AARRR Metrics for a Fintech

 Lets assume this is a case study for a Fintech company’s KPI definition.

Company X is a Fin Tech company providing payment solutions to SME and small businesses via mobile app, card reader and NFC. Company X solutions provide bookkeeping and analytics features to its customers by means of tracking its product usage and events.

Tracking mobile app usage and web sites are done by using web and mobile analytics tools such as Localytics, Flurry, Google Analytics, Tealium, Xiti etc. But in some cases the data from the analytics tools are not enough to deduce conclusions and hence require additional data from various systems such as CRM, Financial transaction systems, CMS and inventory control systems. Due to the need for blending data from disparate systems, a data strategy needs to be defined and a robust and scalable data architecture needs to be in place.

I would like to provide two relevant blog posts from my own blog that point to the concepts of growth hacking and data blending.

Data Value Chain

Growth Hacking

KPIs

Data monetization for the growth of businesses, entails tracking user behavior both online and offline to optimize products and processes. A list of KPIs or metrics to measure product usage and means of revenue generation are used as a guideline for data monetization efforts. Whether it is to assess global performance of a site, measure the impact of a specific campaign or product feature change, a set of indicators will be needed to focus on the changing parameters.

There are 5 metrics defined by Dave McClure : Acquisition, Activation, Retention, Referrals, Revenues or AARRR also known as the pirate metrics that serve as a good indicator of business growth.

For each of the metric area there are several KPIs defined. For each of the KPIs there are again 4 essential components or ways of analyzing:

• Data points – Data points are the points in the app or site that generate interesting insights about the business in question. It could be individual features in the product or events.
• Funnels – Setting up funnels ensures tracking all the steps that lead to completion of a particular process on the site or app like tracking steps that lead to an online payment page or the steps that lead to a signing up for a newsletter.
• Segmentation – Segmenting the potential and existing customer base to be able to understand their wants and needs in order to be able to serve them better, which is a means of revenue generation. Segmentation can be
• Behavioral – Users who spend lot of time on the site or app, frequently login or rarely login, browsers, visitors that leave without making purchases or visitors that make purchases
• Technical – The browsers used, the OS versions, devices used and if the users have saved the site as a bookmark or enter the site through search engines or social networks
• Demographics – Clustering users based on their age, gender, location etc.
• Cohorts – Cohorts are also a type of segmentation but more from a time series perspective to be able to compare data sets at different points of time. For example checking trends or shopping behaviors at different points in time.

The pirate metrics for product usage can be broadly classified as below:

Acquisition

The process of acquiring customers, which would mean tracking new customers that visit the site or download the app or search the product. The KPIs for acquisition would include all the metrics that indicate a growth or changing trends:

• Number of unique visitors
• %mobile traffic
• %web traffic
• % traffic from social networks
• % traffic from search engines
• Number of app downloads
• Visit trends
• Page view trends
• App Download trends
• New User Account Creation Rate
• Bounce Rate
• Funnel analysis for conversion
• Number of new customers in the last Month/Quarter
• Number of new customers YoY growth
• Campaign effectiveness – measuring the number of customers signing up or deregistering

 

Activation

When the users have logged in and have started using the product, the usage needs to be tracked to be able to further develop the product for better customer experience.

• Page views
• Time spent on the site
• Hourly traffic
• Seasonal traffic
• Monthly Active Users
• Number of paying customers in the last Month/Quarter
• Number of paying customers YoY growth
• Type of payments
• Types of Merchants (small/SME/seasonal)
• Types of businesses/industry
• Type of most sold items
• Customer Segmentation (Technical, Demographics, Behavioral) to understand customer’s need to use the product to improve product development

 

Retention

Retention is the process of retaining existing customers by continued service leading to customer satisfaction. Measuring the factors that lead to retaining customers is a good indicator.

