How to Optimize the Sales Funnel

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This defines the sequence of marketing activity nodes leading from customer acquisition to making the actual revenue. 

The Pirate Metrics

Dave McClure categorized customer lifecycle into five stages, which he called the Pirate Metrics. AARRR! These metrics are simple, actionable, and easy to measure. They are widely accepted for Startup performance measurement.

A for Acquisition

Track all the channels by which users access your product. When you have created awareness for your product and the value proposition is good to the users, the next step is user acquisition.

Measure: User acquisition usually manifests in form of Email Subscribers to your product website, inquiry chat engagements on your website (e.g. via a bot), download of resources, users contacting via all the available contact us channels, etc.

Optimize channels: Website landing page, Chatbots, Email newsletters, Resources download page, Contact forms, SEM, SEO, Blogs, Social Networks, Affiliates, Direct on TV, Telephone, PR, etc.

A for Activation

At this point, the user gets to experience your product or service. Depending on the nature or your offering, it’s a good practice to offer a free trial period (e.g. 14days free trial), free consultations for certain services, freemium, or pay per download (might require more convincing and demonstration of value).

Measure: Free trial sign-ups, freemium downloads (e.g. mobile apps and games), responses from sales contacts and engagements.

Optimize channels: Customer-Journey map of the products and services – optimize experiences in Buying, Payment, Usage, and Support e.g. self-service features. 

R for Revenue

Users pay for your product or services. You are a winner! However, your job is not done. You still need to measure, track and optimize to ensure these users are retained, and above all refer other users to your product.

Measure: the actual cost of acquisition of a paying customer, rate of Trial-to-paid conversion, customer profile, and segmentation analysis (who buys what package of your product).

Optimize channels: customer journey map especially the Buying experience (Checkout flow and payment processes), user experience overall,

R for Retention

Users have enjoyed the product or service and return for more. This is definitely a good sign.

Measure:

• Customer lifetime value (CLTV), i.e. how much revenue the user generates for you in his/her lifetime of using your product.
• Incremental revenue. How have the users fared in generating revenue for you? Have they upgraded or downgraded on the usage of the services?
• Churn – the number of users who stopped using your product over a period of time. They might have moved on to competitive products or substitute products.
• Net Promoter Score – NPS shows how happy your users are being with you versus being with the competition.
• Promoters (score 9-10) are loyal enthusiasts who will keep buying and referring 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.

Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).

Optimize channels: Customer lifecycle management (campaigns and other marketing initiatives such as gifts, discounts and freebies), retargeting and other product marketing initiatives.

R for Referral

Users refer other users to your product! Word of mouth marketing is very potent and leads to an over 80% conversion rate. You need to offer a very good experience at all points to ensure you create product/service ambassadors out of your users.

Measure: Net promoter score (NPS), Social shares of your communications and interactions.

Optimize channels: Referral marketing channels and initiatives, overall product/services experience.