calculate customer payback period?

CAC $ / (avg. MRR per acquired customer)*(subscription gross margin %) OR Inverse of the CAC ratio [use this formula only if the CAC ratio was calculated with S&M in denominator and already accounts for subscription gross margin %] ...this is the same as saying: Total S&M of prior quarter / 12*(new MRR of current quarter)*(subscription gross margin %) [ideally, these metrics would be calculated for specific customer cohorts]

What is a CAC ratio and why is it important?

CAC Ratio = [(GM Q2 - GM Q1)*4] / (S&M Q2) The CAC ratio captures the cost of acquiring customers

Acronym to outline steps in product design question?

CIRCLES -Comprehend the situation -ID the customer -Report customer needs x2 -Cut, through prioritization -List solutions x3 -Evaluate trade-offs, mention design criteria -Summarize recommendation

Why is customer lifetime value important?

CLV is connected to a firm's value/earning potential

Customer Lifetime Value equation

CLV= (margin)x (retention rate/(1+discount rate-retention rate)

MRR vs CMRR

CMRR is more insightful because it includes all MRR, plus signed contracts currently committed and going into production, and minus "churn," which is the MRR that is no longer committed from customers that have turned off the service, or are anticipated to do so in the future

In non-contractual situations with identifiable customers, what is a major complication? What is the solution?

COMPLICATION: customer purchase activity is sporadic --> cannot count current customers SOLUTION: recency

Advertising Facts

CTR for Google Search Ads: 2% CTR for Google Display Ads: 0.35% CPM for Display Ad: $2.80 CPM for Video Ad: $12.80 Avg. CPC on Google Search Ads: $2.14 Avg. CPC on Display Network: $<1 Avg. CPM for iOS Banners: $0.20 - $2.00 Avg. CPM for Android Banners: $0.15 - $1.50 Avg. Conversion Rate Search Ads: 2.7% Avg. Conversion Rate Display Ads: 0.9%

M/M

Cancels out

Web Design Patterns: Layouts (3)

Card Grid Magazine

____ is the amount of customers or subscribers who cut ties with your service or company during a given time period.

Churn rate

How to change Gmail

Clarify ( who, what, why, how ) ( revenue, user acquisition, retention, csat ) ( constraints: resources, deadlines, platform, geography ) Share assumptions Identify users and needs (use cases) Prioritize Solutions. 10% and/or 10x. Trade offs Recap

How to monetize Twitter

How would you design a washing machine for google? And then estimate how many units you are going to sell?

Imagine Gchat added Video calling: how would you about starting?

What are your 4 favorite Google Products. Pick one, and describe how to improve it.

Estimation Steps

Clarify, log assumptions Think of Edge Cases EQ Sanity Check

Types of goals

Click goal, page view goal, custom goal, revenue goal

Enterprise Software Facts

Cloud Infrastructure Spending: $36B Traditional Infrastructure Spending: $61B Total IT Spending on Enterprise Soft: $351B Global ERP Software Spending: $34B Global CRM Software Spending: $26.3B Global IT SaaS Spending: $246B

Cohort Analysis

Cohort analysis is not a specific churn metric, but is the measurement of the gross or net churn of a specific group or "cohort" of customers over time. Most often, the cohort is defined by the date the customer was acquired. For example there might be a "November 2012" cohort of customers, and a "June 2012" cohort of customers. The company can compare the attrition rates of the two groups at their respective 6, 12, and 18-month intervals and so on. Cohort analysis can provide insight into customer success and onboarding programs. It can also help the company understand if it is trending toward acquiring customers who are more, or less, likely to churn. Cohorts are also frequently refined based on customer size, or type, to add further clarity to their fundamental churn characteristics.

Omnichannel Approach

Companies create contextual engagements with customers that look and feel the same across channels and devices.

Self-regulation

Companies or industries who create their own rules or guidelines that they pledge to follow. This is often done as a method for stopping legal measures from being established by lawmakers.

Evaluation

Compare results to original goals

What does each letter stand for in the CIRCLES Method?

Comprehend the Situation Identify the Customer Report the Customer's Needs Cut, Through Prioritization List Solutions Evaluate Tradeoffs Summarize Your Recommendation

Before and After Analysis

Consider the before and after impacts of your proposed change

Having all action buttons follow a similar design pattern in an application is an example of this design principle

Consistency

Havining similar operations and similar elements for achieving similar tasks.

Consistency

____ in how you count customers is very important to measure over time.

Consistency

A toaster only accepting sliced bread and a form only accepting certain data rules are examples of this design principle.

Constraints

Limiting the range of interaction possibilities for the user to simplify the interface and guide the user to the appropriate next action relates to this design principle.

Constraints

funnel metaphor

Consumers start with number of potential brands in mind (funnel's wide end), marketing directed as they reduce that number (move through funnel), emerge the one brand they choose to purchase o Today - funnel concepts fail to capture all touch points/key buying factors resulting from explosion of product choices and digital channels, emergence of increasing, well-informed consumer o Need a more sophisticated approach to help marketers navigate this that's less linear and more complicated

Grid Web Layout

Content-heavy sites want to display all primary items with equal hierarchy.

Quantitative or qualitative information that surrounds our key metrics is called:

Context

Retention applies to ____ situations, in which customers are either retained or not.

Contractual

CUSTOMERS METRIC Contractual situations: Non-contractual situations:

Contractual: count number of customers CURRENTLY under contract and the percentage retained Non-contractual: count number of customers of a specified recency

Total conversion rate

Conversion Rate of entire funnel (CTR * Conversion Rate)

Acquisition cost per customer per channel

Cost per click divided by total conversion rate

Vendor Cons of SaaS

Costs Associated with Providing the Service - SaaS vendors typically have lower gross margins because they have to operate the data center that provides the service to customers Lower Switching Costs for Customers - Consumers can relatively easily run test pilots of alternative solutions even if the original solution is widely deployed in the firm

Why paid CAC is important

Costs typically go up as you try and reach a larger audience. So it might cost you $1 to acquire your first 1,000 users, $2 to acquire your next 10,000, and $5 to $10 to acquire your next 100,000. That's why you can't afford to ignore the metrics about volume of users acquired via each channel.

Step 3 of 5 in design process

Create PERSONAS

Which method can be used to measure the impact of offline advertising on your website?

Creating redirects

Return on Investment (ROI)

Current value of asset - Purchase value of asset divided by purchase value of asset

Customer Success and Customer Care Metrics

Customer Churn and Churn Rate Customer Onboarding Costs Net Promoter Score (NPS) Advocacy (Viral Coefficient) connected to the NPS Customer Effort Score (CES) Net Easy Score Customer Engagement

continuous improvement

Customer Journey -> Collect Data -> Improvement (then loop back) • Map journey using stages and sub-stages in a Customer Journey model to understand your customer's journeys • What data can you collect at each stage? o 10Es o Love & Hate model • Analyse the data, find patterns, make improvements, repeat to loop

Immersion

Customer Journey muss geräteübergreifend online und offline betrachtet werden. Die Grenze zwischen Online und Offline verliert immer mehr an Bedeutung. Hybrider Kunde: Wechselt kontinuierlich zwischen Verkaufskanälen hin und her. ROPO: Research online, buy offline

____ encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships.

Customer Lifetime Value (CLV)

Customer profit equation

Customer Profit = customer revenue - customer costs

Customer Metrics

Customer Satisfaction -renewal rates for services likeliness to recommend to friends -effectiveness of online customer service -customer ratings on sites such as Yelp or Amazon

_____ = Total marketing costs over a period of time / Total amount of new customers in that same time period _____ = The number of people who open an email that has been sent to them dividing by the total number of people to whom the email was sent ____ = The number of people who see the marketing content through a mobile device

Customer acquisition cost Open Rate Mobile traffic

What Are Four Ways You Can Reduce CAC?

Customer acquisition cost is designed to measure and maintain the profitability of your acquisition teams. If your costs to get the customer through the door are higher than your Customer Lifetime Value (CLTV, LTV) than the business cannot be viable. The best rule of thumb is to be spending 33% or less of your customers lifetime value. With that being said lets put this knowledge into action today. Here are some ways you can reduce your CAC and optimize for profit. Optimize your funnel: Quantify each step of the process, and understand how many visits lead to leads, how many leads lead to opportunities, and how many opportunities lead to customers. The best way to do this is to apply the Balfour Method of growth process to your funnel, which ensures proper mechanics in your channels. Optimize your pricing: Remember a huge portion of CAC feeds into the recovery period, as well as your CAC ratio. As such, if you optimize your pricing to gain cash up front to recover your CAC, in the form of mandatory training, integration costs, etc., you can ensure you start making a profit as soon as possible. Check out more on value based pricing strategy here on our Price Intelligently blog. Strengthen the effectiveness of Sales and Marketing spend: Take a lean approach to marketing and sales expenses. Put money into channels that have proven returns so that you aren't wasting any more dollars. Quickly engage new customers and prospects: Cut down the time it takes to get new customers engaged with your product. The quicker product engagement happens per customer the cheaper acquisition cost becomes per customer

Customer Count Retention

Customer count retention is another metric sometimes used in conjunction with net revenue retention to get better visibility into underlying customer dynamics. It is simply based on a count of the customers active one year ago, and how many of those customers remain active today. The deficiency of this metric is that it treats all customers as financial equals, which can be misleading if the company has a wide variety of customer sizes. More often than not, the smaller, less consequential, customers churn more frequently, so this metric tends to overstate the impact of churn from a financial perspective.

____ is the number of customers of a firm for a specified period of time.

Customer counts

CUSTOMER METRICS What are the 2 important metrics for understanding the values of customers? _____ = measures the long-term value of each customer. _____ = emphasizes customers' contribution to overall company profits. ____ = informs companies about how much a customer is worth to them

Customer lifetime value Customer profit Customer lifetime value Customer profit Customer lifetime value

_____ is the amount of value a customer contributes to your business over their lifetime - which starts with a new customer's first purchase/contract and ends with the "moment of churn."

Customer lifetime value (CLV)

____ is the profit the firm makes from serving a customer or customer group over a specified period of time.

Customer profitability The difference between the revenues earned from and the cost associated with the customer relationship in a specified period.

Aspects of Effective Customer Experience

Customer: thoughts, feelings/emotions, psychological processes (memory, belief, attitude formation), senses (smell, sound, touch, taste), actions

If you were Google's CEO, would you be concerned about Microsoft?

Customers Company Competition The point is to understand purchase behavior as a cycle wherein the customer must first be aware of your product, then they have to evaluate it against their needs and competitors' offerings, and then they finally purchase it. After the purchase decision, the customer relationship continues and your company should likely work to foster a strong relationship."

Expressed permission

Customers actively request or approve of being contacted in the future. An example of this would be filling out a form where the user checks a box to ask for an email newsletter to be sent to them.

Implied permission

Customers indirectly agree to being contacted, often by not removing technology or pre-populated elements that indicate approval. An example of this would be websites that place coookies on a visitor's computer by alerting the customer that by using their site, cookies will be placed on their computer. In this situation, the customer is giving an implied permission (or implied consent) by continuing to use the computer without updating their computer's settings to remove or block cookies.

A profit maximizing firm should only serve which customers?

Customers that contribute more than they cost.

_____ = measures the ability to tailor products and services to customers. Which metrics includes measures of certifications, training, employee involvement? Which metrics involves configuration systems, flexible manufacturing and *just-in-time inventory?* _____ = measure whether companies are attentive to customer needs. _____ = ensure that companies produce high-quality products and services. _____ = measure a company's ability to innovate.

Customization metrics Quality Metrics Customization metrics Responsiveness Metrics Quality Metrics Innovation Metrics

Which of the following is NOT an A/B Testing tool? A) Qubit B) Google Experiments C) AB Tasty D) AB Lab

What matters more? Percentages or dollars?

DOLLARS because that is what you can spend (it's tangible)

What are "COGS" for SaaS companies?

Data hosting and customer support

Wichtige Kriterien der Customer Journey

Dauer der Kaufentscheidung Anzahl der Kanalkontakte Abstand zwischen den Kanälen Anzahl der genutzten Kanäle

Step 2 of 5 in design process

Define GOALS and CONSTRAINTS

Step 4 of 5 in design process

Define REQUIREMENTS

AARM Framework

Defines metrics for a product: - Acquisition: tracking customer signups - Activation: getting lazy users to complete registration - Retention: getting users to use service more and behave in a way that helps the user or business - Monetization: collecting revenue from users

Term - Thought - Something You've Learned

Definition - Answer - ETC

% Churn Rate

Definition: % of customers lost per month.

Cohort

Definition: A group of customers. In the SaaS world, it is used typically to describe the group that joined in a particular month. So there would be the January, February, etc

ACV

Definition: Annual Contract Value of a subscription agreement. The annualized version of MRR (Monthly Recurring Revenue).

ARR

Definition: Annualized Run Rate = MRR x 12ARR is annual run-rate of recurring revenue from the current installed base. This is annual recurring revenue for the coming twelve months if you don't add or churn anything.

Average Contract Length

Definition: Assuming a mix of different contract lengths, this gives you the average duration in months or years.

ARPA

Definition: Average monthly recurring Revenue per Account. This number is tells you the average monthly revenue per customer. It is useful to look at this for just the new customers booked in the month. Plot a trend line to show you the average price point that your new customers have chosen.

Billings

Definition: Billings is the amount that you have invoiced that is due for payment shortly.

% MRR Churn

Definition: Defined as lost revenue due to churned customers as a percentage of total recurring revenue.

% MRR Expansion

Definition: Defined as the expansion revenue from existing customers as a percentage of total revenue.

Customer Lifetime

Definition: If you start with a cohort of 100 customers and apply a constant churn rate every month, you'll get an exponential decay, as shown in the following graph (which uses a 3% monthly churn rate): http://goo.gl/tGDDsb Note that if the Customer Churn rate is a monthly % or yearly %, then the Customer Lifetime will be for the same time period. Here is a monthly and annual example to illustrate the point: a) If the Monthly customer churn rate is 3%, then the Customer Lifetime will be 1/0.03 which is 33 months. b) if the Annual customer churn rate is 20%, then the Customer Lifetime will be 1/0.20 which is 5 years.

LTV

Definition: Lifetime Value of a Customer. (To truly get an accurate picture of LTV, you should take into consideration Gross Margin. However in most SaaS businesses, the gross margin % is high (above 80%), and it's quite common to use the simpler version of the formula that is not Gross Margin adjusted. Assumes ARPA is constant; if not, see: http://goo.gl/U413PX)

MOF

Definition: Months up Front; Average of months (or years) of payment received in-advance with new bookings. Getting paid in advance has a big positive impact on cash flow. This metric has been used at both HubSpot and NetSuite in the past as a way to incent sales people to get more paid up front when a new customer is signed. However asking for more money up front may turn off certain customers, and result in fewer new customers, so be careful how you balance these two conflicting goals.

Net New Customers

Definition: Net New Customers = # of new Customers - # of churned CustomersThis is the net number of new customers added once lost customers due to churn has been taken into account.

Net New MRR

Definition: Net New MRR = New MRR + Expansion MRR - Churned MRR This is the sum of the three different components that will change MRR during each month.

Revenue

Definition: Revenue is amount of money that can be recognized according to accounting policy. Even if it is paid for upfront, usually subscription revenue can only be recognized ratably over time as the service is delivered.If more money has been paid than can be recognized, the difference goes into a balance sheet item called Deferred Revenue.

% Renewal Rate ($'s)

Definition: Similar to the number above, but instead of looking at the number of customers, it looks at the dollar value of the renewed contracts. It's important to look at both, as they each tell an useful part of the story. If you were losing a lot of customers, you'd want to know why. Similarly, if you were only losing a few customers, but they were your biggest $ value customers, you'd also want to know that as well.