• Number of returning customers
• Average time for transaction
• of transactions
• Transaction failure rate
• Number of transaction per payment type
• Peak hour
• Peak Season
• Types of Merchants
• Average revenue per Merchant
• Average Revenue per Merchant per branch/Industry type
• Average time taken for deposit to merchants
• Competitor Analysis through web/Facebook crawling
• FaceBook engagement (Likes, Shares, Comments) per Month/week
• Number of Complaints per category of complaint type
• App Store Ratings/Review trends
• Text Analysis for tweets/ Facebook comments
• Number of cash payments Vs Card payments

 

Referrals

When the customer satisfaction index is high, the customers refer the products to others thereby acting as brand ambassadors. Referrals are a means to measure customer satisfaction because customers refer the product only when they are themselves happy with the product usage.

• Number of visits coming from social media
• Number of site entry from Facebook ads
• Number of shares on Facebook
• Text analysis of tweets and Facebook messages

Revenue

One of the most important part of a business is revenue generation as revenue is not only the sustenance factor but an indicator of growth.

• Total Payment Volume
• Total Net Revenues
• Transaction losses
• Net revenue YoY growth
• Net revenue YoY growth per type of business
• Net Revenue per type of card (Master/Visa)
• Sales turnover of customers
• Number of transactions per Month/Quarter
• Number of transactions per type of business
• Number of transactions per Location
• Net revenue per platform (mobile app {ios/Android/ipad}/ card reader/NFC)
• Net revenue per type of merchant
• Average revenue per client
• Average value per transaction
• Peak volume of transactions per hour
• Peak volume of transactions per hour per location per type of business (to be able to suggest to similar merchants about the optimum time and hour of transaction)
• %churn
• %churn per type of merchant/type of business/Month/Quarter
• Average Selling price per type of Merchant per type of business
• Average Selling price per type of Merchant per type of business trends – Monthly/Quarterly/Seasonal
• Number of customers that have applied for loan
• Type of customers (business/demographics) that have applied for loan via Company X

 

Conclusion

Product usage tracking to improve the overall product features and outreach is an iterative process involving several processes like continuous A/B testing, UX strategy, Analytics, ideation and product development. In order to create state of the art products, Company X needs to know who their audience is and how the product will make it easy for businesses to sell. By tracking product usage, the aim should be to learn deeply about the customers’ needs and behaviors to be able to generate great solutions, proactively. Iterating towards the solution that creates the most value by collecting and analyzing data is the key.

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How to make your MVP the talk of the town

So you are launching your product or planning a launch but are you sure your product is going to make the waves? You don’t want to be spending your time, energy, $$ and efforts on a product, in vain. Maybe you are still working in a 9-5 job and are testing the waters in the startup community? Then it becomes, even more relevant to get your ideas validated by a targeted audience before you take the plunge, lock, stock and barrel!

Let’s get discussing how you can be sure that your MVP is sustainable and creates the necessary ripples in the market.

• Get feedback early in the process. Feedback from friends and family, who can be brutally honest with you. Doing so will also make you think deeply and clearly about your value proposition. Use your family and circle of friends to spread the word about your product.

          “If you can’t explain it simply, you don’t understand it well enough” – Albert Einstein

• Meetup.com – Gather a bunch of like minded people and brain storm your ideas. You will find out if someone has already treaded the path you are planning, learnings and consequences. You just might stumble upon your business partner or a seed investor.
• Social Media Marketing – Get going on the social media bandwagon, post information and images relevant to your product and get some feedback. Target your tribe through social media, utilise influencer marketing to check how your MVP is percieved. Follow other similar product brands and do some competitive analysis.
• Explainer video – Shoot an excellent graphical and easy to understand video while at the same time highlighting the features that define your MVP. Get this video out there on social media and analyze the popularity.
• Crowdsource – your branding and advertising efforts. Make your targeted customers be a part of the product development journey. They will not only feel connected to your would be product but also contribute to the making by with useful feedback. If they like it they’ll love to be brand ambassadors.
• Demand Vs Supply – Last but not the least check the demand of the product you are launching. If there already exist a dozen such products then it probably will be an upphill task fighting the competition. Thinking out of the box and finding an area where there is a demand supply gap is the wisest thing to do unlesss your product is so radical that it changes the way people have been experiencing other similar products.

Marketer’s guide to Private Marketplace

PMP (private marketplace) is basically a way of buying inventory via programmatic. In other words, audience buying by an automated process where the advertiser gets value due to reachability, top-drawer service or premium placement.  Audience buying is determined by analyzing behavioral data, location data and device data which aids in targeting a specific group of audience. A private marketplace is an invite only exchange that allows publishers to whitelist specific advertisers based on mutual interests, reserve an inventory for them at relatively high valuation.

