Optimizing for Growth

In my last post I spent some time talking about why we care about measuring retention rates, and tried to make the case that retention rate works as a meaningful measure of quality.

In this post I want to look at how a few key metrics for a product, business or service stack up when you combine them. This is an exercise for people who haven’t spent time thinking about these numbers before.

  • Traffic
  • Conversion
  • Retention
  • Referrals

If you’re used to thinking about product metrics, this won’t be new to you.

I built a simple tool to support this exercise. It’s not perfect, but in the spirit of ‘perfect is the enemy of good‘ I’ll share it in it’s current state.

>> Follow this link, and play with the numbers.

Optimizing for growth isn’t just ‘pouring’ bigger numbers into the top of theĀ  ‘funnel‘. You need to get the right mix of results across all of these variables. And if your results for any of these measurable things are too low, your product will have a ‘ceiling’ for how many active users you can have at a single time.

However, if you succeed in optimizing your product or service against all four of these points you can find the kind of growth curve that the start-up world chases after every day. The referrals part in particular is important if you want to turn the ‘funnel’ into a ‘loop’.

Depending on your situation, improving each of these things has varying degrees of difficulty. But importantly they can all be measured, and as you make changes to the thing you are building you can see how your changes impact on each of these metrics. These are things you can optimize for.

But while you can optimize for these things, that doesn’t make it easy.

It still comes down to building things of real value and quality, and helping the right people find those things. And while there are tactics to tweak performance rates against each of these goals, the tactics alone won’t matter without the product being good too.

As an example, Dropbox increased their referral rate by rewarding users with extra storage space for referring their friends. But that tactic only works if people like Dropbox enough to (a) want extra storage space and (b) feel happy recommending the product to their friends.

In summary:

  • Build things of quality
  • Optimize them against these measurable goals