What growth metrics are really important for startups?

Opinions expressed by Entrepreneur the contributors are theirs.

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 intensely data-driven subject, so there are metrics for absolutely everything. I am constantly answering questions about the most useful metrics to track.

Unfortunately for truth seekers, there is no “one size fits all” or “correct” growth metric that one should religiously watch 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 Key Metrics Every Business Should Track

Why there is no “one size fits all” metric

When Uber was founded in 2009, like many startups in their frantic early days, the company was focused on acquiring new users and scaling. They were also specifically aimed at ensuring that the supply and demand relationship between drivers and passengers (the utilization rate) was healthy. For Uber, it was the measurement of those early days that mattered most to their long-term success.

Uber did everything it could to acquire drivers, even going so far as to hand out free iPhone 4s to people who agreed to sign up and drive. That would go against return on investment (ROI) and lifetime value (LTV), but it’s something they needed to do to support local ridesharing markets and keep them healthy as they go. as the company entered it. Over time and Uber’s IPO, 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’s founders determine which metric(s) to measure based on a rolling prioritization of growth metrics, usually based on the maturity of the startup.

Prioritization of growth indicators evolving over time.

Image credit: Jonathan Martinez

Using startup maturity as a gauge, it becomes less opaque about how to prioritize metrics along the journey. Let’s dive into each of them!

Startups: the first steps

If I was given just three metrics to use for tracking early in the life of a startup, I would choose the following fundamental metrics that I believe are essential for every growth campaign and act of experimentation to come:

  • CTR = Click-through rate % = (clicks / impressions) x 100

  • CVR = Conversion rate % = (number of events A / number of events B) x 100

  • CPA = Cost per action = (Total spend / actions)

When trying to find the market fit for your product when scaling, the most important element you want to define is the pitch.

Location = Messaging = CTR

The main reason I chose CTR as the first indicator is that if we don’t focus on this data, further growth efforts will suffer. Imagine a potential consumer who has never heard of your product before, suddenly writing an email or advertisement. It would be catastrophic, at best.

The data collected on a consumer’s experience through the funnel will be crucial in adjusting your flow going forward. Do you offer free account subscriptions for the first month to stimulate potential interest? Does your ad come with valuable props or testimonials? These are the types of questions that will guide optimizations to move the needle on the CVR and ultimately the CPA.

Whether you’re running a paid acquisition campaign, an email marketing newsletter, or a landing page test, these three metrics (CTR, CVR, and CPA) will be crucial for tracking from the get-go.

Related: 3 Secret Growth Metrics That Matter Most to Investors

Startups: the intermediate and final stages

You’ve traveled the crazy journey of a startup, you’ve come to a point where the product market is right and users are responding 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 consider as you continue to build a green, lean growth machine.

ROI and LTV are lagging metrics of success for efforts in the early stages of positioning, messaging, and funnel definition. This is when a line can be drawn in the sand for CPA goals using revenue data points 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 its ROI target at a conservative CPA of 1 ($50), while Hyper-Growth Startups B and C set their ROI targets at aggressively at 0.8 and 0.5.

While I was at Postmates, we were in a very competitive food delivery space with other major players, such as DoorDash and Uber Eats, battling with us for market share. This situation put us in the commercial equivalent of wartime, where we often had large deficits in return on investment to defend our No. 1 market, Los Angeles.

There will always be caveats like Postmates, but measuring success by ROI or LTV is a good sign that your startup is maturing and striving to scale effectively.

Related: Use the metrics that really matter in your business

Startups: the last step

Congratulations! You have progressed to the advanced stage of your startup. Maybe you raised a few rounds of VC funding? Maybe you’ve passed $1 million in revenue?

There’s no better way to describe the late stage than things are now getting fun, highly analytical, and running this successful business now requires the precision of a Formula 1 circuit driver. important at this stage are:

Incrementality is hugely important in growth marketing, and it helps increase conversion volume by activating 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.

When we start to analyze ROI and LTV by media, channel, campaign and even demographics, the data revealed allows us to put in place more and more strategic measures.

For example, why spend the same amount of money and effort on two segments that have divergent results in the LTV of converting users? By leveraging the power of regression analysis, one can identify areas of diminishing returns and reduce or even eliminate inefficient spending.

Take advantage of the tools

The power of any growth measurement is amplified when there are tools to separate and analyze the data in multiple ways. Two of the tools I recommend having right from the start are a smart platform for business, such as Amplitude, and a mobile measurement partner if you run mobile campaigns.

A smart business tool can help understand user behavior and different product funnel attributes, 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”.

When you start thinking about what metrics you track, remember once again that there is no “one size fits all” metric that can predict the success or failure of your startup. Each startup is a unique case. Ask yourself what stage your startup is in, then leverage that insight to identify the most important metrics for pursuit and analysis. Failing to give proper emphasis to the correct metrics can have lasting impacts and be the difference between success and effective scale, or sink your startup into the ground.

About Madeline Powers

Check Also

Join the IWSC to celebrate success, network with key decision makers, and enjoy a long-awaited industry

As we head towards the close of our 2022 judging, the IWSC is delighted to …