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CTR, CVR, CPM, IPM, CPA, LTV – It’s easy to get lost in the myriad of acronyms and metrics that measure growth.
After all, growth marketing is an intensively data-driven subject, so there are metrics for just about everything. I constantly ask questions about which metrics are most valuable to track.
Unfortunately for truth seekers, there is no single “one size fits all” or “correct” growth measure that one should religiously monitor for their startup. The correct answer to this question largely depends on who you ask, the vertical and maturity of the startup, and a plethora of other variables.
Related: The 5 Most Important Statistics Every Business Should Track
Why there is no ‘one size fits all’ statistic
When Uber Founded in 2009, like many startups in their frenzied early days, the company was focused on acquiring new users and scaling up. They were also specifically aimed at making the supply and demand ratios between drivers and drivers healthy (the load factor). For Uber in those early days, this was the metric most important to their long-term success.
Uber did everything they could to get drivers, even resorting to handing out free iPhone 4s to people who agreed to sign up and drive. This would go against Return on Investment (ROI) and Lifetime Value (LTV), but it’s something they had to do to support the local rideshare markets and keep them healthy when the company entered them. As time went on and Uber went public, the focus has largely shifted to efficiency and metrics, such as LTV or ROI.
This is a great example of how and why there is no ‘one size fits all’ metric. Instead, a startup founders determine which metric(s) to measure based on a rolling prioritization of growth metrics, usually based on the startup’s maturity.
Growth metrics priorities that evolve over time.
Image Credit: Jonathan Martinez
Using startup maturity as a benchmark makes it less opaque about how to prioritize the metrics along the journey. Let’s dive into each one!
Startups: the early stages
If I were given only three metrics to use for tracking early in a startup’s life, I’d pick the following fundamental metrics that I believe are essential to any upcoming growth campaign and experiment:
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CTR = Click-through rate % = (Clicks / Impressions) x 100
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CVR = Conversion Rate % = (Event A Count / Event B Count) x 100
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CPA = cost per action = (total expenditure / actions)
When trying to find the market fit of your product while scaling, the most important piece you want to capture is the field.
Pitch = Posts = CTR
The main reason I chose CTR as our first metric is because without a focus on this data, further growth efforts will suffer. Imagine a potential consumer who has never heard of your product and suddenly writes an email or ad copy. It would be terrible at best.
The data collected through the funnel about a consumer’s experience is critical to how you can customize your flow in the future. Do you offer free account plans for the first month to drive potential interest? Does your advertising lead with valuable props or testimonials? These are the types of questions that guide optimizations to move the needle on CVR and, ultimately, CPA.
Whether you’re running a paid acquisition campaign, an email marketing newsletter, or a landing page test, all three of these metrics (CTR, CVR, and CPA) are critical to monitoring from the get-go.
Related: 3 Secret Growth Stats That Matter Most to Investors
Startups: the middle and later stages
You’ve hummed through a startup’s wild journey, got to a point where the product market fits, and users respond well to your offering. This is a significant achievement as a business owner, and it signals that now is the time to introduce additional growth metrics to research as you continue to build a lean, green growth machine.
ROI and LTV lag behind the success indicators of early-stage positioning, message and funnel capture efforts. This is when a line can be drawn in the sand for CPA targets using data points about revenue generated by an average user.
Startups A, B and C with different ROI goals.
Image Credit: Jonathan Martinez
In a scenario where users generate $50 in lifetime revenue, Startup A sets their ROI target at a conservative 1 ($50 CPA), while hypergrowth startups B and C aggressively set their goals at 0.8 and 0.5.
When I was with Postmates, we were in a very competitive food delivery space with other major players, such as DoorDash and Uber Eats, competing with us for market share. This situation brought us into the business equivalent of wartime, where we often had large ROI shortfalls defending our No. 1 market, Los Angeles.
There will always be caveats like the one with Postmates, but measuring success at the ROI or LTV level is a good sign that your startup is maturing and striving to scale efficiently.
Related: Use the metrics that really matter in your business
Startups: the final phase
Congratulations! You are late stage with your startup. Maybe you’ve raised a few VC funding rounds? Maybe you exceeded $1 million in revenue?
There is no better way to describe a late stage than things are getting fun and very analytical now, and running this successful business now requires the precision of a Formula 1 racetrack driver. The types of metrics that are important at this stage are listed below:
Incrementality is extremely important in growth marketing and increases conversion volume by turning on a specific campaign or channel. A perfect example of this is with Google-branded search terms, often not an incremental campaign, as users searching for a brand would more than likely have converted regardless of an ad.
As one begins to analyze ROI and LTV by medium, channel, campaign and even demographics, the data revealed allows us to implement more and more strategic measures.
For example, why spend the same amount of money and effort on two segments that have different results in the LTV of users converting? By leveraging the power of regression analysis, one can locate those areas of diminishing returns and reduce or eliminate the inefficient spend.
Using Tools
The power of any growth metric is enhanced when there are tools to pull apart and analyze the data in multiple ways. Two of the tools I recommend early on are a business intelligent platform, such as Amplitude, and a mobile measurement partner if you’re running mobile campaigns.
A business intelligence tool can help understand user behavior and the different characteristics of the product funnel, such as source or day of the week. A mobile measurement partner is responsible for attribution on mobile app campaigns, which is even more important to use after the release of iOS14”.
As you begin to think about the metrics you track, just remember that there is no “one size fits all” metric that can predict the success or failure of your startup. Every startup is a unique case. Ask yourself what stage your startup is in, then use that knowledge to determine which metrics are most important to pursue and analyze. Not giving due importance to the right metrics can have lasting consequences and mean the difference between success and efficient scale, or cause a startup to take a dive.