Net Promoter Score

Definition: Since it is likely that customer satisfaction is likely to be good predictor of future churn, it would be useful to survey customer satisfaction. The recommended way to measure customer happiness is to use Net Promoter Score (NPS). The beauty of NPS is that it is a standardized number, so you can compare your company to others. (http://www.netpromoter.com/why-net-promoter/know/) The Net Promoter Score, or NPS®, is based on the fundamental perspective that every company's customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one simple question — How likely is it that you would recommend [your company] to a friend or colleague? — you can track these groups and get a clear measure of your company's performance through your customers' eyes. Customers respond on a 0-to-10 point rating scale and are categorized as follows: Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth. Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings. Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth. To calculate your company's NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.

SaaS Growth

Definition: So why is SaaS growth so important? We have suggested that as soon as the business has shown that it can succeed, it should invest aggressively to increase the growth rate. You might ask question: Why? SaaS is usually a "winner-takes-all" game, and it is therefore important to grab market share as fast as possible to make sure you are the winner in your space. Provided you can tell a story that shows that eventually that growth will lead to profitability, Wall Street, acquiring companies, and venture investors all reward higher growth with higher valuations. There's also a premium for the market leader in a particular space. However not all investments make sense. In the next section we will look at a tool to help you ensure that your growth initiatives/investments will pay back: Unit Economics.

SaaS

Definition: Software as a Service. SaaS/subscription businesses are more complex than traditional businesses; traditional business metrics totally fail to capture the key factors that drive SaaS performance.

MRR

Definition: The Monthly Recurring Revenue at the end of each month. Computed by taking the MRR from the previous month and adding Net New MRR.

New MRR

Definition: The increase in MRR (Monthly Recurring Revenue) from new customers in the current month/year.

Expansion MRR

Definition: The increase in MRR from expansion in your installed base in the current month.

Churned MRR

Definition: The lost MRR from churning customers in the current month.

# of churned Customers

Definition: The number of customers lost due to churn this month

# of new Customers

Definition: The number of new customers added this month

Bookings

Definition: The total dollar value of all new contracts signed. Usually taken as an annualized number even if the contract period is longer than one year.Since the bookings number might have a mix of different durations (e.g. month-to-month; 6 months; 12 months) this number is not very helpful for understanding the business.To really understand what is going on in your SaaS Business, you should look at the following components: a) What happened with new customers: - New MRR/ACV from new customer contracts b) What happened in your installed base: - Renewals - Churned MRR/ACV - Expansion bookings c) The sum of all of the above: - Net New MRR/ACV

CAC

Definition: There is a problem with using this formula in the early days, as you may several expensive people in the team that should scale to handle a far number of customers as you grow. In that case, your CAC will be too high. I suggest doing a very simple adjustment to the Sales & Marketing expenses to take only a portion of those salaries and expenses in the early days. That will give a better indication of how CAC will look in the future when you are at scale.

% Net MRR Churn

Definition: This is the number that will go negative if the Expansion revenue from existing customers starts to outstrip the lost revenue from churn. Getting to negative Net MRR Churn is a great goal for a SaaS company.

% Renewal Rate (Customers)

Definition; It can be confusing to look at both your renewal rate (which should be just 1- Churn) in addition to churn. However in a model where you have yearly contracts being renewed, the two numbers can actually be different. For example, in the early days of a startup, you might have low churn because many of your customers have not yet reached the point where they could drop your service because of the length of their contract. In that situation, your churn number will not accurately predict what is really going to happen when you reach steady state. So a better number to look at is how many of your customers are renewing at the point where their contract expires. That is what this number measures. When you reach steady state, this number should be equal to 1 - % Customer Churn.

What should test in A/B testing

Depends on your goals: The call to action's (i.e. the button's) wording, size, color and placement, Headline or product description, Form's length and types of fields, Layout and style of website, Product pricing and promotional offers, Images on landing and product pages, Amount of text on the page (short vs. long).

Velocity Metrics

Describes how long it takes a company to achieve certain milestones. This includes the average number of days it takes a prospect to go from signup to becoming a PQL, and the average number of months it takes a company to break even (when CLV>CAC).

Human Centered Design

Design consistency in terms of font, images, buttons, links, etc is key in building and leveraging existing familiarity for the user Use buttons over links to persuade the user to take action Reduce the amount of text so that the user is not fatigued by text on screen; too much text could cause the user to leave the app Use images to quickly communicate context to the user Provide feedback to the user that the actions taken were successful or failed Visual hierarchy: present things in order of importance by color, placement, size, etc

Design leader who developed 10 principles of good design

Dieter Rams

______ = measures the success of marketing efforts in digital media environment

Digital marketing metrics

_____ = The cost of capital for the organization (like interest rate on a loan) _____ = the percentage of customers who remain loyal over time. What is the customer lifetime value formula?

Discount rate Retention rate Margin (retention rate / 1+ discount rate - ret rate)

How do you evaluate tradeoffs between solutions when answering a design question? Is there a more rigorous way to do so?

Discuss the pros and cons. Bonus: Define tradeoff criteria. Such as customer satisfaction, implementation difficulty, and revenue potential.

STAR

Do you struggle to give concise answers to interview questions? Are you unsure how to share your accomplishments during an interview without sounding boastful? The STAR interview response technique can help. Situation Task Action Result

Beta Testing

Done at customer site to determine if the product works and is bug-free

Operating Margin

EBIT/Sales Operating Income/Sales Revenue - COGS - SG&A - R&D

EBITDA Margin

EBITDA / Sales or Revenue Revenue - COGS - SG&A - R&D + D&A

'Upper funnel' or 'top of the funnel' keywords are the search keywords used during what point of a customer's consideration life cycle:

Early, when they have not yet made up their mind

Customer Pros of SaaS

Easier and Cheaper to Use the Software - No upfront license fees or infrastructure costs to house a datacenter on customer's premise Faster Time to Using 'Live' Software - Customer does not need to build or modify the software solution or supporting infrastructure and can go 'live' faster Free Up Resources While Getting Latest Software - Product updates are performed by the vendor, enabling customers

What are the two methods of A/B testing

Element based Site-wide

It conserves resources and minimizes physical and visual pollution throughout the lifecycle of the product.

Environmentally-friendly

Vorteil E Marketing bei Customer Journey

Erfolgsmessung mit einfachen Trackingtechnologien Untersuchung des Klick und Suchverhaltens von Kunden

Accounting for Services portion of SaaS contract

Even though the set-up and customization would be delivered early on in the plan, as they are not a separate unit of accounting they would be recognized over the lifetime of the whole plan, along with the CRM software. If the company doesn't offer these as separate services and they are obligatory for any customer who is starting to use their CRM software, then they aren't separate units of accounting and are amortized over the lifetime of the contract. Say the SaaS company also offers a 6-month consulting service for $5,000. It is offered on a standalone basis, regardless of whether the customer is using the CRM. This would be a separate unit of accounting, even if it was sold along with the CRM software. The revenue would be recognized on its own straight-line basis.

List 5 customer personas for: [choose a product in the room]

Examples include: - Food Lovers - Soccer Moms - College Students - Small Business Owners

CLV =

Expected revenue from customer over lifetime - Expected costs from serving customer over life

Negative Churn

Explanatin: The ultimate solution to the churn problem is to get to Negative Churn. There are two ways to get this expansion revenue: 1. Use a pricing scheme that has a variable axis, such as the number of seats used, the number of leads tracked, etc. That way, as your customers expand their usage of your product, they pay you more. 2. Upsell/Cross-sell them to more powerful versions of your product, or additional modules. To help illustrate the power of negative churn, take a look at the following two graphs that show how cohorts behave with 3% churn, and then with 3% negative churn. http://goo.gl/5kIeZX http://goo.gl/dnoHHA (In our graphs below, a different color is used for each month's cohort, so we can see how they decline or grow, based on the churn rate.) In the top graph, we are losing 3% of our revenue every month, and you can see that with a constant bookings rate of $6k per month, the revenue reaches $140k after 40 months, and growth is flattening out. In the bottom graph, we may be losing some customers, but the remaining customers are more than making up for that with increased revenue. With a negative churn rate of 3%, we reach $450k in revenue (more then 3x greater), and the growth in revenues is increasing, not flattening.

Multi-axis Pricing

Explanation:

Customer Segmentation

Explanation: In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal. As an example, bigger customers are harder to sell to, but usually place bigger orders, and churn less frequently. We need a way to understand which of these are most profitable, and this requires us to segment the customer base into different types, and compute the unit economics metrics for each segment separately. Common segments are things size of of customer, vertical industry, etc. Despite the added work to produce the metrics, there is high value in understanding the different segments. This tells us which parts of the business are working well, and which are not. In addition to knowing where to focus and invest resources, we may recognize the need for different marketing messages, product features. As soon as you start doing this segmented analysis, the benefits will become immediately apparent. For each segment, we recommend tracking the following metrics: - ARPA (Average Revenue per Account per month) - Net MRR Churn rate (including MRR expansion) - LTV - CAC - LTV: CAC ratio - Months to recover CAC - Customer Engagement Score Brad Coffey, HubSpot: "At HubSpot, we started to see some of our biggest improvements in unit economics when we started segmenting our business and calculating the LTV to CAC ratio for each of our personas and go to market strategies. As one good example - when we started this analysis, we had 12 reps selling directly into the VSB market and 4 reps selling through Value Added Resellers (VARs). When we looked at the math we realized we had a LTV:CAC ratio of 1.5 selling direct, and a LTV:CAC ratio of 5 selling through the channel. The solution was obvious. Twelve months later we had flipped our approach - keeping just 2 reps selling direct and 25 reps selling through the channel. This dramatically improved our overall economics in the segment and allowed us to continue growing. We ended making similar investments in other high LTV:CAC segments. We went so far as to incentivize our sales managers to grow their teams - but then would only place new sales hires into the segments with the best economics. This ensured we continued to invest in the best segments and aligned incentives throughout the company on our LTV:CAC goals. It also allowed us to push innovation down to the sales manager level. Managers could experiment with org structure, and sales processes - but they knew that if they didn't hit their LTV:CAC goals they wouldn't be able to grow their teams. Calculating LTV:CAC by segment can be challenging, especially on the CAC side. It's relatively easy at the top level to add up all the marketing and sales expense in a period and divide it by the total number of customers (to get CAC). Once you try to segment down your spend you run into questions like 'how much marketing expense do I allocate to a given segment', 'how much of the sales expense'? We solved this by allocating marketing expense based on number of leads and sales expense based on headcount but it's not perfect. For us the keys are: 1) Needs to account for all costs - no free lunch, 2) It needs to be consistent over time. Progress on improving the metric is more important than the actual value."

Uses for SaaS Guidelines

Explanation: 1. One of the key jobs of the CEO is to decide when to hit the accelerator pedal. The value of these two guidelines is that they help you understand when you have a SaaS business that is in good shape, where it makes sense to hit the accelerator pedal. Alternatively if your business doesn't meet the guidelines, it is a good indicator that there is more tweaking needed to fix the business before you should expand. 2. Another way to use the two guidelines is for evaluating different lead sources. Different lead sources (e.g. Google AdWords, TV, Radio, etc.) have different costs associated with them. The guidelines help you understand if some of the more expensive lead generation options make financial sense. If they meet these guidelines, it makes sense to hit the accelerator on those sources (assuming you have the cash).Using the second guideline, and working backwards, we can tell that if we are getting paid $500 per month, we can afford to spend up to 12x that amount (i.e. $6,000) on acquiring the customer. If we're spending less than that, you can afford to be more aggressive and spend more in marketing or sales. 3. There is another important way to use this type of guideline: segmentation. Early-stage companies are often testing their offering with several different uses/types of customers / pricing models / industry verticals. It is very useful to examine which segments show the quickest return or highest LTV to CAC in order to understand which will be the most profitable to pursue.

Sales Capacity

Explanation: In many SaaS businesses, sales reps play a key role in closing deals. In those situations, the number of productive sales people (Sales Capacity) will be a key driver of bookings. It is important to work backwards from any forecasts that are made, to ensure that there is enough sales capacity. I've seen many businesses miss their targets because they failed to hire enough productive salespeople early enough. It's also worth noting that some percentage of new sales hires won't meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. When computing Sales Capacity, if a newer rep is still ramping and only expected to deliver 50% of quota, they can be counted as half of a productive rep. That is often referred to as Full Time Equivalent or FTE for short. Another important metric to understand is the number of leads required to feed a sales rep. If you are adding sales reps, make sure you also have a clear plan of how you will drive the additional leads required. There is much more that could be said on this topic, but since it is all very similar to managing a sales force in a traditional software company, we will leave that for other blog posts.

Unit Economics

Explanation: Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable. We need some tools to help us figure this out. A great way to understand any business model is to answer the following simple question: Can I make more profit from my customers than it costs me to acquire them? This is effectively a study of the unit economics of each customer. To answer the question, we need two metrics: 1) LTV - the Lifetime Value of a typical customer 2) CAC - the Cost to Acquire a typical Customer Entrepreneurs are usually overoptimistic about how much it costs to acquire a customer. This probably comes from a belief that customers will be so excited about what they have built, that they will beat a path to their doors to buy the product. The reality is often very different!

SaaS Bookings

Explanation: Every month in a SaaS business, there are three elements that contribute to how much MRR will change relative to the previous month: 1) What happened with new customers added in the month: New MRR (or ACV) 2) What happened in the installed base of customers: Churned MRR (or ACV) (from existing customers that cancelled their subscription. This will be a negative number.) 3) Expansion MRR (or ACV) (from existing customers who expanded their subscription) The sum all three of these makes up your Net MRR or ACV Bookings.

Months Up Front

Explanation: Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover the cash problem that we described earlier in the article. It is often worth providing good financial incentives in the form of discounts to encourage this behavior. The metric that we use to track how well your sales force is doing in this area is Months up Front. Getting paid more upfront usually also helps lower churn. This happens because the customer has made a greater commitment to your service, and is more likely to spend the time getting it up and running. You also have more time to overcome issues that might arise with the implementation in the early days. The Metric "Months up Front" has been used at both HubSpot and NetSuite in the past as a way to incent sales people to get more paid up front when a new customer is signed. However asking for more money up front may turn off certain customers, and result in fewer new customers, so be careful how you balance these two conflicting goals.

SaaS Viability

Explanation: In the first version of this article, I introduced two guidelines that could be used to judge quickly whether your SaaS business is viable. The first is a good way to figure out if you will be profitable in the long run, and the second is about measuring the time to profitability (which also greatly impacts capital efficiency). Over the last two years, I have had the chance to validate these guidelines with many SaaS businesses, and it turns out that these early guesses have held up well. The best SaaS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8. And many of the best SaaS businesses are able to recover their CAC in 5-7 months. However many healthy SaaS businesses don't meet the guidelines in the early days, but can see how they can improve the business over time to get there. The second guideline (Months to Recover CAC) is all about time to profitability and cash flow. Larger businesses, such as wireless carriers and credit card companies, can afford to have a longer time to recover CAC, as they have access to tons of cheap capital. Startups, on the other hand, typically find that capital is expensive in the early days. However even if capital is cheap, it turns out that Months to recover CAC is a very good predictor of how well a SaaS business will perform. Take a look at the graph below, which comes from the same model used earlier. It shows how the profitability is anemic if the time to recover CAC extends beyond 12 months: http://goo.gl/BFG1yC I should stress that these are only guidelines, there are always situations where it makes sense to break them.

Running a SaaS Business

Explanation: It takes time for most initiatives to have an impact. We've learned from some tough lessons that planning has to be done well in advance to drive a SaaS business. For example if you are not happy with your current growth rate, it will often take nine to twelve months from the point of decision before the growth resulting from increased investment in sales and marketing will actually be observed; it is important to plan ahead. Hopefully what you will have gathered from the discussion above is that there are really three things that really matter when running a SaaS business: 1) Acquiring customers 2) Retaining customers 3) Monetizing your customers The second item should be first on your list of things to get right. If you can't keep your customers happy, and keep them using the service, there is no point in worrying acquiring more of them. You will simply be filling a leaky bucket. Rather focus your attention on plugging the leaks. SaaS businesses are remarkably influenced by a few key numbers. Making small improvements to those numbers can dramatically improve the overall health of the business. Once you know your SaaS business is viable using the guidelines provided for LTV:CAC, and Time to recover CAC, hit the accelerator pedal. But be prepared to raise the cash needed to fund the growth.