If premium is defined as well targeted, less crowded inventory, premium programmatic is a means of automating much of the ad exchange process, allowing advertisers to purchase impressions in real time (RTB, real time bidding) while maintaining the high cost and edge of premium inventory.

Factors that make PMP advatageous are

•  PMPs can offer less competition for the advertisers as the inventory is usually open for premium clientele
•  Helps reaching out to a targeted audience
• Targeted ads lead to higher conversions even if the CPM is high in some cases. It is however, essential to understand the pricing models – CPC, CPA, CPL etc. that maybe more appropriate in certain cases, based on the campaign type

To establish the automated buy/sell process in real time, a unique Deal ID takes care of the required correspondence between publisher and advertiser in order to replace the traditional IO (insertion order). The deal id allows an advertiser to recognize the seller/publisher and the accompaying pre-decided agreements that come with it and vice versa, in a real time automated exchange. The moment a user visits a site,the publisher sends a bid request to the ad exchange, after having determined the user’s location, online behaviour, previous browsing history and device. The advertisers bid on impressions and the highest bidder wins the impression. The deal id is the parameter being sent into bid requests and recieved from the bidders, which is then sent ahead to the DSP (Demand side platform). Deal IDs are very important from a measurement point of view, both for publishers and advertisers to measure the effectivenesss of inventories, campaigns, impressions and conversions.

Thus, the rise of PMP has lead to the media planners taking on more of an analyst role, analyzing data to find the source of traffic, understanding the ad tech eco system and geting innovative with the latest tools and products like native advertising, content sponsorship and targeted audience buying. Ultimately private marketplaces work the same way as traditional open exchanges, both requiring to evolve with time and technology!

Programmatic Conversion

Programmatic marketing involves data driven insights to convert prospects into customers. There is more than meets the eye in the case of conversion rate optimization. Some of the deciding factors for conversion are UX design, the landing page, the source of web traffic, content, competitive price of products, good will, social media marketing, effective campaigns and customer engagement. Programmatic marketing entails analsying data at every customer touch point and targeting the consumer with compelling, preferably  personalised, offers. Conversion is not necessarily making a customer shell out money, it could be interpreted as winning customer loyalty by means of signing up for newsletter, downloading whitepapers or trial versions of the product or spending considerable time on the site. This loyalty, in the long run, could result in big wins through persuasion in the form of emails, SMSs, direct contact and targeted recommendations.

Channelizing data about prospects – online behaviour, previous shopping, socio-economic segmentation, online-search, products saved in the online basket, in other words getting to know the customer better to be able to suggest meaningful differences in people’s lives through the products on offer, results in higher conversion rates. It is here that digital convergence is of paramount importance. Digital convergence blends online and offline consumer tracking data over multiple channels to come up with targeted campaigns. Offline tracking through beacon technology is catching up. It is a win-win solution for both the retailer and the consumer providing each with useful information, the consumer, with an enabled smartphone app within a certain distance from the beacon, recieves useful and targeted information about products and campaigns and the retailer gathers data about consumer shopping habbit.

The online experience can be enhanced to reduce the bounce rate by incorporating some of the following design thoughts:

1. Associative content targeting: The web content is modified based on information gathered about the visitor’s search criteria, demographic information, source of traffic, the more you know about the prospect, the better you can target.
2. Predictive targeting: Using predictive analytics and machine learning, recommendations are pushed to consumers based on their previous purchase history, segment they belong to and search criteria.
3. Consumer directed targeting: The consumer is presented with sales, promotions, reviews and ratings prior to purchase.

Programmatic offers the ability to constantly compare and optimize ROI and profitability across mulitple marketing channels. Data about consumer behaviour, both offline and online, cookie data, segmentation data are algorithmically analyzed, to re-evaluate the impact of all media strategies on the performance of consumer segments. Analyzing consumer insights, testing in iterations, using A/B testing contributes to a higher conversion rate. Using data driven methods to gain a higher conversion rate is programmatic conversion and it’s here to stay.