- The Business Algorithm
- Posts
- How to leverage data for 10x growth
How to leverage data for 10x growth
I'm sure you never heard of growth analytics.
Thomas Varekamp
October 21, 2022
I want to share some knowledge on how you can use data to boost customer growth - also called growth analytics.
Growth Analytics
The goal of growth analytics is to grow fast and extract as much value as possible with limited resources.
The scope of growth analytics includes measuring and optimizing the transition into various states, from Traffic → Prospects → Users → Paying Customers → Ambassadors.
For example:
Traffic -> number of website visits
Prospects -> number of signups
Users -> Time since last visit
Paying customers -> Average revenue per customer
Ambassadors -> Invites sent to other people
Measuring this will show possible bottlenecks in your customer acquisition process.
However, this does not suggest what to do next.
Using advanced growth analytics it is possible to answer the following:
Who are the high-value users we need to target for growth?
Which marketing channels have the most growth potential for our product?
How can we retain customers for the longest time possible?
In order to do this well, you need to define the right growth metrics for your product.
Metrics are numbers that are used to measure, compare, and track performance.
The most important one for growth is The North Star Metric.
The North Star Metric
The North Star Metric (NSM) is the metric that a company uses as a focus for its growth. This number best reflects the amount of value that your company brings to your customers.
It is used by almost all big players, such as Spotify, Airbnb and Facebook to give direction and maximize their growth.
For example, below are the North Star Metrics for these companies:
Spotify = Time spent listening
Airbnb = Number of nights booked
Facebook = Monthly active users
As you can see, these metrics embody value for the customer. Revenue is a poor North Star Metric since focusing on this it might negatively impact customer experience (which does not support future growth).
Everything you do in your business should center around this measure.
Final growth advice
Usually, growth comes from aspects you don’t expect.
Therefore, you must leverage data to identify opportunities and take immediate action when the opportunity presents itself.
Try to use a data-driven approach to test your marketing efforts and product features in order to maximize growth potential.
Do you use metrics in your business? I'm curious about your experiences.
If you enjoyed it, please forward this email to friends who want to know more about data in business.
See you next week!
Thomas