Lead Source ROI

Explanation: Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc. What we have found is that each of these lead sources tends to saturate over time, and produce less leads for more dollars invested. As a result, SaaS companies will need to be constantly evaluating new lead sources that they can layer in on top of the old to keep growing. Since the conversion rates and costs per lead vary quite considerably, it is important to also measure the overall ROI by lead source. Growing leads fast enough to feed the front end of the funnel is one of the perennial challenges for any SaaS company, and is likely to be one of the greatest limiting factors to growth. If you are facing that situation, the most powerful advice we can give you is to start investing in Inbound Marketing techniques (see Get Found using Inbound Marketing). This will take time to ramp up, but if you can do it well, will lead to far lower lead costs, and greater scaling than other paid techniques. Additionally the typical SaaS buyer is clearly web-savvy, and therefore very likely to embrace inbound marketing content and touchless selling techniques.

Growth Levers

Explanation: SaaS businesses are more numerically driven than most other kinds of business. Making a small tweak to a number like the churn rate can have a very big impact on the overall health of the business. Because of this we frequently see a "quant" (i.e. a numbers oriented, spreadsheet modeling, type of person) as a valuable hire in a SaaS business. At HubSpot, Brad Coffey played that role, and he was able to run the models to determine which growth plays made the most sense. Understanding these SaaS metrics is a key step towards seeing how you can drive your business going forward. Let's look at some of the levers that these imply as growth drivers for your business: 1) Churn Get Churn and customer happiness right first (if this isn't right, the business isn't viable, so no point in driving growth elsewhere. You will simply be filling a leaky bucket.) 2) Product You're in a product business - first and foremost: fix your product. - If you're using a free trial, focus on getting the conversion rate for that right (ideally around 15 - 20%). If this isn't right, your value proposition isn't resonating, or you may have a market where there is not enough pain to get people to buy. - Win/Loss ratio should be good - Trial or Sales conversion rates on qualified leads should be good 3) Funnel metrics - Increase the number of raw leads coming in to the Top of your funnel - Identify the profitable lead sources and invest in those as much as possible. Conversely stop investing in poor lead sources until they can be tweaked to make them profitable. - Increase the Conversion Rates at various stages in the funnel 4) Sales Metrics - Sales productivity (focus on getting this right consistently across a broad set of sales folks before hitting the gas) - Add Sales Capacity. But first make sure you know how to provide them with the right number of leads. This turns out to be one of the key levers that many companies rely on for growth. We have learned from experience how important it is to meet your targets for sales capacity by hiring on time, and hiring the right quality of sales people so there are fewer failures. - Increase retention for your sales people. Since you have invested a lot in making them fully productive, get the maximum return on that investment by keeping them longer. - Look at adding Business Development Reps. These are outbound sales folks who specialize in prospecting to a targeted list of potential buyers. For more on this topic, click here. 5) Pricing/Upsell/Cross Sell - Multi-axis pricing - Additional product modules (easier to sell more to existing customers than it is to sell to brand new customers) 6) Customer Segmentation Customer Segmentation analysis will help point out which are your most profitable segments. Two immediate actions that are suggested by this analysis are: - Double down on your most profitable segments - Look at your less profitable segments and consider changes that would make them more profitable: lower cost marketing & sales approaches, higher pricing, product changes, etc. If nothing seems to make sense, spend less effort on these segments. 7) International Markets - Expansion internationally is only recommended for fairly mature SaaS companies that already have honed their business practices in their primary market. It is far harder to experiment and tune a business in far off regions, with language and cultural differences.

SaaS P&L / Cash Flow Trough

Explanation: SaaS businesses face significant losses in the early years (and often an associated cash flow problem). This is because they have to invest heavily upfront to acquire the customer, but recover the profits from that investment over a long period of time. The faster the business decides to grow, the worse the losses become. Many investors/board members have a problem understanding this, and want to hit the brakes at precisely the moment when they should be hitting the accelerator. In many SaaS businesses, this also translates into a cash flow problem, as they may only be able to get the customer to pay them month by month. To illustrate the problem, we built a simple Excel model which can be found here: http://dskok.wpengine.netdna-cdn.com/wp-content/uploads/2012/09/SaaS-Economics-101.zip (Data used in following graphs; explains the Cash Flow Trough)

SaaS Success Factors

Explanation: SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime). If a customer is happy they will stick around for a long time, increasing profits. On the other hand if a customer is unhappy, they will leave quickly, and the business will lose money on the investment made to acquire that customer; Retention is the key, the customer is the product.

Customer Engagement Score

Explanation: Since churn is so important, wouldn't it be useful if we could predict in advance which customers were most likely to churn? That way we could put our best customer service reps to work in an effort to save the situation. It turns out that we can do that by instrumenting our SaaS applications and tracking whether our users are engaged with the key sticky features of the product. Different features will deserve different scores. For example if you were Facebook, you might score someone who uploaded a picture as far more engaged (and therefore less likely to churn), than someone who simply logged in and viewed one page. Similarly if you sold your SaaS product to a 100 person department, and only 10 people were using it, you would score that differently to 90 people using it. So the recommendation is that you create a Customer Engagement Score, based on allocating points for the particular features used. Allocate more points for the features you believe are most sticky. (Later on you can go back and look at the customers who actually churned, and validate that you picked the right features as a predictor of who would churn.) And separately score how many users are engaged with specific scores. Over time you'll also come to discover which types of use are the best indicators of possible upsell. (HubSpot was the first company that I worked with who figured this out, and they called it their CHI score. CHI stands for Customer Happiness Index. It evolved to be a very good predictor for churn.) Brad Coffey, HubSpot: "At HubSpot we had a lot of success looking at this metric - we called in Customer Happiness Index (CHI). First - by running the analysis we identified the parts of our application that provide the most value to customers and could invest accordingly in driving adoption in those areas. Second - we used this aggregate score as an early proxy for success as we experimented with different sales and onboarding processes. If a set of customers going through an experiment had a low CHI score we could kill the project without waiting 6 or 12 months to analyze the cohort retention."

Cohort Analysis

Explanation: Since churn is such a critical element for success in a SaaS company, it is an area that requires deeper exploration to understand. Cohort Analysis is one of the important techniques that we use to gain insight. As mentioned earlier, a cohort is simply a fancy name for a group. In SaaS businesses, we use cohort analysis to observe what happens to the group of customers that joined in a particular month. So we will have a January cohort, a February cohort, etc. We would then be able to observe how our January cohort behaves over time (see illustration below). This can help answer questions such as: 1) Are we losing most of the customers in the first couple of months? 2) Does Churn stabilize after some period of time? Then if took some actions to try to fix churn in early months, (i.e with better product features, easier on-boarding, better training, etc.) we would want to know if those changes had been successful. The cohort analysis allows us to do this by comparing how more recent cohorts (e.g. July in the table above) compared against January. The table above shows that we made a big improvement in the first month churn going from 15% to 4%.

Funnel Metrics

Explanation: The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel. However there is a common way to measure each step, and the overall funnel, regardless of your sales process. That involves measuring two things for each step: the number of leads that went into the top of that step, and the conversion rate to the next step in the funnel (see below). In the diagram above, (mirrored in the dashboard), we show a very simple three phase sales process, with visitors coming to a web site, and some portion of them signing up for a trial. Then some of the trials convert to purchases. As you can see in the dashboard, we will want to track the number of visitors, trials and closed deals. Our goal should be to increase those numbers over time. And we will also want to track the conversion rates, with the goal of improving those over time. Another key value of having these conversion rates is the ability to understand the implications of future forecasts. For example, lets say your company wants to do $4m in the next quarter. You can work backwards to figure out how many demos/trials that means, and given the sales productivity numbers - how many salespeople are required, and going back a stage earlier, how many leads are going to be required. These are crucial planning numbers that can change staffing levels, marketing program spend levels, etc.

Kinds of SaaS Business

Explanation: There are two kinds of SaaS business: * Those with primarily monthly contracts, with some longer term contracts. In this business, the primary focus will be on MRR (Monthly Recurring Revenue) * Those with primarily annual contracts, with some contracts for multiple years. Here the primary focus is on ARR (Annual Recurring Revenue), and ACV (Annual Contract Value). Most of the time in this article, I will refer to MRR/ACV. This means use MRR if you are the first kind of business, or ACV if you are the second kind of business. The dashboard shown below assumes monthly contracts (MRR). However in the downloadable spreadsheet, there is a tab that shows the same dashboard for the second kind, focusing on ACV instead of MRR.

Cohort Analysis (Customer)

Explanation: There are two ways to run Cohort Analysis: the first looks at the number of customers, and the second looks at the Revenue. Each teaches us something different and valuable. The example graph below simply looks at the number of customers in each cohort over time.

Cohort Analysis (Revenue)

Explanation: There are two ways to run Cohort Analysis: the first looks at the number of customers, and the second looks at the Revenue. The example graph below looks at how MRR evolves over time for each cohort. This particular example illustrates how the graph would look if there is very strong negative churn. As you can see, the increase in revenue from the customers that are still using the service is easily outpacing the lost revenue from churned customers. It is pretty rare to see things look this good, but it is the ideal situation that we are looking for. For those wondering if this can be achieved, one company in our portfolio, Zendesk, that has numbers that are even better than those shown in the example below.

MMR Bookings

Explanation: This chart shows the three components of MRR (or ACV) Bookings, and the Net New MRR (or ACV) Bookings. By breaking out each component, you can track the key elements that are driving your business. The one variation we would recommend making to this chart is to show a dotted line for the plan, so you can track how you are doing against plan for each of the four lines. This is one of the most important charts to help you understand and run your business. Ron Gill, NetSuite: "This chart is really good. I also like to look at this data in tabular form because I want to know y-o-y growth rates. E.g. "Net new MRR is up 25% over June of last year". The Y-o-Y % is a metric easily compared with increased spending, sales capacity, etc."

Bookmark & Organization

F.A.T. >*Favorites, Bookmarks, and Wish Lists:* Users forget or cant find content they particularly like >*Activity Feed:* Users want to stay updated on site activity. >*Tagging:* Content is so broad that users don't want to skim through it all.

Users by Platform

Facebook: 1.8B Snapchat: 300M WhatsApp: 1.5B WeChat: 1B Instagram: 1B Twitter: 321M Pinterest: 291M

*A/B testing and conjoint analysis cannot be used for new product development.

False

*BCG and McKinsey matrixes use the same axis markings.

False

A/B tests are more expensive to conduct than multivariate tests.

False

According to Avinash Kaushik, simply stating an average (for example, the 'average conversion rate' for a website) is a useful technique for measuring KPIs.

False

Avinash Kaushik recommends that you only pay attention to a usability test participant's comments, not their body language.

False

It is recommended that you make global changes or redesigns to your website based solely upon the results of a lab usability test.

False

Media mix modeling involves conducting experiments and changing one variable at a time in an effort to determine which campaign should receive credit for a conversion.

False

The data you collect about your own website using a competitive intelligence tool should always match the data you collect using your site's analytical tool (such as Google Analytics). `

False

T or F: Innovation is just fixing mistakes and errors in products and services. T or F: Innovation Metrics should measure levels of breakthrough products, next-generation products, *major enhancements, minor enhancements* and corrections.

False TRUE

*Reviewing the company's portfolio of products needs to be done only once.

False. It must be continuous.

Design principle of making it clear to the user what action has been taken and what has been accomplished

Feedback

Using visual, tactile, audio elements to communicate to the user that they have takenan action and the consequence of doing so are examples of this design principle.

Feedback

Element based

For a single element on a page create variations of that button in your testing tool. When the test is live, the A/B tool will randomly replace the original button on the page with one of the variations before displaying the page to the visitor.

Site-wide

For an entire website create and upload a new page on your website, then create a variation. When the test runs, your tool will redirect some visitors to one of your alternate URLs.

DIGS Method

For behavioral questions: - Dramatize the situation: provide context and details that emphasize your importance - Indicate the alternatives: be thoughtful and analytical by listing three approaches to problem - Go through what you do: emphasize yourself as the driving force - Summarize your impact: provide numbers and qualitative statements the validate your impact

CIRCLES Method

For product design questions: - Comprehend the situation: ask clarifying questions and state assumptions - Identify the customer: list potential customer personas and choose one to focus on - Report the customer's needs: provide a user story that conveys their goals, desires and potential benefits - Cut, through prioritization: prioritize, assess tradeoffs and make decisions - List solutions: brainstorm at least three ideas that exploit future trends and customer behavior - Evaluate tradeoffs: define your tradeoff criteria and analyze the solution through a pro and con list - Summarize recommendation: specify which you would recommend and explain why

Big Picture Framework

For questions about marketing campaigns: - Goals: state overall business objectives and intermediate marketing objectives - Segmentation: group buyers by attributes to identify those who would benefit - Targeting: choose segments that would appreciate the product - Positioning: create a product image for the segment - Product: develop new product ideas using the CIRCLES method - Place: choose the distribution channel that best meets the business goals - Promotion: match promotional tactics with your strategies - Price: use breakeven analysis for existing products and the pricing meter for new products

Cut, through prioritization

For use case. - If a certain feature is a win/lose, use corp strategy to decide ○ e.g. feature increases revenue by 5% but decreases engagement by 3%. What is company's strategic goal? Large company don't care about additional rev and big on engagement and making a sticky platform. Or younger company paying off debt.

CAC

Full cost of acquiring users (stated on per user basis) Paid CAC is the best method: Total Acquisition Cost / New Customers Acquired through Paid Marketing Blended CAC includes users acquired organically across all channels which can sometimes be lower Note: CAC typically goes up as you go to a broader audience. Easier to acquire first 1,000 users than it is to acquire next 1,000 users

GMV vs. Revenue

GMV = Total sales dollar volume on eCommerce Take rate = % that company takes from GMV

Disadvantage of using GTM to add Optimizely snippet

GTM loads asynchronously, causing variations to "flicker" before loading.

Step 1 of 5 in design process

Gather BACKGROUND

Preisdifferenzierung

Gleiche Produkte -> Unterschiedliche Preise Ziel: Gewinnsteigerung durch Abschöpfen der unterschiedlichen Zahlungsbereitschaften Differenzierung nach Raum, Zeit, Menge, Leistung Beispiele: Flugtickets

Mobile OS Market Share

Global: Android: 87% iOS: 13% USA: Android: 61% iOS: 37%

Internet Users by Continent

Global: 3.2B North America: 320M Asia: 1.8B Europe: 636M Africa: 353M

Objectives

Goals set to help guide a marketing plan or elements of the plan.

Dieter Rams Ten Principles of Good Design

Good design is: 1) Innovative * 2) Makes a product useful * 3) Aesthetic 4) Understandable * 5) Unobtrusive 6) Honest * 7) Long-lasting 8) Thorough down to the last detail 9) Environmentally friendly 10) As little design as possible

LTV / CAC

Good measure to determine CAC payback Calculated as CAC / (Average MRR) or CAC / (LTV/average life)

Ad Revenue by Platform

Google: 80B Facebook: 30B Twitter: 2.5B Snapchat: 400M

Churn

Gross Churn = MRR lost in given month/beginning month MRR Net Churn: MRR loss net of upsell revenue divided by beginning MRR

Gross Margin

Gross Profit/Sales Revenue - COGS

Gross burn

Gross burn on the other hand only looks at your monthly expenses + any other cash outlays.

***What is the GOAL of customer management?

Grow the business profitability by acquiring, retaining and developing THE RIGHT customers.

Data Privacy

Guidelines and laws that describe how a customer data should be treated to protect individuals and give them knowledge of how their information is being used by companies.

5Es Framework

Helps brainstorm different stages of the customer experience:

4 D's

Here's a very simple yet effective time management technique. Before responding to any request, filter them through the 4D's framework, a simple yet effective time management method: Do's Defer Delegate Dump

What is likely to happen if a majority of your customers are VULNERABLE customers?

