With limited resources to work with, startups need to make precise decisions that move the needle 10x. Tracking metrics enables them to adopt a data-driven approach that makes it happen. Hence, we explore the key growth marketing metrics and why you should track them. 

Understanding growth marketing metrics

Growth marketing metrics are KPIs for measuring your business performance. They allow you to understand the effectiveness of your growth marketing strategies. Here are other reasons why you should track these metrics:

• It saves you the risk of overspending on ineffective strategies.
• It speeds up decision-making.
• It helps you identify quick wins and opportunities.

Growth marketing metrics and their importance

Growth marketing metrics and their definitions

Here are the definitions of the essential growth marketing metrics that startups should track.

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Read on to learn more about the key growth marketing metrics for each stage of the AARRR funnel and why you should track them.

Acquisition metrics

Customer Acquisition Cost (CAC): Startups need to know what costs them to bring in a new customer. For instance, you spend $500 on a Google Ad campaign, and it brings in 100 customers. Your CAC would be $5. 

But CAC alone doesn't tell a complete story. You may combine it with other metrics to get better insight. So, if your ARPU is $7, that’s a $2 profit. Ideally, you want a low CAC. So, focus on high-performing ads and remarketing existing customers.

Conversion Rate: Think of customers completing a purchase or signing up for a demo. Higher conversions improve your ad campaign ROI. It shows you’re attracting and keeping your customers. You can also use it to identify drop-offs and bottlenecks that you can improve. Tracking conversion rates also;

• Improves your revenue potential.
• Measures the effectiveness of your ad copies and creatives.
• Improves your ad budget allocation.

Marketing Qualified Leads (MQLs): Analytics tools like Google Analytics and Facebook Pixel can be used to track MQLs and conversion goals. Start by defining your qualifiers, such as;

• Demographic factors.
• Engagement levels—time spent on the landing page, etc.
• Specific actions—free proposal requests, signing up for a demo, etc.

You may also segment your MQLs through an ad campaign. Then, you can nurture them into paying customers.

Activation metrics

Trial to Paid Conversion Rate: This is a simple way to know if users value your product. Low numbers may indicate issues with product-market fit. Evernote increased its trial-to-paid conversion rate by around 5% through its freemium plan strategy, enabling it to acquire over 225 million users.

Lead Magnet Effectiveness: Your lead magnets are incentives you offer potential users in exchange for their contact details. So, that would include free trials, webinars or gated content, e-books, etc.

Tracking lead magnets allows you to build a robust email list. You can use it to feed the top of your sales channel with qualified leads. It also supports your ad retargeting efforts. HubSpot offers educational content, templates, and webinars in exchange for user details. They then send users more personalized content to get them to pay for products. 

Retention Metrics

Customer Retention Rate (CRR): Measuring CRR helps you gauge customer loyalty. Remember, selling to an existing customer has a 70% success rate, while it is only around 20% for a new customer. So, that’s one motivation to track your retention rate.

We outlined some innovative growth strategies to help you improve customer retention. Lego uses the Lego Ideas platform to encourage users to submit Lego set designs. Successful ones are put into production, and the users are rewarded with a share of the profit.

Churn Rate: For startups, a high churn rate could signal problems with the value proposition, customer satisfaction, or product-market fit. 

Suppose you just launched a new app. Then, you ran an ad campaign and acquired 300 users in a month. If 150 of them cancel their subscriptions, that's a 50% churn rate. While your ad is attracting users, you may need to tweak the product features or improve the user experience. There’s also a chance that you’re not targeting the right audience.

Net Revenue Retention (NRR): The NRR is one of the metrics investors look at when assessing a startup's potential. It tells you whether you’re retaining enough revenue from existing customers to stay in business long-term. 

So, why not just track customer retention? You should track both. However, one customer may contribute up to 10% of your revenue and another up to 0.05% at most. Losing either of these customers will impact your business differently. So, it is essential to track retention in the context of revenue and not just the number of customers alone.

Referral metrics

Net Promoter Score (NPS): Tracking NPS helps you understand customer satisfaction. You can determine your NPS by asking your customers how likely they are to refer a friend on a scale of 1 to 10. The answers are grouped into three categories as follows;

• Promoters: People who score you 9 and 10 are likely to refer your brand.
• Passives: People who score you 7 and 8 have neutral sentiment towards your brand.
• Detractors: People who score you 0 and 6 are unlikely to refer your brand.

Tools like SurveyMonkey and Typeform offer NPS survey forms with which you can collect the data. To calculate NPS, subtract the percentage of detractors from the percentage of promoters. Ideally, you want to keep your NPS at least above 50%.

Referral Rate: Like NPS, referral rate is an easy way to understand customer satisfaction. Insights from the metric can inform acquisition strategy. A high referral rate usually indicates customer loyalty and satisfaction.

Effective referral programs have been shown to increase product adoption and signups. For instance, Dropbox achieved 35% of its daily signups from referrals and grew its customer base by 3900% in 15 months. 

Virality Coefficient: A good score indicates happy customers who are referring others. A score greater than 1 indicates growth. If below 1, you need extra marketing effort. 

Studying your virality coefficient allows you to understand and improve your referral program. For instance, if your referral program is delivering low numbers, you may need to improve your referral incentives or the process itself.

Revenue metrics

Average Revenue Per User (ARPU): The ARPU metric is also common with startups that use a subscription model. It helps you identify opportunities to increase revenue through remarketing, upselling, cross-selling, etc. 

Analyzing ARPU by customer segment also allows you to see your most profitable segments. Netflix uses its ad-supported tier to raise its ARPU. Although it's cheaper than their other plans, it has brought in over 40 million active global users.

Monthly Recurring Revenue (MRR): To get your MRR, multiply your number of customers by the ARPU. The monthly recurring revenue (MRR) shows how much you're earning from your customers every month. Here are other importance of tracking MRR.

• It is good for measuring growth, especially for subscription-based products.
• It sends a positive signal to investors if it is healthy.
• It gives deeper meaning to customer retention and churn.

Customer Lifetime Value (CLV): While startups often focus on quick wins, customer lifetime value encourages a long-term view. Insights from CLV can improve financial forecasting and inform long-term product development. 

Uber uses its customer loyalty programs to improve the lifetime value of its users. It uses a tiered rewards program. Drivers also get partner perks, lube discounts and tips that can increase their earnings by up to 30%. These incentives keep users within the ecosystem, which increases their lifetime value to the brand.

Common mistakes in interpreting growth marketing metrics

When tracking metrics, it’s easy to misunderstand aspects of it, which may lead to wrong data interpretation. Here are some common mistakes and how to handle them.

• Overreacting to short-term fluctuations: Always keep an eye on the long-term. That way, you can avoid hasty decisions based on slight short-term changes.
• Focusing on vanity metrics: Prioritize metrics that directly impact your business rather than those that may look good on paper but add no real value.‍
• Not using cohort analysis: By failing to analyze metrics by user segments, you can miss out on important insights, leading to misguided strategies.