1. Metrics-Driven Marketing Strategy (+ a little Product Strategy too)
Dave McClure
Visiting Lecturer
Stanford Facebook Class (CS377W)
11/15/07

2. Summary
Marketing Plan / Strategy = Target Customer Acquisition Channels
3 Important Factors = Volume, Cost, Conversion
Focus on conversion to target customer lifecycle actions
Measure as deep down the conversion funnel as possible
Estimate Customer Lifecycle, Conversion, Revenue Potential
Hypothesize Customer Lifecycle & Critical Conversion Points
Estimate Conversion , Revenue Potential when designing marketing plan
Understand “Annual Rev. Per User” (ARPU) & “Customer Lifetime Value” (CLV)
Match Marketing Channel Costs to Customer Revenue Potential
Design channels that costs <20-50% of target ARPU / CLV
*NOTE: “Cost” has multiple meanings
actual dollars
marketing costs
product development time & resources
time
profit vs cashflow

3. Agenda Quick Review of Pirate Metrics Example Mktg Channels
Brainstorm 3 Scenarios

4. Customer Lifecycle: 5 Steps
Acquisition: users come to the site/page/app from various channels
Activation: users enjoy 1st visit: "happy" user experience
Retention: users come back, visit site multiple times
Referral: users like product enough to refer others
Revenue: users conduct some monetization behavior
AARRR!

5. Facebook App / User Conversion
Feeds
Profile
App Directory
App Cross-Marketing
1. ACQUISITION
Invites
4. REFERRAL
Ads
Active: Initial App Invites
2. Activation
CTA, Copy & Graphics
App Cross-Marketing
Your App s
3. RETENTION
Passive: Feeds & Profiles
Canvas Pages
Feeds, Profiles
5. Revenue $$$
Ads, Lead Gen, Subscriptions, etc

6. Conversion Dashboard (example below; customize for your use)
Category
User Status
Conv %
Est. Value
Acquisition
Visit Site
(or landing page, or external widget)
100%
$.01
Doesn't Abandon
(views 2+ pages, stays 10+ sec, 2+ clicks)
70%
$.05
Activation
Happy 1st Visit
(views X pages, stays Y sec, Z clicks)
30%
$.25
/Blog/RSS/Widget Signup
(anything that could lead to repeat visit) 5% $1
Acct Signup
(includes profile data) 2% $3
Retention
Open / RSS view -> Clickthru 3% $2
Repeat Visitor
(3+ visits in first 30 days) $5
Referral
Refer 1+ users who visit site
Refer 1+ users who activate 1%
$10
Revenue
User generates minimum revenue
User generates break-even revenue
$25

7. Questions / Focus by Role
Founder / CEO:
What do you measure & why? Who’s responsible?
Product Manager / Developer:
How do you choose what to build?
Marketing
What channels do you choose / who do you target?

8. Founder/CEO Q: What metrics do you watch? WHY? Who’s responsible?
Hypothesize Customer Lifecycle & Refine
Choose 5-10 conversion steps
Less, not More is better
Q: minimal necessary & sufficient metrics rqd to make decisions?
can you simplify to top 3? just 1?
Delegate each Metric to someone (not you) to OWN
Focus on conversion improvement; measure & iterate
NOTE: if you measure something, it should tell you something…
Use “Is it Actionable?” test to determine whether or not to track a metric

9. Product Q: how do you choose what to build (or NOT build) ?
Choose features for conversion improvement
80% on existing feature optimization
20% on new feature development
Just guess, then A/B test… A LOT
Measure conversion improvement
Rinse & Repeat

10. Marketing Q: what channels / who do you market to?
Design & Test Multiple Mktg Channels
Select & Focus on Channels with:
High Volume
High Conversion
Low Cost
Measure *deeper* down the conversion funnel, not just to website / landing page
Segment & Select channels & customers by deepest possible level (ideally $$$)

11. Agenda Quick Review of Pirate Metrics Example Mktg Channels
Brainstorm 3 Scenarios

12. Example Marketing Channels
disclaimer: these estimates of vol, cost/user, time & effort are highly subjective & very dependent on your specific business
Channel
Volume
Cost/user
Time to implement
Mktg Effort
Prod Effort
Viral / Referral
depends on CTA; size of accessible social networks / # users
low/zero
Low for FB social networks;
med/hi for normal sites
low
low/med
depends on CTA, size of your house lists, signups
Low
(med = create templates)
Blogs / Bloggers
Depends on # blogs in your segment, competitive scenario
Low (if just you blogging);
med (if you're setting up big CMS / evangelizing to other bloggers)
(med = CMS, prof design)
SEO
depends on your keywords
Low/zero
Medium
(depends on your search geeks)
med/hi
SEM
Depends
Low/med
(depends on your marketing)
(landing pages = med)
Contest
small unless big prize $
(don’t, keep it under $5K)
(depends on contest, site, campaign)
Med
(med = prof contest site)
Widget
Depends on CTA; size of accessible sites, level of adoption + bloggers
med
med/hi (depends on complexity)
domains
depends on keywords, domain costs
depends
Low (redirects/co-brand?) PR
depends on your business & audience & news
Med/hi
medium (develop story, build contacts)
Biz Dev / Partner
depends on partner, size of customer base, conversion
med-high
med/hi (capture metrics, generate reports)
(reports, co-branding)
Affiliate / Lead Gen
depends on economics
med/hi (need to build affiliate program, capture metrics, generated reports)
med/hi (depends on rqd tracking & reporting)
Direct / radio
depends on geography
medium
Telemktg
depends on target demographics
High
low/zero if no system;
Med/hi if integrated SFA TV
Potentially large (if you spend)
Med-high
Med/hi (production cost)

13. Conversion Measurement
Conversion Criteria:
best-performing (%) channels / campaigns / copy
largest-volume (#) channels / campaigns / copy
lowest-cost ($) channels / campaigns / copy
Measurement Components:
Audience Segment (age, region, profession, interest)
Channel Source (social network, SEM, organic, PR, etc)
Campaign Theme / Brand Promise (“save money”, “get cool stuff”)
Landing Page & CTA
Copy & Graphics

14. Agenda Quick Review of Pirate Metrics Example Mktg Channels
Brainstorm 3 Scenarios

15. Scenario I Example: Lightweight Facebook App
Consumer target: people who poke, are frisky ;)
Customers are worth: $0-5?
currently advertising revenue
potential for sponsorship, e-commerce revenue
Company has ZERO funding / marketing budget
limited ability to raise capital
limited budget mostly from ad revenue
Questions:
how to design marketing channels?
Significant viral potential?
Conversion to long-term customer potential?
Marketing potential off-FB?

16. Scenario II Example: Consumer Website (low-end)
Consumer target: pet owners
Customers are worth $5-25
mostly advertising, sponsorship revenue
some e-commerce revenue
Company has modest funding / marketing budget
raised $XM in capital / not yet at break-even
spending $X00K / year on marketing
Questions:
how to design marketing channels?
marketing?
SEO/SEM keyword opportunities?
Blogging / Affiliate opportunites?

17. Scenario III Example: Consumer Website (high-end)
Consumer target: people tracking their money/finances
Customers are worth $
significant lead-gen & advertising
potential for lots of e-commerce revenue
Company has funding / marketing budget
raised $XXM in capital; approaching break-even / profitable
significant >$XM spend on marketing; known customer economics
Questions:
how to design marketing channels?
SEO/SEM potential?
Direct Marketing potential?
Biz Dev opportunities?
Viral may be less important if large vol of profitable leads