High turnover

Vendor Pros of SaaS

Higher Revenue Visibility Broadens Reach to Underserved Customers - SMBs and other customers are increasingly adopting SaaS to gain access to enterprise-class technology at significantly lower costs

Good design is __________. It does not attempt to manipulate the consumer with promises that cannot be kept.

Honest

Prospect (user) onboarding

How a prospect moves through initial signup, experiences initial value, and reaches PQL status. It is designed to help users become familiar with the product and realize initial value as soon as possible.

First Response Time

How long it takes for your team to reach your customers. It is averaged across all customers for a certain period of time: a day, a week, a month, or a year.

In regards to content marketing metrics, "Consumption Metrics" answers which of the following questions:

How many people viewed, downloaded, or listened to this piece of content?

HEART

How to choose right UX metrics for your product. You might want to consider the HEART framework designed by Kerry Rodden, Hilary Hutchinson and Xin Fu, from Google's research team. Happiness Engagement Adoption Retention Task Success

Brand Recognition

How well can you recognize these logos without the brand name?

How to preface design problems

I'll think about -Goals -User & use cases -Prioritize use case -Brainstorm solution

Marketing analytics continuous function

Identify--> analyze--> improve

Under what condition would bookings equal the change in deferred revenue for a given period?

If all of the contract value was paid upfront; if only partial was paid upfront then bookings would exceed deferred revenue

How I am sure that I am choosing right customer experience

If you meet success criteria in labs, test new design through an AB Test built by engineering team. Now you'll be able to measure your hypothesis against quantitative feedback from AB Test. If the AB test successfully meets measurements identified in hypothesis, then productionize the feature and release it to the rest of the customer base

Digitale Customer Journey

Im stationären Verkauf: Produktauswahl nach Anbieterauswahl Im E Commerce, erst Produkt, dann Anbieter Problem dabei: Viele Informationskanäle führen zur Informationsüberlastung (Information Overload) Wichtig den Kunden da abzuholen, wo die Entscheidung entsteht -> Emotion wichtig, einfache Prozesse

What were netflix' conclussions

Images that have expressive facial emotion that conveys the tone of the title do particularly well. Winning images might be quite different in various parts of the world. Artwork featuring recognizable or polarizing characters from the title tend to do well.

In what stage is it time to do everything possible to ensure the success of the campaign? In what stage is it important to determine how many resources, if any, should be spent on it in the future. In what stage are A/B tests important due to their nature? In what stage do you see whether a campaign has met its goals, and if not, how the campaign could be improved In what stage is important to regularly monitor the results of A/B Tests, perhaps creating new ones and making adjustments.

Implement Evaluate Implement Evaluate Implement

Cost Equation

Impressions x CTR x CPC

Moment of Truth (MOT)

In marketing, the moment when a customer/user interacts with a brand, product, or service in a way that serves to form or change an impression about that brand, product, or service.

Conditions for Optimizely to work with GA

In order to integrate Optimizely with Universal Analytics, you must have an available Custom Dimension (note: this refers to a Custom Dimension in Google Analytics, not the Optimizely feature) to populate with Optimizely experiment data. Google Analytics integration will not function properly unless the Optimizely snippet is above the GA snippet.

Multiple Comparisons

Increased risk of false positive when you have multiple hypotheses. Control using bonferroni correction or false discovery rate

Anwendungsorientierte Faktoren der E Communication (3)

Individualisierung - Kommunikation segment oder Kundenspezifisch Intelligence - einfache und kostengünstige Marktforschung Interaktivität - Wechselseitiger Informationsaustausch

What are common segmentations to make in SaaS (i.e. to run cohorts off of)?

Industry Customer size Plan type (i.e. product model) Selling type (e.g. direct vs. reseller) Lead source (e.g. PPC, video ads, inbound marketing)

Customer Data

Information about a person that companies collect. These could be demographic data, contact details or behavioral data.

Payback Period

Initial Investment / Annual Cash Flow

Technological development is always offering new opportunities for ____________ design. But ____________ design always develops in tandem with ____________ technology, and can never be an end in itself.

Innovative

Strategische Faktoren der E Communication (3)

Integration - E Kommunikation lässt sich gut in bestehende Kommunikation eingliedern Industrie Restrukturierung - Neue Kommunikationswege durch veränderte Industriestrukturen Independenz - Unabhängigkeit von Ort und Zeit (Live Chat, GoTo Meeting..)

Definition E Communication

Interaktive, multifunktionale Kommunikation unter Nutzung netzwerkbasierter und elektronischer Kommunikationsplattformen

What company created and made popular the RICE method of prioritization?

Intercom

You run a blog about web analytics and you want to conduct a competitive intelligence analysis in which Avinash Kaushik's www.kaushik.net (Links to an external site.)Links to an external site. blog is one of your competitors. Based on the paragraph below, taken from Avinash Kaushik's blog post you read this week, why might the data describing the volume of traffic to www.kaushik.net (Links to an external site.)Links to an external site. not be a representative measurement? "As Edward Snowden and the NSA/CIA/MI6/GCHQ documents releases have shown, there are many kinds of competitive intelligence in the world. Our interest here is not that type of intelligence. [Note to NSA reviewer of this blog post: I'm a harmless digital marketer, totally not worth your attention.]"

Internet searches for "Edward Snowden" may have driven the wrong kind of traffic to www.kaushik.net.

Billion / Million B/M

M/K

then exploit

Keep only 'Winner' for selection

This week, which methodology are you using to collect qualitative data on visitors to your website?

Lab usability testing

Avinash Kaushik believes that your first A/B test should contain bold, substantially different versions because the difference between your results will likely be ______.

Large

For Barak Obama's campaign website which of these four buttons did the best? Join Us Now Learn More Sign Up Now Sign Up

Learn More

context

Lemon and Verhoef, 2016 customers now interact with firms through numerous touch points in multiple channels and media, customer experiences more social in nature - firms need to integrate multiple business functions and external partners to create/deliver positive customer experiences • Address importance of experiences in today's society & opportunities to benefit from creating strong and enduring customer experiences

Customer Cons of SaaS

Less Control and Security of Data - While it is less of an issue now, some firms (especially large enterprises) are still reluctant to part with control of their data in some cases Limited Customization Available - Since all customers use the same application, there is limited customization relative to an on-premise solution

Customer satisfaction (CSAT)

Lets you see how customers are feeling specifically about your support interactions, and can take a pulse of how your team's responses are being received. .

Perpetual License

License Fee: one time fee to use in perpetuity - you get key and use software Maintenance & Support: recurring in nature, attach rate is usually 100%, typically 20% of license, terms are generally 1 year Hosting: can be on prem or hosted in the cloud for deployment, many customers will host on prem for themselves Services: implementation, customization, configuration and other services performed by the company for the customer in relation to the software

United States Facts

Life Expectancy: 80 Years People/Household: 2.5 Median Household Income: 53K GDP: 16.8T % Smart Phone Penetration: 70% % Bachelors Degree: 30% % Married Adults: 52% % < 18: 23% % > 65: 13%

It avoids being fashionable and therefore never appears antiquated. Good design is _____________.

Long Lasting

DEVELOPMENT METRICS Low cost metrics Customization metrics Quality Metrics Responsiveness Metrics Innovation Metrics ____ = measure the ability to deliver goods and services at low cost.

Low cost metrics (ex; Boeing => reduce costs in aerospace manufacturing. Can also measure the degree to which supply chain efficiencies and purchasing capabilities lower costs).

What does Lumity do and why do you think it'd be a good investment?

Lumity provides a data-driven benefits platform for SMBs that helps employers and employees forecast and plan healthcare spending (employers save money by choosing the right health plan and employees gain more insight into their healthcare budgeting) Lumity is a good investment candidate because it's a recurring revenue business model and is poised to benefit from favorable industry trends (i.e. shift within HR technology from systems of record --> systems of engagement)

Major Events in the history of SaaS

Main frame to client server to web and now cloud computing which really in many regards enables SaaS

Having an automobile chair control that looks like a chair is an example of this design principle.

Mapping

This design principle is about having a clear relationship between controls and the effect they have on the world.

Mapping

Market Entry Framework

Market Characteristics Competition Company Fit

For market entry and exit:

Market size and marketing growth should be measured

Annual Recurring Revenue

Measure of revenue components that are recurring in nature (excludes on-time non-recurring fees and professional services

Low Cost Metrics

Measure the ability to deliver goods and services at a low cost

Customization Metrics

Measure the ability to tailor products and services to customers -Can include modular design, configuration systems, flexible manufacturing, and JIT inventor -Dell allows customers to configure and customize their PC to their liking, using online configuration tools.

Responsiveness Metrics

Measure whether companies are attentive to customer needs -Include measures of development speed, attentiveness to needs, and market feedback -Many companies release new updates in the App Store to better the users experience.

Gross Retention

Measurement of annual revenue lost from a company's installed base of customers NOT accounting for cross-sells, up-sells, price increases, or organic account growth. Gross Revenue Retention will always be less than 100%. Gross Retention = total MRR from that same list of customers less any that are no longer active/customers from 12 months ago and sum of their MRR for that month This metric best isolates lost customer revenue without being obscured by a myriad of other important, but tangential factors. It allows businesses to be more accurately compared to each other, and it may also better identify business model issues that would otherwise be hard to isolate.

Development Metrics

Measures a company's ability to leverage competitive advantage and product or service development.

Days from PQL to Customer

Measures the average number of days it takes a PQL to become a customer.

Days to Break-Even know

Measures the average number of days it takes a customer to generate enough revenue to cover the CAC. In other words, it shows how quickly a company recovers its CAC.

Days from Signup to Customer

Measures the average number of days it takes a prospect to become a customer.

ACV (Annual Contract Value)

Measures value of contract over 12 month period

Multi-page funnel testing

Multi-page (also known as "funnel") testing is similar to A/B Testing except that rather than making variations to a single page, the changes you make are implemented consistently over several pages.

Enables of SaaS

Multi-tenant architectures, which provide a degree of efficiency in providing the same service to many different constituents ('one-to-many') Access to much greater bandwidth and ubiquitous broadband Internet availability Much faster and cheaper memory

Multivariate testing

Multivariate testing uses the same core mechanism as A/B testing, but compares a higher number of variables, and reveals more information about how these variables interact with one another. Think of it as multiple A/B tests layered on top of each other. The purpose of a multivariate test, then, is to measure the effectiveness each design combination has on the ultimate goal.

TRUE/FALSE: all customers are created equal.

LTV

NPV of net profit from customer over the duration of the relationship Includes: Revenue per customer per month (AOV * orders) Plus Contribution Margin (revenue minus variable costs associated with the customer (SG&A and operational costs) Avg life span of customer = 1/monthly churn LTV = contribution margin * average customer lifespan

Native advertising

Native advertising is the use of paid ads that match the look, feel and function of the media format in which they appear. Native ads are often found in social media feeds, or as recommended content on a web page.

What is negative churn and why is it so powerful?

Negative churn occurs when the expansions/up-sells/cross-sells to your current customer base exceed the revenue that you are losing because of Churn; It's so powerful because (a) you don't have to pay as much for it (one-time benefit) and (b) it increases your MRR (multi-period benefit)

Profit margin

Net Income/Sales

What is a good example of a case study for user testing?

NetFlix: Selecting the best artwork for videos through A/B testing. "At Netflix, we are constantly looking at ways to help our 81.5M members discover great stories that they will love. A big part of that is creating a user experience that is intuitive, fun, and meaningfully helps members find and enjoy stories on Netflix as fast as possible"

CUSTOMERS METRIC In ____ situations, it depends largely on whether the individual is identifiable. What happens if customers are NOT identifiable? What happens if customers ARE identifiable?

Non-contractual NOT identifiable: count visits or transactions Identifiable: count how many have bought during certain period of time (i.e. recency)

LTV:CAC Ratio

Notes: Our guideline for a successful SaaS business is that this number should be higher than 3.

Months to Recover CAC

Notes: To be perfectly accurate, this should include a Gross Margin adjustment, however in our guideline which states that Months to Recover CAC should be less than 12, we are assuming that you are using the simpler formula, and have a Gross Margin of 80% or higher.

P-Value

Null hypothesis is that metrics does not matter. P-Value <.05 means we reject the null, meaning it matters. Comfortable with anything less than .05

OKRs

Objectives and Key Results

SMART

Objectives should be Specific, Measurable, Achievable, Realistic and Timebound

Prioritization

Once you decide the list of features or request which you plan to work, but wondering which one to pick or test first, below prioritization frameworks help you in that: Impact vs Effort Weighted scoring Kano Model

RFM

One of the best customer segmentation technique based on user behaviour. It groups customers based on their history (how recently, how often and how much) and sends marketing communication accordingly. Recency Frequency Monetization

Split test common uses

One of the most common ways A/B testing is utilized is to test two very different design directions against one another. A/B testing is also useful as an optimization option for pages where only one element is up for debate.

What is the PURPOSE of the Customer Profitability metric?

PURPOSE: to identify the profitability of individual customers (not all customers are equal)

Bounce Rate:

Percentage of people who leave the webpage after viewing only one page

Porter 5 Forces

Porter's Five Forces Framework is a tool for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability. It helps you in product strategy & roadmap planning. Threat of New Entry Threat of Substitute Power of Suppliers Power of Buyers Market Rivalry

____ drives increased customer engagement, customer retention, brand loyalty, and business growth.

Positive customer experience

____________ analytics is the process of analyzing current and historical data to forecast future events.

Predictive

Step 5 of 5 in design process

Prioritize and select a SOULTION.

Triangular Comparison Test

Product is compared to two competitive products instead of one

Produktdifferenzierung: Mass Customization

Produktion von Produkten und Leistungen, welche die unterschiedlichen Bedürfnisse jedes Nachfragers treffen mit der Effizienz einer vergleichbaren Massenfertigung. Grundlage: Co Design Prozess (von Hersteller und Kunde) zur Definition der individuellen Leistung, zwischen Anbieter und Nutzer Geht über Individualisierung hinaus, da Kunden kollaborativ auch in den Wertschöpfungsprozess miteingebenden werden

Evaluate

Pros/Cons of solution Design criteria

Definition Customer Experience Management

Prozess des strategischen Managements alle Erlebnisse des Kunden mit einer Marke an sämtlichen Touchpoints des Unternehmens zum Kunden

Prozess der E Kommunikation: Sender Empfänger Modell

Quelle - Organisation / Individuum, die Botschaft sendet Kodierte Botschaft - Technische Übersetzung der Botschaft, Digitalisierung Medium zur Übertragung - Methode zur Übertragung, Email, Banner, Video Dekodierte Botschaft - Interpretation der gesendeten Botschaft - Technisch: Umwandlung in analoge Form Empfänger - Organisation / Individuum, die Botschaft empfängt Feedback zurück an die Quelle - Bewertung der Reaktion des Empfängers - Interaktion als aktive Reaktion auf die Botschaft Umwelteinflüsse auf allen Ebenen - Störungen, die Botschaft überlagern - Veränderungen der Botschaft - Missverständnisse, Ablenkung

What is every prioritization matrix or scorecard ultimately based on?

ROI

Return on Marketing Investment (ROMI):

ROMI = (Marketing Revenue * Contribution Margin) / Marketing Spending

Click Through Rate (CTR):

Ratio of people who click on a link compared to the total number of people who saw the link.

____ is the length of time since a customer's last purchase.

Recency

Revenue

Recognized when the service is provided or ratably over life of the subscription agreement

Customer Journey

Reise eines potentiellen Kunden über verschiedene Touchpoints: Von der Inspiration und Bedürfnisweckung über Informationsbeschaffung und Suche bis zur finalen Zielhandlung.

