Most of the startups which are directed and supported by investors are measuring the success of the product on the sales and revenue numbers like Monthly Recurring Revenue, the year to year revenue or total sales. While it is good for an organisation to have sales as it displays the success of their product on the market, such metrics can mostly be understood as so-called vanity metrics: they are helping us to feel good and show our investors, that something in our organisations is working. But it misses to show us what we did well and where we need to improve.
Scaling the product with right data
In his book “Scaling Lean” Ash Maurya describes the so-called “Pirate Metrics” (or “AARRR Metrics”), which help us to display a funnel on how the user experiences our sales approach. Pirate Metrics are not only measuring the result of our Marketing and Sales efforts, but also the journey a user is confronted with until they become a customer. 1,000 paying customers per month might sound like a great achievement for a startup. But it doesn’t look as great if we are aware that we actually have 1,000,000 visits per month, who are not checking out.
Ash Maurya calls such an approach a customer factory: A process of developing users from leads into customers who are willing to repeat their business and/or are also telling their friends and colleagues to do so. For Ash Maurya it is important to separate between making a customer happy and making happy customers. Making customers happy is much easier as it can be achieved via free incentives. Creating happy customers is more difficult, as happy customers are the ones who enjoy using the product. But those are more likely to refer your product to their colleagues or friends as they genuinely think it is a good solution to a problem they have.