YC
Consumer Startup Metrics | Startup School
@ Y Combinator
01/07/24
Takeaways
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Tom Blomfield
01/07/24
@ Y Combinator
For consumer startups, tracking headline user growth is crucial because monetization often comes later, and a good growth rate is 15% month-over-month, which can lead to a 5x increase in user base annually.
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Tom Blomfield
01/07/24
@ Y Combinator
Organic growth, which is growth that doesn't require payment, is often neglected by founders. For example, at Monzo, we reached a million customers before spending on direct marketing or advertising, primarily through virality and network effects.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Virality occurs when one user introduces your product to others, while network effects mean the product becomes more valuable as more users join. Successful consumer companies leverage both to grow their user base organically.
TB
Tom Blomfield
01/07/24
@ Y Combinator
To enhance virality, identify sharable moments in your product where users are inclined to share their achievements, like completing a level in a game or achieving a milestone.
TB
Tom Blomfield
01/07/24
@ Y Combinator
For network effects, consider how your product can improve as more users join. Shift your perspective from a single-player experience to a multiplayer journey, enhancing the product's value with each new user.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Paid referral schemes can be a form of paid acquisition, but they risk cannibalization, where you pay for users who would have signed up for free. It's essential to test these schemes to measure their true impact.
TB
Tom Blomfield
01/07/24
@ Y Combinator
When measuring customer acquisition cost (CAC), focus on active, monetized users rather than just sign-ups, as many may drop off shortly after registration. This ensures you're tracking the cost of retaining valuable users.
TB
Tom Blomfield
01/07/24
@ Y Combinator
The best consumer companies often have a growth split of over 80% organic to 20% paid. Relying too heavily on paid growth can lead to increased costs and reduced profitability as competition for ad space intensifies.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Changes in advertising platforms, like those made to iOS, can drastically affect your business. Many companies have failed due to over-reliance on paid growth strategies that become unsustainable after such changes.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Great consumer companies that achieve significant scale typically optimize their viral loops and network effects to ensure the majority of their growth comes from organic channels.
TB
Tom Blomfield
01/07/24
@ Y Combinator
At Monzo, we found that customers who traveled abroad frequently generated more revenue, while those who contacted customer service often incurred higher costs, highlighting the importance of analyzing customer behavior for profitability.
TB
Tom Blomfield
01/07/24
@ Y Combinator
It's essential to track unit economics closely, especially in businesses with thin margins, to optimize costs and focus on advertising channels that attract high-revenue, low-cost customers.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Unit economics measures the revenue generated per customer minus the variable costs associated with serving that customer, which is crucial for understanding profitability on an individual basis.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Retention in consumer startups can be challenging; for Monzo, we defined an active user as someone who completed at least one financial transaction per week to measure engagement effectively.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Identifying a 'magic moment'—a specific user behavior that predicts long-term retention—is key. For example, Facebook found that adding seven friends in the first ten days significantly increased user retention.
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Tom Blomfield
01/07/24
@ Y Combinator
For Monzo, users who added three friends to their account during signup retained significantly better than those who did not, demonstrating the impact of social features on user engagement.
TB
Tom Blomfield
01/07/24
@ Y Combinator
The Net Promoter Score (NPS) measures customer loyalty by asking how likely customers are to recommend a product, with a score of 50 or above being a strong indicator of success for consumer startups.
TB
Tom Blomfield
01/07/24
@ Y Combinator
To maintain a consistent NPS, it's crucial to ask the same question at the same point in the customer journey, as changing the timing can lead to misleading results.
TB
Tom Blomfield
01/07/24
@ Y Combinator
Gathering qualitative feedback alongside NPS scores helps identify areas for improvement, particularly by addressing the concerns of detractors to enhance overall customer satisfaction.
TB
Tom Blomfield
01/07/24
@ Y Combinator
For consumer startups, achieving at least 15% month-on-month growth in active users is ideal, with 10% being acceptable, while 5% is likely insufficient for long-term viability.