Market Entry Framework: Market Fit

Relation to existing brand promise, expertise, economies of scale, distrib channels, supplier relationship

Grow CTR

Research target customer to understand messaging they respond to. Keyword research tool to find words customer likes/dislikes. Power words: provoke urgency, authority, performance, advanced tech, scarcity, social proof. Eye catching images. Clear call to action. Demographic targeting

____ is the ratio of the number of retained customers to the number at risk.

Retention rate

_____ = revenue from marketing multiplied by the contribution margin divided by marketing spending

Return on marketing investment

Gross profit = Unit margin =

Revenue - COGS Selling price - Cost per unit

Pre-Tax Income

Revenue - COGS - SG&A - R&D - Interest Expense

Net Income

Revenue - COGS - SG&A - R&D - Interest Expense - Taxes

Acronym to manipulate prod/serv?

SCAMPER S.ubstitute C.ombine A.dapt M.odify/Maginfy P.ut to other use E.liminate R.everse/Rearrange

Definition of SaaS

SaaS is an application or service that is provided through a browser over the Web. The business model typically associated with this is a subscription model, where a fee is paid for a service to be consumed over a set time or duration.

__________ is an important aspect to consider when obtaining competitive intelligence data from web analytics vendors

Sample size

Customer Satisfaction Metrics

Shows how engaged customers are, how much value they derive from your product, and whether they will recommend your solution to peers. Customer satisfaction reflects how a customer perceives the value and experience with your company, brand, and product. A few examples of metrics in this category include Net Promoter Score (NPS), Customer Behavior Index (CBI), and Customer Lifetime Value (CLV).

AIDA

Similarly, AIDA framework is also popularly used to optimize marketing channel and communication. It describes the effect of advertising media and helps to explain how an advertisement or marketing communications message engages and involves consumers in brand choice Awareness Interest Desire Action

URL targeting

Simple match, exact match, substring match, regex

Magazine

Site has a lot of regularly-updated content in multiple categories. Alternating sizes of columns, cards, and/or headlines

___________ surveys are good at capturing the macro experience of a customer's visit to your website.

Site-level

Market Entry Framework: Market Characteristics

Size, growth, profit margins, trends (regulatory, customer preference)

According to the Recency definition, what is a six month customer?

Someone who purchased at least once in the last six months.

Streaming Services - Paid Subscriber Base

Spotify: 100M Netflix: 150M Apple Music: 56M Pandora: 6.8M Hulu: 27M HBO Now: 8M

Statistical significance

Statistical significance represents that likelihood that the difference in conversion rates between a given variation and the baseline is not due to chance.

Typische Touchpoints

Suchmaschine Mobile Online Werbung Social Media Freunde POS TV Radio

T or F: In order for a company to be competitive, it needs to have a firm understanding of its brand. T or F: A lot of marketing is for the purpose of investing in the long-term value of a brand rather than seeking immediate sales. .

T T

How many ideas should you share when presenting solutions for a design problem?

THREE. Think up ten and choose the best three.

TRUE/FALSE: CLV model assumes if customer is lost (i.e. not retained), they are lost forever.

TRUE

TRUE/FALSE: Churn rates are dependent on the industry standard - can vary dramatically between industries

TRUE

TRUE/FALSE: Companies often aren't selling directly to customer - what customer pays versus what you get (as a company) is the added value provided to the consumer (e.g. retailer provides customer service and ~sometimes~ delivery).

TRUE

T or F: A firm runs marketing analytics to assess the success of its overall marketing strategy. T or F: Big data analytics has not allowed managers to keep up with their marketing campaigns in real-time. T or F: Marketing analytics is not a continuous function of measuring results of campaigns.

TRUE FALSE (it has!) FALSE ( it can be conceived as having a "rinse, lather, repeat" cycle.)

This is arguably the most difficult step of the marketing analytics process ... 1 Identify the metrics 2 Analyze the metrics 3 Take improvement actions

Take improvement actions

_____ = In this stage, the marketing analytics manager must implement changes to help the campaign perform better or continue good performance trends. 1 Identify the metrics 2 Analyze the metrics 3 Take improvement actions A/B testing can be useful during this stage since it allows marketers to make the related changes until the best performing marketing effort can be achieved. T or F: diminishing returns exist when optimizing a marketing campaign.

Take improvement actions Take improvement actions TRUE

What does it mean when you talk about distribution channel ALIGNMENT?

Talking about how you incentivize channel members (with money) to serve customers efficiently and effectively.

Customer journey mapping

Technique for optimizing customer processes and developing innovative management concepts. Helps visualize the purchase process from the consumers perspective.

Multi-page testing common uses

Testing different design directions against one another can easily be done using multi-page testing.

Use Testing

Testing the prototype under normal operating conditions

Multi-page limitations

Tests with too many variables take longer to run; it will also be more difficult to determine the impact of each individual change you make to each page. When setting up a multi-page test you must have the same number of variations for every page that is part of the experiment.

5W's & H

The 5W's & H also help product manager in asking a right question and gather information about the problem before jumping into solution or some conclusion. What is it? Who is it for? Why do they need it? When is it available? Where is it available? How does it work?

REST API

The Optimizely REST API lets you create and manage Optimizely projects and the experiments inside of them.

Marketing Media Life Cycle

The Process of creating and running a campaign through several stages: -Design -Implementation -Evaluation

What is the Rule of 50 and why is it a good measure of performance for a SaaS company?

The Rule of 50 is when LTM revenue growth plus LTM EBITDA margin > 50%; it's a good measure of financial performance because it demonstrates that the company is growing fast but also maintaining profitability

Brand recognition

The ability to confirm a prior exposure to a brand

Average Selling Price (ASP)

The amount of revenue per customer generated.

Customer Acquisition Cost (CAC)

The average amount that a company spends to acquire a single customer. CAC is the sum of all customer acquisition costs, including sales and marketing expenses (and salaries), divided by the number of customers acquired during the same period.

Channel attribution

The breakdown of how a SaaS company allocates its marketing dollars between various marketing channels (e.g. SEO, SEM, viral marketing, social media marketing, email marketing)

Digital Transformation

The change associated with the application of digital technology to all aspects of human society.

Gross vs Net churn

The difference between the two is significant. Gross churn estimates the actual loss to the business, while net revenue churn understates the losses (as it blends upsells with absolute churn).

Value Gap

The discrepancy between what a customer expects from the product and the value received or perceived.

Need recognition

The first stage of the buyer decision process, in which the consumer recognizes a problem or need

What does the CAC Payback Period (CPP) represent?

The months of contribution margin to pay back the cost of acquiring a customer

Multivariate test common uses

The most commonly cited example of multivariate testing is a page on which several elements are up for debate — for example, a page that includes a sign-up form, some kind of catchy header text, and a footer.

"Conversation Rate" is defined as:

The number of conversations per social media post. On Facebook, this would be comments; on Twitter it would be replies.

PESTEL

The outcome of PESTEL is an understanding of the overall, external picture surrounding the company. Political Economic Social Technological Environmental Legal

Net MRR Churn (a.k.a. Net Revenue Churn)

The percentage of MRR change based on churned and expansion MRR for the same period. It is calculated by subtracting expansion MRR from churned MRR and dividing that by MRR at the start of the period. Net MRR churn is the percentage of MRR lost from existing customers in a period.

MRR Expansion Rate (a.k.a. Net Revenue Retention Rate)

The percentage of MRR that is gained due to upsells and cross-sells to existing customers for the period for which MRR expansion is calculated. It is calculated by dividing the amount of expansion MRR by the starting MRR.

PQL-To-Customer Rate

The percentage of PQLs that convert to customers. It is calculated by dividing the number of customers by the number of PQLs. The PQL-to-customer rate shows how effectively your company converts PQLs to customers.

Signup-to-PQL Rate

The percentage of prospects that complete profile and in-product engagement requirements to become product qualified leads (PQLs). It is calculated by dividing the number of PQLs by the number of signups. The signup-to-PQL rate provides insights into how effectively your company engages prospects in the early stages of reaching initial value.

Signup-to-Customer Rate

The percentage of signups that become paying customers. It is calculated by dividing the number of customers by the number of signups. The signup-to-customer rate shows how your company, on average,

Visitor-to-Signup Rate

The percentage of visitors that visit your page and then sign up. It is calculated by dividing the number of product signups by the number of visitors to a signup page. The visitor-to-signup rate shows how effectively your company convinces visitors to sign up for free trials or a freemium.

Product Champion

The person who has the highest level of engagement with your product, and has a good understanding of who will be using your product in his/her organization, as well as which roles each user has.

Lead generation

The process of finding customers that have an interest in a product or service. Some examples of lead generation tactics (lead generators) in digital marketing are: a. email b. display advertisements c. search engine marketing d. promoted social media e. native advertising

Customer Onboarding

The process of getting a newly subscribed customer (or account) up and running effectively with your product, including training, account and team member setup and assistance with integrations. The goal here is to set up the customer to realize the full value of your product, thereby retaining customers while also expanding business within the account, or getting referrals from your happy customers.

Multivariate test limitations

The single biggest limitation of multivariate testing is the amount of traffic needed to complete the test.

Which step in acquisition funnel has the issue? How I can fix that issue?

The step that has the largest drop off in engagement is the one that needs to be addressed because therein lies the largest quantity of customers to engage

Customer Experience Era

The third wave of SaaS, where customers now research, evaluate, select, and share experiences that feel more like consumer experiences, including multiple touchpoints and interactions.

Moment of Joy

The time when a prospect feels the value in the product. Similar to the Moment of Truth; especially popular in the gaming industry. Successful product-led conversion connects moments of joy with recognition and rewards when a user performs a desired action.

The social media metric, "Engagement", measures which of the following:

The total number of likes, shares, and comments on a post

New Sessions:

The total number of new site versus recurring visitors.

Average Customer Life (ACL):

The total time (in days) of a relationship between a customer and the company. It measures an average number of days (or months) between the day a prospect becomes a customer and when the customer churns (or cancels)

DIGS

There is another DIGS framework by Lewis C. Lin which also helps to answer the behavioural question in a structured and impactful way. Dramatize the situation Indicate the alternative Go through what you did Summarize your project

Valued (Golden) Features

These help companies understand which product capabilities deliver customer value and fill the Value Gap. The idea also provides a mechanism to know which customers receive value from product features, and which customers are not engaged at key stages in their lifecycle.

Contextual Engagement

This happens when the right customer receives the right messages at the right time through the right channel.

Value-Based Pricing

This involves knowing which product features customers value most.

Cost Per Conversation

This is price it costs your company to have each individual conversation answered. It is calculated by adding your employee salary, burden rate (usually about 50%-60% of salary) and the cost of your tools and then dividing it by the number of conversations for that same period.

In-Product Call To Action

This reveals prospects' buying intentions and helps to drive prospects to PQLs or conversion events.

Nothing must be arbitrary or left to chance. Care and accuracy in the design process show respect towards the user.

Thorough down to the last detail

Why might it be useful to maintain negative profit relationships?

To cover fixed costs

***What is the PURPOSE of the following metric(s)? Customers, Recency & Retention

To monitor firm performance in attracting and retaining customers To count customers and track customer activity

If Orbitz derives 35% of its revenues from advertising and other sources, how much would its total revenue be? Assume that Orbitz's non-advertising revenue is $675M.

To solve for this question, you want to need to setup the equation: $657M non-advertising / (1 - 35% advertising and other revenues) = $657M / .65. You can round this to: ~$650M / .65 = ~$1B

Why is calculating CUSTOMER PROFITABILITY important?

To understand which customer relationships are better than others

Total Contract Value

Total Value of contract (includes one-time, professional service fees, and recurring charges)

Customer Acquisition Cost (CAC)

Total marketing costs over a period of time/ Total amount of new customers in that same time period.

Unique Visitors

Total unique visitors to a webpage (monitored by IP address)

Total Visits:

Total visits to a webpage (non-unique, including unlimited visits by the same person)

Vergleich traditionelle vs E Communication

Traditionelle Kommunikation Unternehmen pusht auf Kunde, Kunde gibt Antwort Interaktive Marketing Kommunikation Unternehmen und Kunden stehen in Pull / Push Relation zueinander. Das Antwort äußert sich als Feedback, das wechselseitig in beide Richtungen geht.

Kommunikationsmatrix (2x2)

Traditionelle Massenmedien - TV, Radio, Print, Plakate Direktkommunikation - Vertreter, Handelsvertreter, Kundenservice Allgemeine Online Kommunikation - Email, Banner, Digitale Reklame, Virales Marketing, Portal Sponsoring Persönliche Online Kommunikation - Personalisierte Werbung, Persönliche Email, Persönliche Webseite

M*M

Trillion

*A/B testing is a marketing experiment that tests a number of variations of a campaign and determines which performs better by showing various campaigns to the same audience.

True

*Companies review their product offerings mainly because they seek to identify unprofitable elements of their portfolio.

True

*Conjoint analysis is a method for assessing customers' preferences that decompose overall preferences for product bundles into preferences for each product attribute option (part-worth utilities).

True

*Marketers view products at three levels: core product, tangible product and augmented product.

True

A multitouch conversion occurs when a customer is exposed to several advertisements, promotions, and/or email campaigns prior to converting.

True

A simple change in the wording of the call-to-action ("Submit" vs. "Support Haiti") on the Clinton Bush Haiti Fund website resulted in increased donations.

True

According to Avinash Kaushik, the primary purpose of a dashboard is to drive action.

True

All testing should start with a hypothesis.

True

An example of context for your website's bounce rate would be to compare this metric from two different time periods.

True

Competitive intelligence (CI) data collected with web-based CI tools is not useful for low-traffic websites (less than 100,000 unique visitors per month).

True

In general, long tail search keywords are fairly easy to rank in Google because they have low search volumes.

True

In general, social media ROI is the return a company gets from the time, money, and resources spent on social media marketing.

True

Information collected from toolbars is a source of competitive intelligence data.

True

Lab usability tests measure a user's ability to complete tasks.

True

One way to provide context to your data is to segment it.

True

Search engines have distinct user bases, so it is advised that you not generalize your insights over all of them.

True

There are 4 stages of a lab usability test: Preparation, Conducting the test, Data analysis, and Follow-up.

True

*The new product development process comprises five stages.

True. Opportunity, Identification, Design, Testing, Introduction, Life Cycle Management.

What is A/B Testing?

Two versions of an element (A and B) and a metric that defines success. Subject both versions to experimentation simultaneously.

What is A and what is B

Typically, A is the existing design (called the control), and B is the new design. Split your website traffic between these two versions and measure their performance using metrics (conversion rate, sales, bounce rate, etc.). Select the version that performs best.

Internet Users by Major Country

USA: 286M (89%) China: 731M (52%) India: 462M (36%) Japan: 118 (93%)

Cost of Goods (SaaS)

Unavoidable costs - hosting, customer support, third party license agreements, data fees, etc. Rainmaker gross margins averaged 77% - accounting for direct costs such as personnel, professional fees/support, software, travel, and marketing

A design which is ____________ clarifies the product's structure. Better still, it can make the product talk. At best, it is self-explanatory.

Understandable

Populations: USA

United States: 320M NYC: 8.4M Los Angeles: 3.9M Chicago: 2.7M San Francisco: 800K Seattle: 700K

Design which is ________ should is both neutral and restrained, and leaves room for the user's self-expression.

Unobtrusive

Broad, 'category' keywords are usually associated with the:

Upper portion of the search keyword funnel

Estimation for pricing, consider

Upselling, average item at SBX $5, but ppl buy non drinks so maybe $6

Listing Solutions stage of CIRCLES

Use SCAMPERS or General Creativity Templates to brainstorm x2-3 Tip: think big

rawson et al 2013

Use whole journeys, not just touchpoints • Companies have focused on touchpoints but this narrow focus on maximizing satisfaction at these points -> distorted picture that customers are higher than they actually are and divert attention from the important customer's end to end journey • Organisations successfully managing the entire experience -> enhanced customer satisfaction, reduced churn, increased revenue, greater employee satisfaction • More touchpoints, more complexity - companies need to embed journeys in their operating models (identify journeys they need to excel, understand performance) • Identify key journeys - draw on customer and employee surveys to assess performance • Understanding current performance - examine each key customer journey to understand causes of performance (additional research) • Journey-based transformations take years to perfect, but reward is high customer and employee satisfaction, increased revenue, lower costs

SCAMPER

Used to brainstorm ideas - Substitute - Combine - Adapt - Modify - Put to other uses - Eliminate - Rearrange

MOB

Used to rate product advertising effectiveness - Memorable - Oh, Product - Benefit

Good design emphasizes the product is ________ whilst disregarding anything that could possibly detract from it.

