Hi there future Growth Devil. Is this your backstory?
You run a business selling juju juice online to voodoo provocateurs in southern Jamaica. You’ve tried everything under the sun to get more clicks and more conversions, but you just don’t know what is working.
You keep asking yourself: why don’t my 1 million acolytes convert to paying juju juice customers?
WHY?!?!
Guess what, you’re not alone.
Many experience this pain. And, we know how to solve it!
Get ready to give your brain a workout and learn about Key Metric Models (you may need some juju juice yourself to get ready!)
Why do we do Key Metrics Modelling?
We believe one thing is fundamental to business success: listening to feedback and constantly iterating. So, we’re always engineering feedback loops from our customers and our business. This helps us keep on the pulse, constantly knowing what’s going on and being able to react to changes as quickly and effectively as possible.
Having a key metrics model helps you always understand where your business is at any one time. It’s the feedback loop for your business.
A key metrics model gives you the knowledge you need about your business to come up with improvements (experiments) that:
- are testable (we just love A/B tests!)
- are easily measurable
- can be tracked against all up-channel metrics so you know the true effect on your business
- affect only a single metric
- actually help grow your business
Keep focused only on experiments that help you succeed, and don’t run experiments just for an ego trip. This is the ultimate pathway to you achieving the goal you’re aiming for.
What is a Key Metric Model (KMM)?
A KMM is business modelling tool for understanding what factors drive the success of your business.
If you have been lucky enough to learn about KPI models then they are very similar and learning about them should be a walk in the park.
Key Metrics = Key Performance Indicators on Juju Juice
(intense, focused, and ready to party)
Key metrics are the measures of your success right now — they can change, as your goals change.
For example, if your goal right now is to prove that your product is ready to take to market, you might look at your key metric being % users retained for six months, or % users that refer their friends after a month of active use.
Both of these key metrics would indicate that your product is valuable to your users — valuable enough for them to stick around, and trust enough for them to refer their friends.
A quick guide to selecting a key metric that drives you towards success:
- Key metrics should always be tied to your goal. I.e. achieving your key metric = achieving your goal.
- Key metrics must be measurable, testable and directly cause you to succeed.
At Growth Devil, we get hired for one thing, and one thing only: to generate growth for the companies we work with.
Today, we’re revealing one of the ingredients to our secret sauce.
How to Use Key Metrics Modelling for Devilish Growth
There is a pretty simple rule for Growth Hackers
If what you’re experimenting on doesn’t contribute to a metric on the KMM then why the hell are you doing it!
It’s pretty simple to drive your growth once you know what drives your growth.
So, one of the first things we do when we begin growing a company is to figure out WHAT factors are contributing to the growth rate of the company and how changes in these factors affect other areas of your business.
Let’s introduce you to some terminology:
- Input factors - these are factors that you can measure directly, and have a direct influence on
- Output factors - when we combine two (or more) input or output factors, we get an output factor
- Goal metric - the metric that represents the ultimate goal we are trying to achieve
We start by selecting a goal metric. This is a key metric that we use the indicate whether we’re hitting our goal. We then move down the chain from the goal through all the output factors until we have worked out all of the input factors.
This is an example of the paid traffic revenue section of a typical SaaS business model.You can see all the key metrics there.
Can you tell which blobs are input metrics in the above model? They aren’t colour coded! The input metrics are everything at the end of a chain (#new users, %conversion rate, $ per user etc.)
How deep do I go? I recommend going as deep as is needed to get meaningful metrics. If you are doing things like online advertising then I recommend breaking that section out into a separate model which feeds into your primary business model. This way it isn’t too overwhelming. You may wish to break sections out for distribution so that those who are working on specific tactics have the information they need for success.
Once you have this level of detail you should build out a spreadsheet that allows you to input variables and see how changes in variables (the things you can effect change in) affect your bottom line.
Individual key metrics can be individually optimised to realise dramatic improvements.
Do you want us to help you build your Key Metric Model?
Get in touch with a Growth Devil today.