Useful

What is an effective way to describe a customer's wants/needs?

User Stories "As a <role/persona>, I want <goal/desire> so that <benefit>."

What is a reliable way to prioritize?

Using a matrix with the following headers: - Revenue - Customer Satisfaction - Ease of Implementation - (Overall Score)

Pre-existing mental models

Utilizing habits people are use to e.g. flipping through photo book -> for digital photos, flick with finger

VULNERABLE CUSTOMERS: FREE RIDERS: STAR CUSTOMERS: LOST CAUSES:

VULNERABLE CUSTOMERS: High profitability; low customer experience (valuable but do not RECEIVE much value). At risk to competition. FREE RIDERS: Low profitability; high customer experience (highly satisfied). Upsell. STAR CUSTOMERS: high profitability; high customer experience. Keep loyal. LOST CAUSES: low profitability; low customer experience. What is the cost of keeping?

Books

Value of contract between company and customer

Moderator variable

Variable that changes the way independent variable affects or relates to the dependent variable

Design principle that the more easily an element is to see, the more likely users will know about them and how to use them.

Visibility

Prioritizing what interface elements are on screen and hiding those less important is an example of this design principle

Visibility

Dimensions

Visitors to your website are not all the same. They differ by source, browser, and other important attributes. Optimizely stores data about every visitor to your page, like when they arrived, what device they use, and where they came from. Each type of information that Optimizely collects is called a dimension.

How did Netflix measure which artwork worked better for titles?

We measured the engagement with the title click through rate, aggregate play duration, fraction of plays with short duration, fraction of content viewed (how far did you get through a movie or series).

Instrumente der E Kommunikation

Werbung Banner, Pop Ups, Ad Breaks, Email Verkaufföderung Promotions, Intranet, Extranet, Allianzen Public Relations Informationsveröffentlichungen, Emails Sponsoring Site Sponsoring, Sponsorships Event Marketing Product Placement, Digital Events Direktkommunikation Direct Mailings, Newsletter, Webseitenindividualisierung Multimediakommunikation Online Kataloge, Interaktive Trainings, Internet Telefonie, Chats

Zero Data (Empty State)

What a prospect sees during their initial signup process when no data is available in the product. To address this, guide the prospect through a journey that populates, uploads, or integrates data to a product.

Jobs to be done

What customers need, want, or desire to get done in their work and in their lives.

The authors of "A/B Testing: The Most Powerful Way to Turn Clicks Into Customers" believe that the overall testing process should begin with which of the following questions:

What do you want to test?

5 C's of Product Pricing

What is the best price for your products or services? This 5 C's framework helps you to determine the optimum price tag for your product. Company Objective Customer Cost Competitor Channel: Distribution Channel

Questions About ACV

What is the size? Are you getting a few hundred dollars per month from your customers, or are you able to close large deals? Of course, this depends on the market you are targeting (SMB vs. mid-market vs. enterprise). Is it growing (and especially not shrinking)? If it's growing, it means customers are paying you more on average for your product over time. That implies either your product is fundamentally doing more (adding features and capabilities) to warrant that increase, or is delivering so much value customers (improved functionality over alternatives) that they are willing to pay more for it.

REAN

What should your digital strategy look like? How should you market your product? Are you using the right channels? The REAN model, popularised by Steve Jackson help product manager or product marketers to answers such questions. Reach Engagage Activate Nurture

When does margin erosion typically occur? In other words, when does COGS increase due to poor marketing?

When add features to product/service that customer does not want and is unwilling to pay for

Focus 10

When don't have a basis of estimation, think of 10 friends and determine estimate based on this. Then adjust a bit for bias

Populations: World

World: 7.4B Europe: 738M Asia: 4.4B South America: 423M Africa: 1.2B China: 1.4B India: 1.3B Japan: 126M UK: 65M

Pick a product in the room. List three personas & pick one. List two user stories.

Write them down!

Why is evaluating the tradeoffs of proposed solutions beneficial?

You come across as thoughtful, analytical, and objective. You protect yourself from being defensive. You mentally prepare yourself for criticism by critiquing yourself. The interviewer will also have fewer things to criticize.

How to Evaluate the momentum of a SaaS business

You would look at ACV as opposed to TCV and you would like at the year over year growth in ACV bookings as opposed to TCV as TCV will not represent the up front revenue recognized, billings is simply an accounting classification to determine when customers pay you, does not dictate when you recognize revenue

Why integrate Optimizely and Google Universal Analytics?

You'll have a direct view of how Optimizely experiments affect the metrics you track in Google Analytics. You'll be able to see Google Analytics data for each variation in your experiment. You'll be able to filter your Google Analytics reporting by visitors who were successfully included in an Optimizely experiment and exclude those who weren't.

When to use Manual Activation Mode

You're easily able to deploy the Optimizely API call code to your site and would prefer calling activate from within your native JavaScript for finer-tuned control Your site is set up such that all experiments need to be manually activated at some time after Optimizely loads A very specific action must be taken on the page to activate an experiment, and that action can only be captured from within your site's native code

Do you need Manual/conditional activation?

You're testing a multi-step form, which appears in a modal and uses a "Next" button but doesn't load a new page. You're testing a web application, which re-renders the page when visitors perform certain actions, but doesn't re-load the page. You're testing an e-commerce site and want to run an experiment when customers modify the product. You're running an experiment that changes an object that appears at a certain scroll depth. You need to run experiments on an AJAX site, where elements are dependent on ajaxComplete You're running an experiment on a site using Angular, Backbone, Ember, or Knockout.

Unified Customer Profile Data

Your organization's system of record for all customer profile, company, and behavioral data.

When to use Conditional Activation Mode

Your site is built on a single page app framework (like Angular.js or Ember.js) and you want to activate an experiment based on an event fired by that framework. A visitor must take certain actions on a page before being bucketed into an experiment, such as triggering a modal, scrolling to a certain point, or activating a widget or other dynamic module There is an AJAX request that happens long after the page has finished loading, and that AJAX request returns new content that needs to be modified

Preisbündelung

Zusammenstellung von Produkten und die damit verbundene Preissetzung Arten: Reine Bündelung: Verkauf von Produkten in Bündeln (Kfz + Sonderaus.) Gemischte Bündelung: Auch einzelner Verkauf von Produkten (Smartphone und einzelner Vertrag) Entbündelung: Produkte nur einzeln angeboten

Nichtlineare Preisbildung

Zwischen Preis und Leistung gibt es keinen proportionalen Zusammenhang Nichtlineare Preisbildung basiert auf Absatzmenge und der Selbstselektion der Nachfrager. Anbieter gibt nur Tarifstruktur vor. Nachfrager verteilen sich auf Segmente. Ziel: Gewinnsteigerung durch Abschöpfen der unterschiedlichen Zahlungsbereitschaften Beispiele: Mengenrabatte, Buy three, get one free, Blocktarife, Pauschalpreise

Digital marketing metrics: _____ ____ = The number of people who have taken a desired marketing outcome, examples include completing a checkout on an e-commerce site, filling out a lead form. _____ = The number of times marketing content has been displayed, including the same person multiple times and regardless of whether there is any response to the marketing content _____ = The number of people who received impressions _____ = The total conversions divided by the total reach _____ = The conversion rate at the campaign or platform level (e.g., the conversion rate for a particular marketing video delivered to new site apps on a mobile phone) _____ = The portion of customers who make it through to the next level of each step in the journey from impression to conversion

____ Conversions Impressions Reach Conversion Rate Micro conversion rate Conversion funnel rates

When considering the frequency distribution of search keywords, the 'long tail' refers to:

a large number of keywords that each drive only a few visitors to your website

Algorithm

a set of rules for problem-solving using computer programming

After-only design

a single outcome is measured only after participants have been assigned to condition

Geofence

a virtual geographic boundary, defined by technology on a mobile phone, that enables an app to know when a customer with a mobile device enters or leaves the defined area

Scalability

ability of a computing algorithm to work across a spectrum of capabilities and be ready for changes in the number of computers / people dependent on it

Marketing intuition

ability to understand or predict a marketing phenomenon immediately, without the need for data analysis

purpose of customer journey mapping:

able to view digital marketing from the perspective of the consumer, identify market growth opportunities, develop innovative operating processes, insight into synergy between channels, helps identify what organizational changes are needed to facilitate product realization, evaluation and improvement of the realized product and provides direction for handling the process of measuring customer experience.

If the data you collect has values that are very close to the actual value of what you are trying to measure, your data has good:

accuracy

Iterative process

achieving a desired result by repeating a cycle of operations

Experimentation

act of running a scientific procedure to validate or reject a hypothesis

User Engagement Metrics

active users, average session duration, and number of key actions already provide a pretty good framework to assess engagement

Intelligent personalization

algorithms that personalize websites to individual site users

Avinash Kaushik recommends that the 'words in English' you incorporate on a digital dashboard involve which of the following:

all of these

Field experiment

an experiment in naturally occurring environment rather than a lab

Within-subjects design

an experimental design in which the same participant is exposed to more than one condition, each with its own outcome measure

Word cloud

an image with words from a textual source presented in different font sizes that indicates word frequency

Who Participates in Customer Experience

any entity that can impact the customer experience: - customer - other customers - employees - media - influencers - public, communities - governments

Machine learning

application of artificial intelligence that allows systems to automatically learn & improve without actually being programmed to do so

Geographic information system tools

applications that present data in the form of a map

Artificial intelligence

area of computer science that emphasizes the creation of intelligent machines that work and react like humans

Concentrates on the essential aspects, and the products are not burdened with non-essentials.

as little design as possible

Lifetime value (LTV)

average gross revenue generated by a customer over the period of retention

Sequential Monadic Test

back-to-back monadic tests with the same respondent

If you think you might lose customers if you don't make an investment, what should you consider?

balance decision against the future value of that customer

2. Analyze the metrics -The measurements of the current state must be compared to ______ aka measurements of the hypothetical ideal state to see whether a campaign has under- or over-performed -The most important step in analysis step is to ... .

benchmarks determine the root cause of why metrics performed as they did

Defining the customer requires a clear understanding of both ____ and ____.

business strategy; buyer behavior ex.: retailers count transactions (i.e. receipts)

________ = is the process of creating and running a campaign through several stages

campaign life cycle

Causal inference

cause-and-effect interpretations of research methods

Isolation

change of only one variable at a time in an experimental test of a specific hypothesis

Before actually conducting a competitive intelligence analysis, it is important to research how your tool _____________.

collects data

Product Adoption

combined effort of successfully onboarding new users while retaining existing customers

post purchase experience

compare product with previous expectations - Be careful to create positive post-purchase communication to engage customers - most important part to repetition

Neural network

computer system modeled after the human brain and nervous system

Initial consideration

consumer considers an initial set of brands (Based on brand perceptions, exposure to recent touch points) - Brands in initial consideration can be 3x more likely to be purchased eventually

The RETENTION RATE metric applies to ____ situations.

contractual ex.: Netflix - customers either renew or cancel subscription

A/ B Test

controlled experiment that tests two conditions

Discount rate

cost of capital for the organization

Which multitouch attribution analysis model is difficult to generalize to other businesses?

custom credit

MRR Churn

customer churn rate and MRR churn rate can be very different

Customer Count Retention

customer retention, is the strongest growth engine for SaaS companies

Margin

customer revenue - cost it takes to service the customer

Customer profit formula:

customer revenue - customer costs.

Customer profit

customer revenue minus customer costs

data preparation capabilities

data discovery, profiling, cleansing, validation and transformation, including data integration

choice of sales channel

deciding where to make the purchase

Applied artificial intelligence

designed to work on specific tasks, such as trading stocks or controlling an autonomous vehicle

Product Usage - Stickiness

determines the level of engagement customers show within your solution

purchase decision

disrupted by negative customer feedback and motivation to accept it

Pine & Gilmore 1998 "Welcome The Experience Economy" Harvard Business Review

economic value increasingly differentiated by experiences factors of demand: experiences= memorable, personal, sensations

In terms of competitive intelligence (CI), _______________ is the type of CI analysis that is mainly focused on what is happening in the industry.

ecosystem-centric

Internet of Things

enables more of the physical and natural world to be integrated into and to become accessible via the internet enables greater access and connection to customers

Fixed horizon

end-point in time for having the data collected

quality metrics

ensure that companies produce high quality products and services

W1 retention

essential metric that you need to optimize to increase customer retention. The majority of users churn during the first week after sign up.

Customer Experience

every relevant phenomenon/behavior - thought - feeling/emotion - psychological process (memory, belief, attitude formation) - senses (sight, smell, sound, touch, taste) - action * customer- related phenomenon/behavior is considered "relevant" to an organization if it is in someway related to organization's brand, product, profit, etc.

post purchase experience

expectations built based on experience to inform the next decision journey

Laboratory experiment

experiment run under highly controlled conditions

Designing a marketing campaign often starts with what type of research ?

exploratory research

Behavior targeting is the process of determining whether customers are happy or sad when they see an advertisement.

false

In a testing scenario, it is not necessary to define a quantifiable measure of success.

false

When conducting a survey, you should ask the customer as many questions as possible.

false

When considering their social media ROI, it's not important for a company to define their social media goals.

false

When creating a digital dashboard, you should try to pack in as much data as possible.

false

Feature Adoption

feature announcements and feature adoption become important to make sure that your customers follow the developments in your product roadmap

information search

find best solution searching internal/external environments (print, visual, WOM), options open, online search, staff help

good power/ bad power

good = 80% bad = 30% If your power is low, then you miss many actual effects, so most of your positive results consist of false positives

Gantt chart

graph that displays information as a bar chart illustrating a project schedule

Pie chart

graph that displays information as a circle divided into slices to illustration proportion

Tree map

graph that displays information as a diagram of hierarchical data in the form of nested rectangles whose size reflect a variable's quantitative value

Area chart

graph that displays information as a line chart for which distinct areas between the lines and the axes are emphasized colors, textures, and hatchings

Radar chart

graph that displays information as a line chart or area chart with many axes representing more than two variables in the data

Heat map

graph that displays information as a map in which variables are represented using colors

Box-and-whisker plot

graph that displays information as a rectangle depicting quartiles with lines extending vertically to indicate variability outside the upper and lower quartiles

Bubble chart

graph that displays information as a scatter plot with an additional dimensions of quantitative data represented by changing dot size

Line chart

graph that displays information as a series of data points connected by straight lines

Scatter plot

graph that displays information as dots representing correlation between two variables

Bar chart

graph that displays information as horizontal bars

Column chart

graph that displays information as vertical bars

Geographical information map

graph that displays information related to spatial variables in the data and in the real world

Quick Ratio

growth efficiency of a SaaS company

Marketing Software

hardware= stores, warehouses, salespeople, etc. software= set of programs/plans/designs that enable, guide, or influence the customer experience

result

how satisfied are you with your decision?

Orientation

identify your customers goals (take into account their goals can change throughout their journey)

satisfaction

if satisfied --> brand loyalty (skip information search and evaluation)

#of people who saw your add

impression

Type 1 error

incorrect rejection of a true null hypothesis

Type II error

incorrect retention of a false null hypothesis

D1, D7, D30, W1 Retentions

indicate the percentage of users who are active after one, seven and 30 days after signing up.

Active Users (DAU and MAU)

indication of engagement and activation

Digital marketing funnel

is a channel of goals that the marketer wishes to lead as many consumers down as possible

ARR per customer

is it flat or growing? If upselling/cross-selling your customers, it should be growing

When selecting an ISP-based competitive intelligence tool, you should look for the one that uses the _______ sample size because you want to avoid ______.

largest ; bias

The __________ attribution model assigns full credit for a conversion on your website to the last interaction.

last click

The ________ attribution model assigns 100% of the credit to the second to the last channel before conversion.

last non-direct click

The _________ attribution model assigns the same amount of credit to all interactions.

linear

Unsupervised machine learning

machine learning that does not need input for the algorithms and does not need to be trained

Supervised machine learning

machine learning that requires humans to provide input and desired output as well as feedback about prediction accuracy during the beginnings of the system

deep learning

machine learning that uses neural networks to identify relationships in data by modeling processes of the human brain

Promotional campaign

marketing communication designed to present information about, increase demand for, or differentiate a product

Autonomous media buying

marketing platform that performs digital media buying on behalf of clients

Statistical significance

measure of whether a research finding is meaningful because it is unlikely the finding has occurred by chance or error

innovation metrics

measures of a company's ability to innovate

Development process metrics

measures of a company's ability to leverage its competitive advantage and product development

responsiveness metrics

measures of a company's attentiveness to customers

low cost metrics

measures of the ability to deliver good and services at a low cost

Customization metrics

measures of the ability to tailor products and services to customers

Digital marketing metrics

measures of the success of marketing campaigns on digital media

ACV (annual contract value)

measures the value of the contract over a 12-month period.

modified in some respect (treatment)

This module describes the analysis of conversions on your website that are influenced by _________ marketing channel(s).

multiple

capsule network

neural networks that recognize relationships among various parts of a subject to easily and quickly recognize that subject in a different image

The RECENCY metric applies to ____ situations.

non-contractual WITH IDENTIFIABLE CUSTOMERS Example: eBay tracks active users defined as those who bid, bought, or listed an item in the past twelve months (rolling twelve) vs. previous twelve months.

Natural experiment

non-randomized experiments in which nature makes the assignments to condition

Avinash Kaushik believes that we live in a world of __________ marketing.

nonline

Sample size

number of participants to include in AB test or other experimentation

Referrals

number of people who clicked a link from another website to get to the website.

Social traffic

number of people who found the website through social media.

Total Conversions

number of people who have taken a desired marketing outcome, as defined by the marketing team. Examples include completing a checkout on an ecommerce site; filling out a lead form; subscribing for a service; or signing up for a newsletter

Organic traffic:

number of people who reached the website by perform a search from sites like Google or Bing.

Direct Traffic

number of people who typed in the URL to get to the website.

aligning marketing with journey

o from focusing brand advertising on the initial-consideration phase to developing Internet properties that help consumers gain a better understanding of the brand when they actively evaluate it o may need to retool their loyalty programs by focusing on active rather than passive loyalists or to spend money on in-store activities or word-of-mouth programs Four kinds of activities can help marketers address the new realities of the consumer decision journey: 1) Prioritize objectives and spending - to be more specific about touch points used 2) Tailor messaging - win part of the journey with greatest revenue oppt. 3) Invest in consumer-driven marketing - internet, buying properties attracting customers (websites, WOM programs, customized advertising) 4) Win the in-store battle - important selling factors of packaging, customers influenced by visual dimension (e.g. favourable shelf position)

Time to Value

onboarding metric which truly defines the success of your business

loyalty

ongoing relationship starts here

Commercial data visualization tools

online or desktop software packages that offer a wide range of options for visualization for a price

Digital marketing platform

online places for the marketing of good or services

Downgrade

opposite of the expansion metric which takes into account the effectiveness of renewals and upsell carried out by sales and customer success

Dependent variable

outcome variable of interest

Customer profitability measures the ____. CLV measures the ____.

past; future

Retention rate

percentage of customers who remain loyal over time

Customer Retention Rate (CRR):

percentage of customers who return to buy again.

customer journey phases

phases presenting potential battlegrounds where marketers can win or lose: 1) Initial consideration 2) Active evaluation 3) Moment of purchase 4) Post purchase experience

The ________ attribution model assigns 40% of the credit to the first interaction, 40% to the second interaction, and 20% is distributed evenly to the interactions in the middle.

position based

Crowdsourcing

practice of gathering information by soliciting the services of a large number of people, either paid or unpaid, typically through online connections

Randomization

practice of using chance methods to assign participants to experimental conditions

If the data you collect has values that are very close to each other (regardless of how close they are to the actual value of what you are trying to measure), your data has good:

precision

Significance level

probability that a statistical test will reject the null given that it is true

Statistical power

probability that a statistical test will reject the null hypothesis given that it is false

Scientific method

procedure consisting of systematic observations for testing hypotheses

Manipulation

process of intentionally presenting each variable

active evaluation

process of researching potential purchases, adding/subtracting brands as they evaluate what they want (e.g. information gathering, shopping) - Brands under consideration can expand rather than narrow as consumers seek information/shop a category - Most touch points involve internet reviews, WOM from family, recollections e.g. GM - strong sales incentives to win during this phase but the real challenge is the initial-consideration and post purchase (e.g. Honda dominates with loyal purchasers that generate positive WOM)

journey based thinking

process-based thinking by grouping people by the route, not destination --> continuous improvement • customer segmentation - customers grouped by product purchased • route segmentation - customers grouped by the route they took to buy the product • devices you "touch" capture Customer Journey data o all channels and devices that have an IP address (e.g. cookers, fridges) o all stages on each journey - shopping, working, social media, travel • digital data examples of better journeys Maintenance done for customer instead of just informing the car issue Fit fix into journey of owner

Hypothesis

proposed explanation of some phenomenon, used as a starting place for further investigation

data integration

pulling together data from different internal and external sources

purchase and start using

purchase product, receive product

metrics

quantifiable measures used to track the status of a marketing process

Estimation for stores, base off of

ratio of residents/store one area

problem recognition

recognition of the need (internal or external stimuli like adverts, awareness)

Swarm intelligence

recurrence of many organisms amplifying their group intelligence by forming groups with the inherent ability to establish feedback loops among members

Availability bias

reliance on examples that immediately come to mind when evaluating a topic, typically from people's own personal lives

Evaluation of alternatives

research on all other options available online to find the right one

After determining a customer's lifetime value, a company can make better ____ decisions.

resource allocation decisions. ex.: advertising/promotion budget, choosing customers to acquire/retain, rewards program entitlements

False positive

results of the exploration stage of the A/B test lead to the belief that one of the options A or B is more successful than the other, when in reality they are likely to perform the same in the exploitation stage

False negative

results of the exploration stage of the A/B test lead to the belief that options A or B do not differ in their success, when in reality one is likely to outperform the other in the exploitation stage

Churn rate is the opposite of ____.

retention rate

Reactivation Revenue

revenue generated through customer who had cancelled their subscription but were pulled back by customer success or sales

ensemble modeling

running more than one algorithm and synthesizing the results to increase accuracy

Sample collection in which some parts of the intended population are not represented as much as others is an example of

sample bias

What must you do BEFORE you count customers?

segment your POTENTIAL and CURRENT customers

moment of purchase

selecting brand at purchase

evaluation of alternatives

shortlist options, influenced by customer's attitude and involvement

Exploration stage

stage of an A/B test for determine which version is more successful with a smaller portion of the potential audience

Exploitation stage

stage of an A/B test that applies the findings of the exploration stage to a larger portion of the potential audience

Experimental condition

state of independent variable for which the dependent variable is measured in order to perform statistical calculations

Propensity model

statistical algorithm used to predict consumer behavior

How to Build Effective Customer Experience

stimulate positive emotions/feelings and memories by qualitative research: - identify journey, path, or buying-related process - construct a map of journey including potential paths - understand what makes for success and for failure during each pat of journey - develop mechanisms to reduce the likelihood of failure and increase likelihood of success - identify customer experience related "clues" that are perceived by consumers via their senses and influence their feelings, thoughts, and actions

Brand recall

the ability to retrieve the brand from memory

Customer Acquisition Costs

the amount of money a firm spends to convince a customer to buy a product or service (total cost of marketing outreach divided by sales in a given period)

Site Time

the amount of time a customer spends on a site (e.g., important for media providers).

customer journey

the complete sum of experiences that customers go through when interacting with your company and brand - is a circular journey (research) o Subjective - what they think, not you or another customer o Context: History - steps and experience that got them there Future - their end goals (you can forecast, use data from those with similar journeys) Now - what options they have now (you can help them in real time) o Modelled by using stream or timeline data at any scale o What people are interested in and all timescales (by seconds, years) or higher scales (buying a car v coffee)

Customer Buying Process

the consumer typically passes through these stages before purchase and they can skip or reverse the steps Aim - make it easy from problem recognition to purchase decision, but more important for customer to be successful and be loyal o Used in context of customer journeys and is modelled to understand their different stages 1) Problem recognition 2) Information Search 3) Evaluation of alternatives 4) Purchase decision 5) Satisfaction 6) Loyalty 7) Post-purchase experience

Micro Conversion Rate:

the conversion rate at the campaign or platform level (e.g., the conversion rate for a particular marketing video delivered to newsite apps on a mobile phone).

Discount rate

the cost of capital for the organization

the currently used version (control)

Depth

the ease with which a brand comes to mind

Big data information value chain

the information flow within a big data system as a series of steps needed to generate value and useful insights form data (Curry, 2016) - Used as a decisions support tool to model chain of activities to deliver a valuable g/s - Made up of a series of subsystems each with inputs, transformation processes and outputs 1) Data 2) Information 3) Knowledge 4) Decisions 5) Actions

touch points

the many critical moments when customers interact with the organization and its offerings on their way to purchase and after

customer lifetime value

the margin multiplied by the retention rate divided by the term 1 plus the discount rate minus retention rate

Open Rate:

the number of people who open an email that has been sent to them dividing by the total number of people to whom the email was sent.

Total Reach:

the number of people who received impressions. Or the total number of followers, retweets or friends.

Mobile Traffic:

the number of people who see the marketing content through a mobile device.

Impressions:

the number of time marketing content has been displayed, including the same person multiple times and regardless whether there is any response to the marketing content.

Before-after experimental design

the outcome variable is measured before and after the participants have been assigned to condition

retention rate

the percentage of customers who remain loyal over time

Conversion Funnel Rates:

the portion of customers who make it through to the next level of each step in the journal from impression to conversion (e.g., from impression to click-through; then from click-through to placing an item in the shopping cart; then from the shopping cart to checking out).

marketing analytics strategy

the process of applying marketing analytics to a campaign lifecycle

Campaign life cycle

the process of creating and running a campaign through several stages

Breadth

the range of usage scenarios for a brand

Data visualization

the representation of information in graphical format

return on marketing investment

the revenue from marketing multiplied by the contribution margin divided by marketing spending

margin

the revenue generated by the customer less the cost it takes to service the customer

conversion rate

the total conversions divided by the total reach

Cardinality

the uniqueness of data values in a column

Automation

the use of control systems working without direct human input to operate machinery or equipment

Qualitative data helps you answer which one of the following:

the why

Participants of a lab usability test should be told up-front that:

they themselves are not what is being tested; it is the website that's being tested

Net Retention

this number includes cross-sells, up-sells, organic growth within a customer account, and price increases. This is an important and broader metric which tells the story of what would happen to a SaaS business over time if it did not acquire any new customers. Growth in the installed base that completely offsets losses (a.k.a. Negative Churn) is a very powerful financial driver. Some high-performing SaaS businesses have "Net Retention" numbers in the 150% to 300% range. It is these outliers that demonstrate the usefulness of reporting both Net and Gross Churn, as cross-selling, up-selling, or individual customer organic revenue growth completely obscures any meaningful erosion in the customer base.

1. Identify the metrics Metrics help bring meaning to what? Metrics are ( qualitative or quantifiable ) measures used to track the status of a marketing process T or F: Metrics don't help marketing analytics know whether goals are being achieved. T or F: it is difficult to determine what metrics are important.

to the data quantifiable False (they do help know if goals are being achieved!) TRUE

Lead to Close Ratio:

total number of sales leads by the total number of sales (important for sales analytics)

TCV (total contract value)

total value of the contract, and can be shorter or longer in duration. Make sure TCV also includes the value from one-time charges, professional service fees, and recurring charges.

It is possible for a data set to have high accuracy but low precision.

true

Controlled experiment

type of experiment in which a hypothesis is tested by looking for changes in a dependent variable measure caused by manipulated changes to an independent variable as the only factor that is allowed to be adjusted

Paired Comparison Test

use of the test product is mixed with a competitive product

Pre-Use Sense Reactions

users reacting to immediate sensations of color, speed, durability, mechanical suitability, etc.

Independent variable

variable for which the marketing analytics professional is interested in seeing an effect on or relationship with the outcome variable

One of the main differences between A/B testing and multivariate testing is the number of ________ being tested.

variables

Computing Likelihoods of Success in Journey

visit store -> find product -> like product -> purchase product .9 x .9 x .9 x .9 = 65.61% vs. find product -> like product -> visit store -> purchase product 1 x .9 x .9 x 1 = 81.00%

____ = Total visits to a webpage (non-unique, including unlimited visits by the same person). _____ = Total # of sales leads by the total number of sales _____ = Total unique visitors to a webpage (monitored by IP address) _____ = The total number of new-site vs recurring visitors _____ = The amount of time a customer spends on a site _____ = Number of people who typed in the URL to get to the website _____ = Number of people who clicked a link from another website to get to the website. _____ = Number of people who reached the website by performing a search from sites like Google or Bing _____ = Number of people who found the website through social media _____ = Percentage of people who leave the webpage after viewing only one page _____ = Ratio of people who click on a link compared to the total number of people who saw the link. *** _____ = Percentage of customers who return to buy again

visits lead to close ratio Unique visitors New sessions Site Time Direct traffic Referrals Organic Traffic Social traffic Bounce rate Click through rate Customer retention rate

Number of Key User Actions per Session

vital KPI for product and customer success

"Relevant" Touchpoints (continued)

website, app, social media, store, etc. with other "relevant" entities/elements (other customers) context/environment: real, virtual, customer's mind and memory

Simpson's Paradox

when averages are taken across different groups, they can appear to contradict the overall averages

Affordance

when the appearance of a specific control suggests its function

Ansatzpunkte für Produktvariation / differenzierung

Ästhetische Eigenschaften (Design) Physikalische Funktion als Eigenschaften (Material) Symbolische Eigenschaften (Marken) Value Added Services (Kundendienst)

what we know about customer experience

• Customer experience dynamics - customer's dynamic external env large influence on customer experience (e.g. economic situation, recession) • Mapping the customer journey - customer journey analysis to understand/map the journey from the customer perspective and requires customer input • The multichannel journey - differing preferences and usages of channels and segments can be identified • The multidevice and mobile journey - mobile channels offer location based, time sensitive oppt to create touch points, better suited for search then for purchase • Customer experience measurement - multiple customer feedback metrics predict customer behaviour

Marketing Ramp-Up Phase

"I think we got it" then begin work on packaging, branding, advertising, etc.

Bookings to BS

"booking" goes onto the balance sheet in a liability line item called deferred revenue. (Because the balance sheet has to "balance," the corresponding entry on the assets side of the balance sheet is "cash" if the customer pre-paid for the service or "accounts receivable" if the company expects to bill for and receive it in the future)

explore first

- Alternatives A/B have an equal chance of selection - Use hypothesis testing to select a 'Winner'

AB testing takeaways

- Do a power calculation first to estimate sample size - Do not stop the test early - Use a valid hypothesis - don't use a scattergun approach - Perform a second 'validation' test -Bayesian experiment design (You can stop your experiment at any time and make perfectly valid inference)

what do you do in a multi armed bandit

- Randomly assign customers to be assigned to A or B (or more alternatives) - Based on the response, increase the probability of assigning to the alternative with higher response

multi armed bandit

- Standard A/B testing : first learn, then earn - Multi-armed bandit problems: simultaneously "learn and earn" (or "explore and exploit")

type II error

- false negative - probability of not seeing a positive results when the null hypothesis is not true

type I error

- false positive - probability of a positive result when the null hypothesis is true

precision

- proportion of true positives in the positive results - It's a function of power, significance level and prevalence ex: if you find 10 positive results, if 9 of them are true (not from the Type 1 error (a)), the precision is 90%

statistical power

- the probability that a statistical test correctly rejects the null hypothesis when it is a false - power = 1- B - usually 80-90% - if power is low, you miss true effects

Arguments for product use testing

1. You want to deliver quality products 2. Risks and costs are small compared to the loss of earnings flow from a successful product

repeated significance tests

1. power calculation to get desirable sample size 2. Run an A/B test until the sample size is achieved 3. Check the results

billings

A good proxy to measure the growth — and ultimately the health — of a SaaS company calculated by taking the revenue in one quarter and adding the change in deferred revenue from the prior quarter to the current quarter If a SaaS company is growing its bookings (whether through new business or upsells/renewals to existing customers), billings will increase.

AB testing

A randomized experiment with two variants: A and B

Single Tenancy

A single instance of the software and all of the supporting infrastructure serves a single customer. With single tenancy, each customer has their own independent database and instance of the software. With this option, there's essentially no sharing going on. Everyone has their own, separate from everyone else.

Multi-arm bandit

Algorithm that allocates traffic to the winning variation

ARR (annual recurring revenue)

Annualized Run Rate = MRR x 12ARR is annual run-rate of recurring revenue from the current installed base. This is annual recurring revenue for the coming twelve months if you don't add or churn anything. A measure of revenue components that are recurring in nature. It should exclude one-time (non-recurring) fees and professional service fees.

LTV / CAC Logic

As long as the sum of the discounted future cash flows are significantly higher than the CAC, then people will argue it is warranted to "push the accelerator," which typically means burning capital by aggressively spending on marketing. The best SaaS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8.

Linear Regression

Assumptions: Linear relationship Multivariate normality No or little multicollinearity No auto-correlation Homoscedasticity Trying to model the relationship between dependent and independent variables by solving for parameters using least squares approach.

Months up front

Average of months (or years) of payment received in-advance with new bookings. Getting paid in advance has a big positive impact on cash flow. This metric has been used at both HubSpot and NetSuite in the past as a way to incent sales people to get more paid up front when a new customer is signed. However asking for more money up front may turn off certain customers, and result in fewer new customers, so be careful how you balance these two conflicting goals.

Avg. life span of customer (in months)

Avg. life span of customer (in months) = 1 / by your monthly churn.

Traditional Perpetual License

Delivered as a key ID license to a customer and sales is one time with recognition of revenue happening all at once. Paid and recognized upfront upon either the sale or the delivery of the license. Gross margin typically 95%+ due to customer taking ownership for computing the software. MTCE is component that is recurring. Attach rate: usually 100% in enterprise software (i.e. all customers are required to buy maintenance). Price: typically ~20% of license (can vary depending on tiers)

Gamma Testing

Designates ideal product use test. Item is thoroughly evaluated by end user. To pass test the item must solve whatever problem customer has, no matter how long it takes.

Net Dollar Renewal Rate

Dollar Renewal Rate = $ from customers who renewed their contracts - Expansion MRR / total $ of contracts up for renewal Similar to the metric above, but also takes into consideration Expansion MRR:If your Dollar Renewal Rate is greater than 100%, you have negative churn, which is a very good thing to have achieved. Example: If you are looking at DRR on an annual basis, another way to think about what DRR represents, is to think of a specific month's cohort (e.g. the January cohort). As an example, let's say that at the end of January the revenue from this cohort is $100k. A year later, you will have lost some customers, (for example let's say $10k of that cohort's revenue), but the remaining customers have also purchased $20,000 more from you (Expansion MRR). So we will have $110k of revenue left from that January cohort a year later. This means that our DRR is equal to 110%.

Alpha Testing

Done in-house by employees

Downloads

Downloads (or number of apps delivered by distribution deals) are really just a vanity metric. Investors want to see engagement, ideally expressed as cohort retention on metrics that matter for that business — for example, DAU (daily active users), MAU (monthly active users), photos shared, photos viewed, and so on.

Total Cost of Ownership

Gartner defines total cost of ownership (TCO) a comprehensive assessment of information technology (IT) or other costs across enterprise boundaries over time. For IT, TCO includes hardware and software acquisition, management and support, communications, end-user expenses and the opportunity cost of downtime, training and other productivity losses.

Sample Size Calculation

How many you need for each variation Need baseline conversion rate. Minimum detectable effect, power and alpha Need to determine sample size so you don't run the test longer than you have to but also want to collect enough data to make a conclusion.

Services Aspect of Delivery for Both

Implementation, customization, configuration and other services performed by the company for the customer in relation to the software. Gross Margin: ~25-35% (headcount dependent revenue stream).

Cloud / SaaS Subscription

In a SaaS model, the license, maintenance and hosting are bundled into one, recurring fee. Terms: Can vary but most commonly 1-year contracts, paid annually upfront. Price: the traditional comparison for SaaS pricing is parity in total cost of ownership ("TCO") over 3 years, vs. the perpetual model Same services component

SaaS Model

In a SaaS model, the license, maintenance and hosting are bundled into one, recurring fee. Terms: Can vary but most commonly 1-year contracts, paid annually upfront or paid monthly or quarterly. Revenue is recognized ratably across the term. Due to the revenue model, growing SaaS businesses have less lumpy financials. Price: the traditional comparison for SaaS pricing is parity in total cost of ownership ("TCO") over 3 years, vs. the perpetual model. If a license costs $100, the TCO of the license + maint. under the perpetual model is $160 ($100 +$20*3). The SaaS product would be priced at ~$53/year (or$160 over 3 years).

Term License

In addition to the perpetual license listed on the price list, Oracle offers 4-year, 2-year, and 1-year term licenses for practically all of its products: 4-year term = 60% of the perpetual license price 2-year term = 35% of the perpetual license price 1-year term = 20% of the perpetual license price Term license pricing is aimed at companies with small IT budgets, but whose business requires a robust software solution. Customers may extend the term of a one-, two- or four-year term license by purchasing an additional term or perpetual license. Note: Although the license fee is discounted, annual support for term licenses is the same price as annual support for perpetual licenses

Growth Metrics Timing Basis

Investors like to look at monthly GMV, monthly revenue, or new users/customers per month to assess the growth in early stage businesses. Quarterly charts can be used for later-stage businesses or businesses with a lot of month-to-month volatility in metrics.

Gross Profit

Investors want to understand how profitable that revenue stream is. Gross profit provides that measure.

Role of Marketing During Development

Involved from the beginning of the new product process, advises the new product team on how the product fits in with marketing capabilities and needs.

ARR per customer

Is this flat or growing? If you are upselling or cross-selling your customers, then it should be growing, which is a positive indicator for a healthy business.

Flaws of LTV

It's a Tool, Not a Strategy: The LTV formula is a measurement tool to be used by marketing to test the effectiveness of their marketing spend - nothing more and nothing less. The Model is Confused and Misused. Frequently the same group that is arguing for more spending is the same one that "owns" the LTV calculation. (This is a mistake - finance should monitor LTV). As a result, it is not uncommon for one to see shortcuts taken that allow for greater freedom. Purchased Customers Underperform Organic on Almost Every Metric. Organic users typically have a higher NPV, a higher conversion rate, a lower churn, and more satisfied than customers acquired through marketing spend. LTV heavy companies are in denial about this point. In fact, many of them will argue until they are blue in the face that the customer dynamics are the same while this is rarely the case. A customer that "chooses" your firm's services will be much more satisfied than one that is persuaded to buy your product through spend.

LTV Formula

LTV is annual subscription revenue per user multiplied by a subscription gross margin to get contribution margin per subscription user and then divided by revenue churn to get to LTV Two points that the traditional LTV calculation misses 1) contribution per customer may vary substantially for different customer segments, and 2) the annual contribution per customer is likely to change over the life of a customer relationship Can offset these mostly by doing cohort analyses but hard to completely offset

Staged roll-out

Minimize the risk of a negative user experience but want to collect enough data to draw conclusions

Retention by cohort

Month 1 = 100% of installed base Latest Month = % of original installed base that are still transacting

Burn Rate

Monthly cash burn = cash balance at the beginning of the year minus cash balance end of the year / 12

Multi-Tenancy

Multi-tenancy means that a single instance of the software and all of the supporting infrastructure serves multiple customers. Each customer shares the software application and also shares a single database. The data is tagged in the database as belonging to one customer or another, and the software is smart e1nough to know who the data belongs to.

Hosting Options for Perp. Model

On-premise: on-site on the customer's own server Hosted: hosted in the "cloud" in a server owned, managed or outsourced by the company Since many customers will host the software on-premise, not every perpetual license company will have hosting revenue Gross Margin: Varies but ~60-70%

AA Testing

Perform before test to confirm that experimental group assignment was successful. (Both groups should have same reaction rate to the A variant). If not, you need to trouble why randomization didn't work as intended. Also get a baseline conversion rate.

Knowledge gained from product use testing

Pre-use sense reactions. Early use experiences ("Does it work?"). Major benefits results (beta tests). Diagnostic information.

What was the average Annual Contract Value for the fastest-growing enterprise software/SaaS companies in their first year or two of operations?

Rapidly growing SaaS companies have a bi-modal distribution of ACV, at $300-$400 (eg Zendesk) and $10K (eg Marketo). As far as the first year or two of operations -- the data above is mostly for current state (ie, later years). But if Year 2 = AFTER product/market fit, I would assume the ACV doesn't change dramatically in later years. This is because while you'll go up-market and maybe get bigger accounts, your CAC will go up as you plow marginally less fertile land.

Switching costs

Redundant Relationship-Specific Investments - customers who change suppliers sometimes must invest in new software/hardware or repeat certain activities they have already completed Contractual Penalties. Companies can impose penalties on customers if they end a contractual relationship prematurely. For example, mobile phone carriers often charge an early termination fee to customers who have signed multi-year contracts

Customer Renewal Rate

Renewal Rate = # of customers who renewed their contracts / total # of contracts up for renewal It can be confusing to look at both your renewal rate (which should be just 1- Churn) in addition to churn. However in a model where you have yearly contracts being renewed, the two numbers can actually be different. For example, in the early days of a startup, you might have low churn because many of your customers have not yet reached the point where they could drop your service because of the length of their contract. In that situation, your churn number will not accurately predict what is really going to happen when you reach steady state. So a better number to look at is how many of your customers are renewing at the point where their contract expires. That is what this number measures. When you reach steady state, this number should be equal to 1 - % Customer Churn.

Gross Dollar Renewal Rate ($'s)

Renewal Rate = $ from customers who renewed their contracts / total $ of contracts up for renewal instead of looking at the number of customers, it looks at the dollar value of the renewed contracts. It's important to look at both, as they each tell an useful part of the story. If you were losing a lot of customers, you'd want to know why. Similarly, if you were only losing a few customers, but they were your biggest $ value customers, you'd also want to know that as well.

Monadic Test

Respondent tests single product for a period of time, services usually use this

Revenue

Revenue is amount of money that can be recognized according to accounting policy. Even if it is paid for upfront, usually subscription revenue can only be recognized ratably over time as the service is delivered. If more money has been paid than can be recognized, the difference goes into a balance sheet item called Deferred Revenue.

Payback Period

Sales and Marketing Expenses for period Q2 / ([Gross Margin Q2 - Gross MarginQ1] - this is on quarterly basis, * 4 to get annual and / 12 to get months is basically inverted Inverted CAC Ratio (Payback Period) The inverted CAC ratio tells us how many years it will take to recover initial investment in sales and marketing for a given month. Best SaaS businesses are able to recover their CAC in 5-7 months (<12) or half a year

stopping tests early

Simulations show that stopping an A/A test3 when you see a positive result will results in successful test in 41% of time

Pitfalls to Beta Testing

Site has no capacity to test the performance of product at required levels, developer uses wishy-washy performance requirements (like user-friendly) that are difficult to measure, done too late in product process, developers test own products, negative results are ignored.

negative uplift

Stopping an A/B test with even negative effect results in a win 9% of the time!

Arguments against product use testing

Suggests lack of faith, expensive, time consuming, competitors working on similar products make it to market first, consumers have to learn how to use products first

MRR (monthly recurring revenue)

The Monthly Recurring Revenue at the end of each month. Computed by taking the MRR from the previous month and adding Net New MRR. Common mistakes with this method include: (1) counting non-recurring fees such as hardware, setup, installation, professional services/ consulting agreements; (2) counting bookings

Myths of SaaS

The cost-advantage is only in the short-term; long-term, SaaS is more expensive - TCO analysis favors SaaS in the short term and people may argue benefits stop here - however, time value of money is important and SaaS keeps cash in the hands of the customer longer, freeing it to be used for other critical operations that can benefit them in the long run Security is a concern with a SaaS application - many customers worry that with all their data under one roof and commingled with other companies data it is at risk - this view is outdated, The top SaaS providers undergo regular security audits, have advanced biometric controls and have a security team monitoring 24x7. Security measures employed by mission-critical SaaS providers are usually for more advanced than those used by Fortune 100 companies.

Bookings

The total dollar value of all new contracts signed. Usually taken as an annualized number even if the contract period is longer than one year. Since the bookings number might have a mix of different durations (e.g. month-to-month; 6 months; 12 months) this number is not very helpful for understanding the business

CAC Formula

To put it simply - CAC is the total cost of sales and marketing efforts that are needed to acquire a customer. It is one of the defining factors in whether your SaaS company has a viable business model that can yield profits by keeping acquisition costs low as you scale. If you have a successful business model your CAC will be sufficiently lower than LTV. If your CAC is higher than LTV right now don't panic. As seen in the image above - CAC is a seesaw that may experience some ups and downs. With the information and steps we are about to show you, you can surely get your SaaS business on the right end of the seesaw. CAC: Here you take the sum of all your sales and marketing expenses over a given period of time (Salaries, tools, spend) and divide by the number of new customers acquired in that same time period.

GMV (gross merchandise volume)

Total sales dollar volume of merchandise transacting through the marketplace in a specific period. It's the real top line, what the consumer side of the marketplace is spending. It is a useful measure of the size of the marketplace and can be useful as a "current run rate" measure based on annualizing the most recent month or quarter.

Net burn

[revenues (including all incoming cash you have a high probability of receiving) - gross burn] is the true measure of amount of cash your company is burning every month. Investors tend to focus on net burn to understand how long the money you have left in the bank will last for you to run the company. They will also take into account the rate at which your revenues and expenses grow as monthly burn may not be a constant number.

Preferred Timespan for LTV

if you have only few months of data, the conservative way to measure LTV is to look at historical value to date

Confidence Interval

sample parameter + critical score * standard error

Unearned or Deferred Revenue

the cash you collect at the time of the booking in advance of when the revenues will actually be realized.

Central Limit Theorem

the distribution of sample averages tends to be normal regardless of the shape of the process distribution and approaches mean of the population. Allows for normal approximation.

Revenue Post GMV

the portion of GMV that the marketplace "takes". Revenue consists of the various fees that the marketplace gets for providing its services; most typically these are transaction fees based on GMV successfully transacted on the marketplace, but can also include ad revenue, sponsorships, etc. These fees are usually a fraction of GMV.

Since there can be some confusion around the difference between bookings, billings and revenue, here is a simple example to help clarify them: Imagine you signed a new contract with a customer with a one year term, specifying that you provide your service to them for $1,000 per month, with an upfront payment of six months:

• Your bookings would be $12,000 (the entire contract value) • You would bill $6,000 in the first month, then $1,000 per month from the seventh month onwards. • You would recognized $1,000 in revenue for each month of the contract. (This is dictated by GAAP accounting policy.) For the example above, the balance sheet and income statement impact of these items is as follows: • Bookings do not affect either the balance sheet or the income statement. • When you bill $6,000 in the first month, but can only recognize $1,000 in revenue (income statement), and the other $5,000 goes into deferred revenue on the balance sheet (a liability). • Each month thereafter until another $1,000 can be recognized as revenue (income statement), and that reduces the deferred revenue liability on the balance sheet.

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